Trump’s trade war promises no real endgame

The reward for negotiators from South Africa to Malaysia working to reach a deal with the White House: three more weeks in the pressure cooker. On Monday, President Donald Trump again extended his deadline to seal country-by-country trade agreements, this time until August 1. The announcement came posed as a threat, with letters sent to a group of world leaders declaring that their exports would be subject to levies ranging from 25 percent to 40 percent next month. Effectively a reminder of Trump's "Liberation Day" tariff threats, his whack-a-mole demands portend ill for any deals that are struck.

Japan and South Korea provide cautionary tales. Trump's April trade announcement applied levies of 24 percent and 25 percent, respectively, only to be delayed for negotiations. He has since vented that Japan does not buy enough American rice and cars. Yet half of all the tariff-free rice Japan imports comes from the US already. Meanwhile, US rice exports to all countries account for a measly $2 billion, less than the $13 billion Japanese tourism contributed to the domestic economy in 2019, according to the State Department. Trump and spokesperson Karoline Leavitt nonetheless fixate on this one issue.

South Korea shows the cost of failing to satisfy such whims. The country sealed a free trade agreement with the US that came into force in 2012. It did nothing to prevent today's broadside. Now, Trump's agenda could slow Korean industrial giants' efforts to ramp production on American shores: recent cuts to electric-vehicle subsidies may ding the likes of battery maker SK On and automaker Hyundai.

Tariff threats against smaller countries are particularly difficult to appease. Look at, say, Laos. Its goods imports from the US amounted to $40 million, versus $803 million in goods exports, in 2024. This is infinitesimal in the scheme of the US's overall $1.2 trillion goods trade deficit, yet a promised 40 percent tariff on its exports would be extremely material to Laos's own $16 billion economy.

Furthermore, what any country gets for reaching a "deal" is still nebulous beyond lowering rates that have never been imposed. Look at Vietnam, where Trump announced a tentative agreement setting a 20 percent tariff and a levy designed to target products passing through the country from elsewhere. Monday's announcements for South Korea and Japan, where there is no deal, involve the same "trans-shipment" charge plus a 25 percent baseline rate. According to the White House, Vietnam even dropped its tariffs on US goods to zero.

Meanwhile, new bugbears – like an additional threatened 10 percent duty on the BRICS nations – creep up. Whether the tumult can ever really end is unclear. The best outcome for any country might be the framework sealed with the UK, which softened some trade barriers but little else. It's a small win now, without relying on Trump not to simply change his mind in the future.

President Donald Trump sent letters to multiple US trading partners on July 7 notifying them of new tariff rates their goods can expect to face starting on August 1. These rates are in most cases close to so-called reciprocal tariffs announced on April 2, which were subsequently paused to allow for the negotiation of trade deals. That pause was initially scheduled to conclude on July 9.