Overview of the Situation
August is fast approaching, and with it comes the much-anticipated deadline for trade tariffs set by the Trump administration. Countries that have not reached bilateral agreements with the U.S. will face differentiated tariffs ranging from 15% to 50%, depending on the country and sector. The U.S. Trade Representative has confirmed that there will be no further extensions or grace periods.
Recent Bilateral Agreements
In the past week, the Trump administration has announced bilateral agreements with Japan and the European Union, despite criticisms. These deals appear to be beneficial for the U.S. from a mercantilist perspective.
Japan Agreement
Japan signed an agreement establishing a uniform 15% tariff on almost all of its exports to the U.S., including automobiles, trucks, rice, and agricultural products. Previously, the U.S. had threatened to impose 25% tariffs. In return, Japan agreed to open its market further to U.S. products and announced investments worth $550 billion in the U.S. Japan will apply 15% tariffs on U.S. imports in reciprocation.
European Union Agreement
The EU agreement was more controversial. Criticized in Europe for concessions made by Ursula von der Leyen to Trump, the deal set a 15% tariff on most European exports to the U.S., avoiding threats of 30% tariffs and a trade war. In exchange, the EU committed to purchasing $750 billion in U.S. energy, investing $600 billion in the U.S., and making significant military equipment purchases.
However, not all products are covered: European steel and aluminum face a special 50% tariff, while certain goods like aeronautical parts and aircraft have zero tariffs. Most U.S. products continue to enter Europe with low or no tariffs, as there was no equivalent reciprocity from the EU.
China Trade Negotiations
Trade negotiations between China and the U.S. remain without a definitive agreement, but both parties have opted to extend the current tariff truce and maintain dialogue. The U.S. currently applies a 30% tariff on Chinese products (down from 145%), while China maintains a 10% tariff on U.S. goods (down from 125%). Significant structural differences persist, and political ratification of a new extension by Trump is expected.
Mexico’s Situation
For Mexico, there appears to be no immediate arrangement. The Mexican Secretary of Economy stated that, in trade terms, Mexico has done all it could. However, the negotiation goes beyond commerce; issues like migration, drug trafficking, and security are crucial in the U.S. political narrative. Without real agreements on these topics, the threat remains.
Export Exemptions Under T-MEC
Despite the challenges, it seems that exports under the T-MEC umbrella will remain tariff-free. General tariffs will apply to items outside this scope, with special cases like tomatoes or steel requiring urgent agreements. Ironically, left-leaning governments may find protection through the very free trade agreement they once opposed for many years.
