U.S. Imposes 100% Tariffs on Chips, 25% on Indian Goods, as Trade Talks Continue

Despite the recent high-profile trade agreements announced by the U.S. administration, the negotiations are far from over. Countries around the world are actively seeking various exemptions and concessions, indicating that these agreements are just the beginning of a new phase of negotiations. On August 6, the U.S. President announced that the country would impose approximately 100% tariffs on chips and semiconductors, while exempting companies like Apple that have invested in manufacturing within the U.S. Additionally, the administration announced a 25% tariff on Indian goods in response to India's purchase of Russian oil.

Nations like the European Union, Japan, and South Korea, which have already agreed to terms with the U.S., continue to push for further exemptions for their key export industries. Several exemptions and special arrangements have already been approved, covering products such as Brazilian orange juice and Chilean copper. The list of exemptions is growing rapidly, despite earlier claims by U.S. government officials that there would be no exemptions or exceptions. As early as April, the White House excluded consumer electronics like smartphones and laptops, as well as energy, gold bars, and certain critical minerals, from the high tariffs imposed on Asian producers. With more bilateral agreements in place, the list of exemptions continues to expand. Brazil and Chile are notable examples of successful negotiations.

Last week, the U.S. President signed an executive order imposing a 50% tariff on Brazilian goods but exempted 694 products, including aircraft, certain metals, fuel, and orange juice. These exempted products account for approximately 43% of Brazil's total exports to the U.S. Similarly, Chile successfully persuaded the Trump administration to exempt tariffs on its key export product, copper, which accounts for about 65% of the U.S.'s refined copper imports. The U.S. is moving from a stance of no exemptions to limited exemptions, particularly for products that cannot be produced domestically.

Traditional U.S. allies view the signed trade agreements as a foundational framework for further exemption negotiations. The European Union, for example, accepted a "political agreement" that imposes a 15% base tariff on most of its goods but expects certain "strategic commodities" to be excluded. Aircraft and their components are likely to be on the exemption list, while the EU continues to seek exemptions for chemicals, non-patented drugs, wine, and spirits. European companies are also taking action, with Volkswagen's CEO stating that the company would continue negotiations with the Trump administration for a multi-billion-dollar investment plan to compensate for the losses incurred by high tariffs. BMW, on the other hand, is pushing for an export tax refund program, which typically allows exporters to recover paid tariffs or other taxes when exporting products from U.S. factories.

Asian allies are also actively engaging in negotiations. South Korea's finance minister stated that the country is preparing for further talks following last week's agreement with the U.S. Japan's chief trade negotiator flew to the U.S. to continue discussions, with Tokyo's primary concern being the timeline for the implementation of agreed-upon reductions in U.S. auto tariffs. Smaller economies are also working to improve their agreement terms. Cambodia's chief trade negotiator and deputy prime minister expressed hope for exemptions for the textile, footwear, and luggage industries on top of the existing 19% tariff. The deputy prime minister noted that the 19% tariff is not set in stone, as Cambodia has the capability to negotiate exemptions for specific industries.

The ongoing negotiations and the expanding list of exemptions indicate that the trade agreements are far from finalized. Countries continue to seek concessions and exemptions, reflecting the complex and evolving nature of global trade relations under the Trump administration. The U.S. administration's approach to trade, characterized by high tariffs and selective exemptions, is likely to continue shaping global trade dynamics in the coming months and years. The evolving landscape of trade negotiations underscores the need for countries to remain adaptable and proactive in pursuing their economic interests.