Donald Trump’s White House had boastfully pledged “90 deals in 90 days” after partly suspending the process of imposing what the US president referred to as “reciprocal” tariffs.
There won’t even be nine deals completed when we get to Trump’s first cut-off date on 9 July. The clincher here, the poker “tell” if you prefer, is the extension of the deadline from Wednesday to 1 August, with further extensions – or delays – possibly to follow.
From an American point of view, Treasury Secretary Scott Bessent reports that all attention has been on the 18 nations that account for 95% of America’s trade deficit. The jaunty missives being dispatched from the US to its trade partners this week are merely a reprise of that notorious White House “Liberation Day” blue board.
The percentages are essentially the same as were initially announced on 2 April. The notorious equation, which proved to employ a measure of the extent of the deficit as a proxy for “the sum of all trade cheating”, remains, in some guise.
All this is being announced without the market chaos witnessed at the time earlier this year due to this further delay. Financial markets are optimistic about rolling delays, in the notion of TACO, that Trump Always Chickens Out, though they might encourage foot-dragging on both sides that creates a new crisis.
The actual lesson here has been the Trump administration’s failure to close deals. The letters are an admission. The White House is playing hardball, but so are the majority of other countries.
Japan and South Korea were targeted for the initial two letters, effectively blowing up their trade agreements with the US to pieces. The Japanese have not made much of an effort to conceal their outrage at the US stance.
Its finance minister even threatened to use its possession of the world’s largest holding of US government debt – essentially the largest banker of America’s obligations – as a possible source of leverage.
Everybody else in the world observes that markets chastise the US when a trade war becomes real, when American retailers threaten the White House with higher prices and bare shelves.
And there remains a believable court case making its way through the system that can make the tariffs illegal. But the world is also beginning to realise the quantitative effects of a reversed international trading system.
The dollar has fallen 10% this year versus several currencies. Speaking at his confirmation hearing, Bessent stated that the expected appreciation in the value of the dollar would reduce any inflationary effect of tariffs.
Trade volumes are also beginning to change. There was huge stockpiling prior to tariffs; there have been subsequent, more recent sharp drops. Meanwhile, US-bound Chinese exports declined by 9.7% year on year so far this year.
But China’s exports to the rest of the world are 6% higher. That involves a 7.4% increase in the UK, 12.2% in the 10 members of the ASEAN alliance and an 18.9% increase in Africa. The figures are flaky, but in line with what would be expected. Tariff revenues are beginning to flood into the US Treasury, with historic receipts in May.
While the US constructs a tariff barrier around itself, the world elsewhere will necessarily trade more with one another – just notice recent economic agreements between the UK and India, and the EU and Canada.
It should be noted that the real tariff rate actually being imposed by the US on the rest of the world is currently around 15%, rather than 2% to 4% over the last 40 years. This is before additional changes in these letters.
