Trade diplomacy has always been a slow waltz. Donald Trump prefers mosh pits. On July 7th America’s president fired off letters to allies in Asia, warning of steep new tariffs unless they secured trade deals with America by August 1st. Japan and South Korea were each threatened with a 25% levy (see table); Indonesia and Thailand were allotted higher rates, 32% and 36% respectively. “We invite you to participate in the extraordinary Economy of the United States,” proclaimed Mr Trump.
The move is the second time in three months Mr Trump has imposed—and then reconsidered—what he calls “reciprocal” tariffs. The earlier deadline of July 9th will pass with little to show. Only Britain and Vietnam have managed to sign so-called “frameworks”, though with scant details. No comprehensive deals have emerged. That has not stopped Mr Trump from escalating his rhetoric. Tariff Man, it seems, has returned to prime time.
Trade deals rarely conform to television schedules. Japan, the administration’s supposed frontrunner, has engaged in seven rounds of talks since April. Its negotiators have been courteous: one donned a MAGA hat during a visit to Washington. But trade talks are not campaign rallies. Japan is reluctant to make concessions that would alienate farmers ahead of its upper house elections on July 20th or threaten its carmakers. And tariffs on Japanese autos, the main irritant, are already in place under a different policy measure, and thus unrelated to the new deadline.
The South Korean case is messier still. Mr Trump has complained Seoul imposes tariffs “four times higher” than America’s, an assertion at odds with the fact that a free-trade agreement already slashed most tariffs to near zero. The agenda has since ballooned. America now demands everything from digital tax relief for its tech giants to data-export leniency for Google, from Netflix’s local network fees to a Korean stake in an Alaskan pipeline. As Lee Jae-myung, South Korea’s president, admitted with rare candour, “the two sides are not really clear what they want”.
By keeping the scope vague and the deadlines fluid, Mr Trump generates maximum leverage. Partner countries, heavily reliant on exports to America, face a conundrum: concede speedily to avoid penalties or stall and hope for another delay. Either way the pressure is unilateral. For the White House, a handful of token purchases—soybeans, LNG, maybe some F-35s—could be paraded as victories. For the partners the goal is to yield enough to postpone punishment without appearing weak at home.
The volume of trade at stake is big. Last year America imported $148bn in goods from Japan and $132bn from South Korea, together accounting for nearly 9% of total imports. Mr Trump’s proposed tariffs would double the levy on roughly 15% of the American car market, where Japanese and Korean vehicles dominate. Shares of Toyota and Honda fell on the news; so too, curiously, did those of Ford and General Motors, hinting at the wider economic toll of disruption.
The product mix makes a tariff war particularly damaging. Japan supplies precision tools, pharmaceuticals and medical equipment. South Korea exports semiconductors, computer parts and household appliances. These are not easy items to substitute. American businesses that rely on specialised machinery or high-end components may find themselves with few alternatives. For the average consumer meanwhile the cost of a washing machine, or a replacement pacemaker, may climb.
All of this undermines the illusion tariffs are a means to freer trade. Mr Trump may claim he is fighting for open markets but his record suggests otherwise. According to the Yale Budget Lab, the average effective tariff rate in America was 2.4% when Mr Trump entered office. It has since ballooned to 15.6%. His latest proposals, if fully implemented, would take the figure far higher.
More than a dozen countries have received letters. Some, like Canada, China and Mexico, are locked into separate talks. The European Union—conspicuously absent from the latest round—remains the biggest player yet to strike a deal. EU officials are scrambling to finalise a narrow “agreement in principle” before the next deadline. The bloc is seeking carve-outs for wine, aeroplane parts and carmakers with factories in the American South. In return it may offer regulatory flexibility on digital rules and joint posturing on China. Brussels has also readied a list of retaliatory tariffs, in case diplomacy stalls.
Most trading partners seek to de-escalate the confrontation without being seen to capitulate. Some pledge new purchases without firm targets. Others recycle old commitments with fresh packaging. The pattern recalls Mr Trump’s earlier skirmishes with Mexico, which produced rebranded deals and recycled promises.
It is tempting to dismiss all this as bluster in order to energise a domestic base rather than reconfigure global trade. But the economic consequences are real. Even the threat of tariffs can sap investment and scramble supply chains as well as inflate prices. If implemented they would represent one of the biggest arbitrary tax increases in recent American history.
There is also a geopolitical cost. Japan and South Korea are not rivals. They are American allies, cornerstones of the Indo-Pacific alliance network. To menace them with economic coercion while demanding security co-operation against China sends a foggy signal. Trade policy, a tool of alliance-building in the past, now resembles a protection racket: agree to the boss’s terms or face the consequences.
The global trading system used to be governed by rules: slow, sometimes unfair, but rules nonetheless. Mr Trump prefers television deadlines; tariff ultimatums; and “deals” sealed by photo opportunities. His methods may produce headlines. But real trade diplomacy is stubbornly immune to reality-TV pacing. Countries are discovering the world’s biggest economy can be both indispensable and impossible. They may nod along with the show. But they are silently searching for a new stage. ■
