Donald Trump delays higher tariffs but announces new taxes for some countries | BBC News

Key Concepts

• Reciprocal Tariffs: Tariffs imposed by a country in response to tariffs imposed by another country.
• Liberation Day Tariffs: The name given to the tariffs that were delayed by Donald Trump.
• Trade Deficit: The amount by which a country's imports exceed its exports.
• BRICS: An acronym for Brazil, Russia, India, China, and South Africa, a group of developing nations.
• Bilateral Trade Deal: A trade agreement between two countries.
• Sectoral Tariffs: Tariffs that apply to specific industries or sectors.
• Market Volatility: The degree of variation in a trading price series over time.
• Geopolitics: The influence of geography on politics and international relations.

1. Delay of Liberation Day Tariffs

• Donald Trump signed an executive order delaying the implementation of his "Liberation Day" tariffs until August 1st.
• Letters were sent to major trading partners, including Japan and South Korea, confirming the new tariffs would take effect on that date.
• More letters are expected to be sent to countries that have not agreed to a trade deal with the US.

2. New Tariffs Announced

• The US is planning to impose a new 25% tariff on products entering the country from South Korea and Japan.
• Japan sent almost $150 billion in goods to the US last year, making it America's fifth-biggest supplier of imports.
• South Korea was also in the top 10.
• Plans for a 40% tariff on goods from Myanmar and Laos and 35% on goods from Bangladesh were also announced.
• South Africa will receive a 30% tariff from August 1st.

3. Rationale for Tariffs

• The letters sent to Japan, South Korea, Malaysia, and others described the US's commitment to a great trading relationship.
• The new tariff rates were necessary to address the US's trade deficits with those countries.

4. Threat to BRICS-Aligned Countries

• Trump issued a threat to further increase tariffs on countries that aligned themselves with what he claimed were the anti-American policies of the BRICS group of developing nations.
• The BRICS group includes Brazil, Russia, India, China, and South Africa.

5. Brazil's Response

• Brazil's president responded angrily to Mr. Trump's threat, stating that countries are sovereign and have the right to reciprocate with tariffs.
• He criticized Trump's use of social media to threaten the world with tariffs.

6. Expert Analysis (KL Handley, University of California, San Diego)

• The tariffs are a negotiation tactic to get countries to offer more concessions to the US.
• The US has turned back the clock on trade concessions negotiated over the past 40-50 years and wants countries to come back to the table with more.
• It's not obvious that countries like Japan and Korea, which already have trade agreements with the US, can give much more.
• The administration may be running out of time to conclude deals.
• Larger countries or country groups like the European Union, which have more bargaining power, are holding out and not offering the administration everything it wants.
• The BRICS countries may try to ally against the United States, giving them more bargaining power.

7. Market Reaction and Regional Responses

• The yen has fallen against the dollar following the news of the tariffs.
• Japan's Prime Minister Shagiru Ishiba said that Japan would continue negotiations with the US to seek a bilateral trade deal.
• South Korea is intensifying trade talks.
• Thailand's finance minister said that they are not going to back down in their trade negotiations with the United States.
• South Korea is saying that any trade deal would need to include both auto and steel sectoral tariffs.
• The UK has received car exemptions for up to 100,000 cars.
• Bangladesh and Malaysia are hoping to negotiate similar deals.
• South Africa's President Siril Ramaposa questioned the reasoning behind the US's decision to impose a 30% tariff on all goods from South Africa going to the US.

8. Financial Market Impact

• Wall Street saw sharp declines following the announcements of the new tariffs.
• All major US indexes closed in the red on Monday because of the new uncertainty.
• European equity strategist Michael Field said that markets will be responding to every twist and turn.
• The yen weakened sharply in response to the news.
• Markets are on tenterhooks until August 1st.
• The summer season is a time of sharp volatility because of thin trading levels.
• Investors are looking to geopolitics to see whether that gives us some steer on what kind of future revenues and earnings and things like this are going to look like for companies.

9. Conclusion

The delay of the "Liberation Day" tariffs and the announcement of new tariffs on several countries have created significant uncertainty in global trading relations. The US is using tariffs as a negotiation tactic to pressure countries to offer more concessions. The reaction from trading partners has been mixed, with some expressing a willingness to negotiate and others vowing to defend their interests. The financial markets have responded negatively to the news, and volatility is expected to continue in the coming weeks.