US trade war: The state of play as Trump’s country-specific tariffs take effect | Money News

Donald Trump’s trade war has been difficult to keep up with, to put it mildly.

For all the threats and bluster of the US election campaign last year to the on-off implementation of trade tariffs – and more threats – since he returned to the White House in January, the president‘s protectionist agenda has been haphazard.

Trading partners, export-focused firms, customs agents and even his own trade team have had a lot on their plates as deadlines were imposed – and then retracted – and the tariff numbers tinkered.

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While the UK was the first country to secure a truce of sorts, described as a “deal”, the vast majority of nations have failed to secure any agreement.

Deal or no deal, no country is on better trading terms with the United States than it was when Trump 2.0 began.

Here, we examine what nations and blocs are on the hook for, and the potential consequences, as Mr Trump’s suspended “reciprocal” tariffs take effect.

How did we get to this point?

To understand the present day, we must first wind the clock back to early April.

Then, Mr Trump proudly showed off a board in the White House Rose Garden containing a list of countries and the tariffs they would immediately face in retaliation for the rates they impose on US-made goods. He called it “liberation day”.

The tariff numbers were big and financial markets took fright.

Just days later, the president announced a 90-day pause in those rates for all countries except China, to allow for negotiations.

The initial deadline of 9 July was then extended again to 1 August. Late on 31 July, Mr Trump signed the executive order but said that the tariff rates would not kick in for seven additional days to allow for the orders to be fully communicated.

Since April, only eight countries or trading blocs have agreed “deals” to limit the reciprocal tariffs and – in some cases – sectoral tariffs already in place.

Who agreed a deal over the 120 days?

The UK, Japan, Indonesia, the European Union and South Korea are among the eight to be facing lower rates than had been threatened back in April.

China has not really done a deal, but it is no longer facing punitive tariffs above 100%.

Its decision to retaliate against US levies prompted a truce level of 30% to be agreed between the pair, pending further talks.

A 90-day deadline for an agreement, which is to fall on 12 August, looks set to be extended

There’s a backlash against the EU over its deal, with many national leaders accusing the European Commission of giving in too easily. A broad 15% rate is now in force, down from the threatened 30%, while the bloc has also committed to US investment and paying for US-produced natural gas.

Mr Trump has told the bloc he will be watching carefully to ensure it keeps its commitments.

Where does the UK stand?

We’ve already mentioned that the UK was the first to avert the worst of what was threatened.

While a 10% baseline tariff covers the vast majority of the goods we send to the US, aerospace products are exempt.

Our steel sector has not been subjected to Trump’s 50% tariffs and has been facing down a 25% rate. The government announced on Thursday that it would not apply under the terms of a quota system.

UK car exports were on a 25% rate until the end of June when the deal agreed in May took that down to 10% under a similar quota arrangement that exempts the first 100,000 cars from a levy.

Who has not done a deal?

Canada is among the big names facing a 35% baseline tariff rate. That is up from 25% and covers all goods not subject to a US-Mexico-Canada trade agreement that involves rules of origin.

America is its biggest export market, and it has long been in Trump’s sights.

Mexico, another country deeply ingrained in the US supply chain, is facing a 30% rate but has been given an extra 90 days to secure a deal.

Switzerland has a 39% rate. Brazil 50%.

For India, it’s also 50%. It had been 25% up until this week, but that number was doubled by Mr Trump because India buys Russian oil on the cheap, helping to fund Vladimir Putin’s war machine in Ukraine.

Is there more to come?

Certainly, there are additional threats.

Mr Trump says he wants to impose a 100% tariff rate on all semiconductors and chips made outside the US in a bid to bring production back to America.

That risks price hikes to electronics, from laptops to cars.

In an interview with Sky’s US partner CNBC, he also said that pharmaceutical products made outside the US could ultimately end up facing a tariff rate of up to 250%.

Again, we have no date for when any duties on those imports could take effect.

What are the consequences of the tariff hikes?

This is where it all gets a bit woolly – for good reasons.

The trade war is unprecedented in scale, given the global nature of modern business.

It takes time for official statistics to catch up, especially when tariff rates chop and change so much.

Any duties on exports to the United States are a threat to company sales and economic growth alike – in both the US and the rest of the world. Many carmakers, for example, have refused to offer guidance on their outlooks for revenue and profits.

Apple warned last month that US tariffs would add $1.1bn of costs in the three months to September alone.

It has since announced a $100bn ($75bn) investment in US manufacturing.

Barriers to business are never good, but the International Monetary Fund has raised its forecast for global economic growth this year from 2.8% to 3%.

Some of that increase can be explained by the deals involving major economies, including Japan, the EU and UK.

US growth figures have been skewed by the rush to beat import tariffs, but the most recent employment data has signalled a significant slowdown in hiring, with a tick upwards in the jobless rate.

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The big risk ahead?

It’s the prospect of another self-inflicted wound.

The elephant in the room is inflation. Countries imposing duties on their imports force the recipient of those goods to foot the additional bill. Do the buyers swallow it or pass it on?

The latest US data contained strong evidence that tariff charges were now making their way down the country’s supply chains, threatening to squeeze American consumers in the months ahead.

It’s why the US central bank has been refusing demands from Mr Trump to cut interest rates. You don’t slow the pace of price rises by making borrowing costs cheaper.

A prolonged period of higher inflation would not go down well with US businesses or voters. It’s why financial markets have followed a recent trend known as TACO, helping stock markets remain at record levels.

The belief is that ‘Trump Always Chickens Out’. He may have to back down if inflation takes off.

However, financial markets now see the prospect of an interest rate cut ahead in September after July’s US employment data came in much weaker than expected.

It may be that Mr Trump gets his wish for a rate cut after all, due to the effects his tariffs are having on business confidence.

Inflation figures due next week could be crucial in determining the outcome.