With tonight's trade agreements between USA and Japan, the tangled tangle of duties imposed by Trump on his trading partners after months of uncertainty begins to unravel and analysts can now glimpse the general outlines of a new trade scenario, starting from Asia. The most significant agreement from 'Liberation Day' of early April could serve as landmark for many other agreements currently under negotiation with Washington, while according to analysts theglobal economy It may be able to sustain the 15% level agreed to tonight.
Yesterday Trump announced an agreement with the Japan which sets tariffs on imports from the country at 15% (while tariffs of 25% were due to come into force in a few days), including automobiles, which represent by far the largest component of the trade deficit between the two countries. In exchange, Tokyo has committed to invest 550 billion dollars in US land.
Yesterday the US also signed an agreement with the Philippines with a rate set at 19%, the same level agreed by theIndonesia and one percentage point below the baseline level of 20% of Vietnam , which indicates that it is likely that most of Southeast Asia receive a similar rate.
The agreement with Japan gives hope for agreements in other countries as well, such as South Korea , ThailandThe latter is hoping for an agreement with the US that would reduce a threatened 36% tariff on its exports before the August 1 deadline, according to Finance Minister Pichai Chunhavajira, who hopes the talks will be concluded within a few days. Industry Minister South Korea Tokyo said today that it will carefully review the terms of the U.S.-Japan trade agreement, envisioning greater cooperation in the energy and industrial sectors ahead of major trade talks in Washington. Japan and South Korea compete in sectors such as autos and steel, so the Tokyo trade deal will increase pressure on Seoul to reach a similar level of 15%, or better, by the August 1 deadline to avoid reciprocal U.S. tariffs of 25%.
Meanwhile, US Treasury Secretary Scott Besent he declared that he will meet his Chinese counterparts in Stockholm next week for the third round of talks to extend the tariff truce and broaden discussions. With China, the US has embarked on a path of chords by themes, which saw on one side the United States which recently loosened restrictions on chips and China which has resumed the rare earth exports.
“We live in a new normal where 10% is the new zero and so 15% and 20% don't seem so bad if everyone else had them,” he said. Bloomberg Trinh Nguyen , senior economist for emerging Asia at Natixis. With a tariff level of 15%-20%, It is still profitable for US companies import from abroad rather than producing similar goods at home, he added.
Putting all these elements together, finally a certain emerges level of predictability after six months of tariff threats that at one point had raised duties to 145% on China and nearly 50% on some smaller Asian exporters. Investors welcomed the move, with the Asian stocks rise to one-month high S&P 500 futures contracts rose. The Nikkei-225 index in Japan jumped 3,2%, with Toyota Motor Corp. and other automakers leading the gains. Also yesterday, President Trump announced that the Japan to form joint venture to develop a project of liquefied natural gas in Alaska.
In April, Trump hit the pause button on higher taxes, after the potent mix of weakening of stocks, bonds and the dollar US stocks showed that investors were annoyed by Trump's protectionist forays. This gave politicians in Tokyo, Manila, and around the world time to negotiate more attractive deals.
While the latest agreements bring some relief, they still remain crucial questions. The Trump administration is still considering a series of sector-specific tariffs on goods such as semiconductors and pharmaceuticals, which will be crucial for Asian economies, including Taiwan and India, both of which are still waiting for tariff agreements with the United States. While Trump is moving quickly in talks with the countries that account for most of the U.S. trade deficit, he has also said he could hit about 150 smaller countries with a flat rate between 10% and 15%.
Asian companies can start reorganizing
Now that some certainty is emerging about tariff levels, companies with complex supply chains across Asia and still dependent on US consumers can begin to assess how to reorganize your activities for minimize the impact on salesJust like the first trade war of 2018, the latest tariff announcements are likely to push companies to increasingly shift production outside of China. For months, companies and industry groups have been warning that uncertainty is worse than investment tariffs. manufacturing sector in the Asia region posted the most significant weakening since August 2021, according to the S&P PMI, due to a sharp drop in new orders, significant job cuts, and weaker purchasing activity. With the new tariffs taking effect, the crazy pace will likely slow down. rush to ship in the US before the tariffs were introduced.
"It is certain that, while the new tariff levels in the 15-20% range are lower than those threatened, they are also much higher than the 10% level before Trump took office." In a note, analysts at Barclays Plc said that this skews the risks to Asia's GDP growth forecasts "to the downside."
For the United States, the risks of higher inflation remain
For US consumers, who have so far been spared the shock of tariffs, economists warn that there is likely to be some repercussions in the coming months. Economists of Goldman Sachs they now predict that the“reciprocal” tariff rate US-based will increase by 10 15% to%, a result that threatens to fuel inflation and to weigh on the economic growthFederal Reserve Chairman Jerome Powell, he said he wanted to see where the duties end and how they infiltrate the economy before cutting the rates of interest, much to Trump's chagrin. "The average tariffs for the United States were around 2,5% for 2024 (while) currently average tariffs are around 17%," said Jefferies' Mohit Kumar, referring to the increase in global tariffs following Trump's announcement of the so-called "Liberation Day" on April 2.
Not just Asia: Expectations for agreements with the European Union
After having defined the outline of the agreements in Asia, they are now also waiting for those in the European Union. Trump said yesterday that EU representatives will arrive in Washington today for trade negotiations. This raised hopes of an agreement with Europe, even though the EU was apparently finalizing countermeasures in the event of a stalemate before the August 1 deadline. Among the tariff threats on major economies currently are 30% on the EU, 35% on Canada, and 50% on Brazil. Such a level for the EU would be economically debilitating Since it relies heavily on trade, it would wipe out entire swathes of transatlantic trade, economists say. The EU initially hoped to achieve a tariff of around 10%, but later acknowledged that the result would likely be at least several percentage points higher.
The Euro STOXX 600 jumped 1% today, with auto stocks rising 3,6%, while UK stocks hit a record high, rising 0,5%. News of the trade deal "raised hopes that the United States is on the verge of reaching agreements with other countries to avoid higher tariffs on August 1," Deutsche Bank analysts wrote in a note.
