U.S. Negotiates Tariff Deals with Key Trading Partners

As the deadline for the implementation of reciprocal tariffs by the United States approaches, several countries are in the midst of negotiations with Washington. The talks, which involve around a dozen key trading partners, are aimed at avoiding the imposition of new tariffs that could disrupt global trade and financial markets.

Kelly Ann Shaw, a former senior trade advisor to President Trump and now a partner at a law firm, anticipates that several agreements will be announced before the temporary suspension of tariffs expires on July 9. She described the 90-day negotiation window as highly challenging, noting that the discussions with approximately 18 core trading partners are serious. After July 9, countries that fail to reach an agreement will receive a document outlining the commitments expected from them. Refusal to comply could result in the implementation of new tariffs.

The negotiations are not just about adding another trophy to Trump's trade policy cabinet. Central banks, including the Federal Reserve, view tariffs and the uncertainty they create as potential inhibitors of economic growth and disruptors of financial markets. They could also drive up inflation during a rate-cutting cycle. If tariff reduction agreements are delayed, the Federal Reserve may remain inactive for a longer period.

Here is an overview of the tariff rates faced by major U.S. trading partners and the efforts each country has made to avoid increased tariffs:

United Kingdom: 10%

The U.K. has reached a limited agreement with the U.S. that includes a 10% base tariff on British products. The automotive and steel industries have been exempted from a 25% industry tariff. However, key details such as the effective date of the tariff reduction, export quotas for British steel, and security review requirements for British steel mill ownership remain unclear.

European Union: 20%

The EU has submitted a revised negotiation proposal in response to what it considers an unrealistic "wish list" from the Trump administration. However, Trump's recent statements suggest that a short-term agreement is unlikely. He indicated that negotiations with the EU have made no progress and that U.S. tariffs on EU goods will increase to 50% starting June 1.

Switzerland: 31%

Switzerland and the U.S. have held two rounds of talks, with both sides describing the discussions as constructive. The next step involves signing an official "letter of intent," followed by formal negotiations in Washington. Switzerland's primary concern is avoiding a 31% reciprocal tariff and hopes to eliminate the remaining 10% tariff during the suspension period. Trump has shown particular interest in Switzerland's pharmaceutical industry, and imposing tariffs on pharmaceuticals could significantly impact companies like Novartis and Roche.

India: 26%

Indian Commerce Minister Piyush Goyal concluded a four-day visit to the U.S., describing his talks with U.S. representatives as productive. India and the U.S. plan to proceed in three phases, aiming to sign an initial agreement by July. The first phase will cover industrial goods market access, certain agricultural products, and non-tariff barriers. The second phase, expected between September and November, will address a broader range of issues with more details. The third phase aims to achieve a comprehensive agreement, with approval from the U.S. Congress targeted for next year.

Japan: 24%

Japan's trade delegation is continuing negotiations in Washington. Chief negotiator Akira Amari previously expressed hope for an agreement by June. In addition to reciprocal tariffs, Japan is focused on a 25% tariff on the automotive industry and a 141 billion dollar acquisition of U.S. steel companies by Japanese steelmakers. Japanese officials have indicated a preference for taking more time rather than making significant concessions to meet deadlines. Prime Minister Yoshihide Suga, following a conversation with Trump, reiterated Japan's request for the removal of these tariff measures.

South Korea: 25%

South Korea's delegation is in Washington for a second round of technical discussions, following a ministerial-level meeting in South Korea the previous week. The talks focus on six areas: trade balance, non-tariff measures, economic security, digital trade, product origin, and commercial factors.

Vietnam: 46%

Vietnam reported progress in the second round of U.S.-Vietnam trade talks. The Ministry of Industry and Trade stated that the three-day negotiations identified several issues on which consensus or near-consensus was reached, as well as areas requiring further discussion. The next round of consultations is scheduled for June, with technical teams strengthening communication to reach an agreement that meets both countries' expectations and conditions as soon as possible.

Thailand: 36%

Thailand's Commerce Minister Pichai Naripthaphan met with U.S. Trade Representative Jamison Grill in mid-May, expressing Thailand's readiness to begin negotiations in Washington as soon as possible. Prime Minister Prayut Chan-o-cha has ordered stricter standards for issuing certificates of origin to prevent abuse. Thailand's Finance Minister Pichai Chunhavajira stated that the country aims to reduce its annual trade deficit with the U.S. by up to 150 billion dollars through enhanced regulation.