U.S. Shifts Trade Strategy Focusing on Phased Agreements to Avoid Tariffs

The U.S. has shifted its trade strategy, focusing on phased agreements to avoid the reimposition of tariffs. This new approach, announced by Trump's administration, aims to finalize deals by July 9th, providing countries with an opportunity to reach modest agreements. The strategy marks a departure from the initial plan of securing 90 agreements in 90 days, instead prioritizing specific negotiations with different countries on disputed trade aspects.

Senior U.S. trade officials are now concentrating on narrower trade agreements, which allow for targeted negotiations and the establishment of "principle agreements" on specific trade issues. This shift is designed to prevent the reapplication of harsh reciprocal tariffs while maintaining existing tariffs at 10%. The administration's goal is to secure deals that offer some reprieve from harsher tariffs, even if broader agreements appear to have been abandoned.

This strategic adjustment comes as the U.S. engages in a series of trade negotiations and tariff adjustments, particularly with key partners in Latin America. The administration has increased tariffs on aluminum and steel to 50 percent, impacting major suppliers. Additionally, a 25 percent tariff has been implemented on automobiles and key automobile parts, with exemptions for vehicles produced under the USMCA agreement. These measures aim to protect domestic industries and encourage domestic production.

The U.S. has also announced tariffs on countries importing Venezuelan oil, imposing a 25 percent tariff on all goods exported to the U.S. from these countries. Furthermore, the administration has delayed tariffs on Canada and Mexico, allowing for continued negotiations and the implementation of reciprocal tariffs. The auto industry has been exempted from tariffs for a one-month period, recognizing the integrated nature of the North American supply chain.

The U.S. Trade Representative has released a 2025 Trade Policy Agenda, outlining the administration's approach to trade policy. The agenda focuses on creating a "production economy" by addressing high trade deficits and non-reciprocal trade relationships. The U.S. has also announced tariffs on steel and aluminum imports, impacting major suppliers in the hemisphere.

The administration's trade strategy has been met with mixed reactions from trading partners. Some countries have expressed frustration and threatened retaliatory measures, while others have sought to negotiate and find common ground. The U.S. has also faced legal challenges to its tariff policies, with courts blocking some tariffs and granting temporary stays to others.

The market response to these developments remains cautious. While no specific changes have been observed in the broader market, macroeconomic uncertainties persist. The potential effects on currency volatility and asset markets are still being assessed. The broader impact includes potential effects on currency volatility and asset markets.