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Donald Trump has revived his threat to hit major trading partners with steep “reciprocal” tariffs even as he granted a three-week reprieve for countries to negotiate trade deals with the US.
The president on Monday sent letters to Japan and South Korea, both among the US’s biggest trading counterparts, saying the country would impose 25 per cent levies beginning on August 1. South Africa would be hit with 30 per cent tariffs, Trump said, while also announcing big levies on 11 other countries.
The tariffs were roughly on a par with those Trump unveiled during his “liberation day” announcement on April 2, which had prompted severe ructions across global financial markets.
The reciprocal levies, which affected dozens of countries, were partially paused until July 9, steadying markets. But since then the White House has struck just three trade pacts — with the UK, China and Vietnam.
Trump said in an executive order late on Monday that the reciprocal levies would now go into effect at just after midnight on August 1. The president made the decision “based on additional information and recommendations from various senior officials, including information on the status of discussions with trading partners”, the order said.
The scale of Trump’s tariff threats on Monday pressured markets despite the delay in their implementation. The S&P 500 ended Monday down 0.8 per cent. Meanwhile, the Japanese, South Korean and South African currencies all declined about 1 per cent against the US dollar.
JPMorgan noted that the announcements on Monday were a “reminder that risks are skewed towards higher tariff rates rather than lower”.
“The reason for the initial delay — beyond the significant market sell-off — was to allow time to generate a series of unilateral trade deals,” the Wall Street bank said. “Not surprisingly, few actual deals have been concluded and the Trump administration has returned to where it all started.”
In almost identical letters posted on his Truth Social platform, Trump said the US goods trade deficits with the countries targeted on Monday, which included Indonesia, Malaysia and Thailand, were a “major threat to our economy and indeed our National Security”.
In the letters, addressed to Shigeru Ishiba, Japan’s prime minister, and Lee Jae-myung, South Korea’s president, Trump added that if either country increased its tariffs in retaliation “then, whatever the number you choose to raise them by, will be added on to the 25 per cent that we charge”.
But in an indication that the proposed tariffs could be negotiated down, he said if the countries opened their markets “we will, perhaps consider an adjustment . . . These tariffs may be modified, upward or downward, depending on our relationship with your Country.”
The US already has a series of sectoral tariffs on imports from all countries, including a 25 per cent tariff on autos and auto parts and a 50 per cent tariff on all imports of steel and aluminium.
A US official confirmed that the goods that were already subject to sectoral tariffs, such as autos and metals, would not be affected by the new rates outlined by Trump in addition.
Washington also has national security probes that could lead to tariffs on a range of other goods and industries, including aerospace, pharmaceuticals, lumber, copper, chips and consumer electronics.
Trump has escalated his rhetoric against Tokyo in recent weeks, singling out the crucial trading partner and attacking it as “spoiled” for refusing to purchase more American rice.
Weeks of negotiations between US and Japanese trade negotiators have produced a number of proposals aimed at breaking the trade deadlock, including Japan buying more US energy and agricultural products. But Tokyo has also demanded a full exemption from Trump’s 25 per cent auto tariffs.
Meanwhile, US trade talks with South Korea were delayed by political turmoil in Seoul following the impeachment of former Korean president Yoon Suk Yeol.
Separately, the EU expected to sign a temporary trade deal with the US this week that would keep tariffs at 10 per cent while talks continued, trade commissioner Maroš Šefčovič told member states on Monday.
The two sides were working on plans to reduce the 25 per cent tariff on vehicles but there was no guarantee levies on steel would be reduced from their 50 per cent level, he added, according to three people briefed on the discussions.
Additional reporting by Andy Bounds in Brussels and Kate Duguid in New York
