Tariff deals: Has Trump carried through against Asian countries? | DW News

Key Concepts:

• Trade Tariffs: Taxes imposed on imported goods.
• Retaliation: Imposing tariffs in response to another country's tariffs.
• USMCA: United States-Mexico-Canada Agreement, a free trade agreement.
• Transshipment: Shipping goods through an intermediate country to avoid tariffs.
• Onshoring/Reshoring: Bringing manufacturing back to the home country.
• Fentanyl Tariffs: Tariffs specifically targeting fentanyl imports.
• Reciprocal Tariffs: Tariffs imposed in response to unfair trade practices.
• Trade Surplus: When a country exports more than it imports.
• Transactional Cost: The expense of executing a trade.
• Friction to Trade: Obstacles that hinder international trade.

New US Trade Tariffs

• The White House announced new trade tariffs on imports from 69 countries, ranging from 10% to 41%, effective the following Thursday.
• Separately, a 35% tariff was announced on some goods from Canada, effective immediately.

Canada's Response

• Pressure exists within Canada, particularly from the Premier of Ontario, to retaliate immediately.
• CBC journalist Evan Dyier notes that retaliatory tariffs often lead to further tariff increases from the US.
• Canada previously responded to a 25% tariff from the US on a dollar-for-dollar basis.
• Dyier suggests Canada might "hold its powder" and continue negotiating a "grand bargain" under the USMCA, as a tit-for-tat tariff war might be ineffective.
• The Canadian federal government may resist pressure to retaliate immediately and instead focus on reaching a final deal.

Asian Market Reaction and Impact

• Asian markets reacted negatively, with shares falling across the region.
• Tariff rates vary: 15% for South Korea, 25% for India, and 40% for Laos and Myanmar.
• Despite the damage, some Asian nations are relieved the tariffs aren't as high as initially threatened.

Analysis by Nixis Economist Trinh Nguyen

• The highest tariffs (40%) are imposed on Laos and Myanmar.
• US allies with large trade surpluses (EU, Japan, South Korea) face 15% tariffs.
• Southeast Asian countries and Pakistan face tariffs in the "high teens to 20s," with India at 25%.
• Nguyen points out that many exemptions exist, particularly for electronics and semiconductors, and the future of these exemptions is uncertain.
• A 40% tariff targets transshipment, particularly in Southeast Asia, aiming to close loopholes used to reroute Chinese exports.
• China faces a 20% fentanyl tariff on top of the existing 25% tariff from "Trump 1.0," potentially reaching 50-60%.
• Mexico is in the best position due to the USMCA.
• Taiwan faces a 20% tariff, but semiconductors are currently exempted. Taiwan aims to negotiate to secure future exemptions for its semiconductor sector.
• Many countries are deploying onshoring strategies to mitigate the risk of future tariffs.
• For Vietnam, a 20% tariff is manageable due to exemptions for electronics.
• The EU's 15% tariff is not stacked on top of other tariffs, but this is not confirmed for other countries.

Fair Trade and Future Outlook

• Nguyen states that the tariffs will lead to "greater transactional cost to trade and greater friction to trade."
• Whether the tariffs result in fairer trade depends on the sector and market.
• India, with its existing 110% tariff on autos, is unlikely to open its market significantly.
• The reality is higher friction to trade with the US, varying by country.
• Exporters should focus on lowering tariffs and diversifying to other markets.

Notable Quotes:

• Evan Dyier (CBC): "So, uh, of course, when Canada was initially hit with a 25% tariff by Donald Trump, it did respond and it attempted to respond on a dollar fordoll basis..."
• Trinh Nguyen (Nixis): "...what we will get is greater transactional cost to trade and greater friction to trade."

Conclusion:

The new US trade tariffs introduce significant complexities and uncertainties to global trade. While some countries are relieved that the tariffs are not as high as initially feared, the potential for retaliation, the targeting of transshipment, and the variable impact across sectors create a challenging environment for businesses. The focus now shifts to negotiating exemptions, diversifying markets, and adapting to a landscape of increased trade friction. The long-term effects on global trade and economic relationships remain to be seen.