President Donald Trump’s trade war risks reigniting next week when a temporary pause on sweeping tariffs is set to expire, potentially driving up costs for businesses and raising prices for consumers.
While Trump and administration officials recently indicated the deadline might be pushed back, the president told reporters Tuesday that he wasn’t planning an extension and is informing countries of their new tariff rates. He said it has been harder than planned to make trade deals with a number of foreign governments because they are “spoiled from having ripped us off for 30, 40 years.”
“We’re going to determine a number just very simply, write them a nice letter,” Trump said aboard Air Force One. “Probably one page or a page and a half at the most, and it’s going to be essentially, ‘Congratulations. It’s going to be an honor to allow you to go and do business in the United States of America,’ because it really is an honor to be able to do that.”
Trump said Wednesday that he had reached a trade agreement with Vietnam in which U.S.-based companies will have to pay a 20% tariff on Vietnamese goods and a 40% tariff on goods routed through Vietnam from other countries. Vietnam agreed to not to charge any tariffs on U.S. goods.
‘Liberation’ delayed
The tariffs, announced with great fanfare during an April event the White House dubbed “Liberation Day,” imposed levies on dozens of countries. They included a tariff of 24% on Japanese imports and a 20% tariff on products from the European Union. At the time, Trump said the duties would end decades of the U.S. being “looted, pillaged, raped and plundered ” by trading partners.
The move caused stocks to tumble, erasing as much as $5 trillion in value from the S&P 500, while global investors began to flee U.S. assets, increasing government borrowing costs. Just a week later, Trump said he was pausing most of those tariffs to give his administration time to broker new trade deals with as many as 75 trading partners in 90 days.
White House officials framed the announcement and subsequent pause as a negotiating tactic and the “art of the deal” in action. But the $80 billion that customs officials estimate the U.S. has collected in additional tariff revenue during Trump’s first six months pales beside the multitrillion-dollar gyration markets have undergone in that time.
And nearly three months later, no trade agreements have been finalized. Talks continue with the U.S.’ closest trading partners, and a framework for one agreement with the U.K. was reached, though details still need to be hammered out.
Now, with the July 9 deadline approaching, U.S. businesses again face the threat of paying hefty levies on goods bought from overseas. Tariffs are taxes paid to the federal government by U.S.-based companies importing products or parts. Companies can then either absorb those fees, taking lower profits or cutting costs elsewhere, or pass those costs along to customers in the form of higher prices.
‘Tariff fatigue’
The imposition of more tariffs could reignite the stock market volatility that the initial announcement caused — just as the S&P 500 recently recouped all of its losses since Trump returned to the White House. Investors largely expect him to extend the July 9 deadline for most trading partners and aren’t anticipating a major spike in tariff costs for companies in the coming days.
“Despite evidence of a ‘tariff fatigue’ among investors, trade policy concerns persist,” Hussein Malik, head of global research at JPMorgan, wrote in a note to clients last week. “We believe that the upcoming July tariff deadline will be less critical,” he said, but noted that “volatility may continue until a final decision is reached this summer. The ability of corporations and consumers to absorb the tariff shocks will be critical in determining the macro consequences.”
Some tariffs have remained in place throughout the pause —including a blanket 10% tariff on all imports and higher rates on steel, aluminum and autos. The United States and China announced a 90-day pause in May on most of their recent tariffs on each other, with the U.S. cutting its effective rate on Chinese imports to 30%, from 145%.
So far, those tariffs haven’t appeared to greatly disrupt the economy, but Federal Reserve Chair Jerome Powell said Tuesday that more effects could emerge soon. Tariff uncertainty has caused the Fed to delay further interest rate cuts, he said, especially as inflation remains slightly above its preferred 2% target. And while many companies stocked up on inventory in the spring to prepare for tariffs, executives have warned that consumers could see higher prices this summer and fall as those supplies dwindle.
Vietnam deal framework
White House officials have said they are in regular talks with 18 of the U.S.’ top trading partners, including the E.U., Japan and India, to negotiate trade deals.
In touting the trade agreement Trump said the U.S. reached with Vietnam, Trump suggested that it could open up the Vietnamese market to American-made SUVs. Vietnam has been a growing trading parter for the U.S., but the buying power for most Vietnamese is limited with the average wage around $600 a month.
“We will be able to sell our product into Vietnam at ZERO Tariff,” Trump wrote in a post on social media. “It is my opinion that the SUV or, as it is sometimes referred to, Large Engine Vehicle, which does so well in the United States, will be a wonderful addition to the various product lines within Vietnam.”
Trump didn’t disclose any further details of the agreement. U.S. imports from Vietnam increased nearly 20% last year to $136.6 billion as more companies, like Nike, have been shifting production there from China to avoid paying the tariffs imposed on China during Trump’s first term.
Trump suggested Tuesday that a trade deal with India was also close, though administration officials have been suggesting that for weeks. Earlier, Trump had threatened India with a 26% tariff.
“It’s going to be a deal where we’re able to go in and compete,” he told reporters. “Right now, India doesn’t accept anybody in. I think India is going to do that, and if they do that, we’re going to have a deal for much less tariffs.”
Talks with Japan and the E.U. drag on
Trump said Tuesday that a deal with Japan was unlikely because the country wasn’t willing to agree to buy enough U.S. rice, a move that could hurt Japanese farmers. Japan is already facing a 25% tariff on cars shipped to the U.S. and a reciprocal tariff of 24% if the tariff pause expires.
The European Union’s top trade negotiator was scheduled to come to Washington on Wednesday to continue talks. The E.U. has threatened to retaliate if there is no deal by July 9, with at least $100 billion worth of retaliatory tariffs on standby and plans to limit shipments to the U.S. of scrap steel and certain chemical products.
White House officials have indicated they haven’t had time to initiate serious trade talks with smaller trading partners, creating uncertainty around what would happen if the pause expires. While some of those countries sell a relatively small amount of goods to the U.S., they can dominate the supply of items in certain areas. Madagascar, for example, faces a 47% tariff once the pause expires and is the U.S.’ main supplier of vanilla used in baking.