Trump postpones Liberation Day 2.0 celebration, hints at imposing fresh tariffs
Starting from August 1, 2022, the United States will impose reciprocal tariffs on imports from Japan, South Korea, and Thailand. The tariff rates for each country are as follows:
- Japan: 25%
- South Korea: 25%
- Thailand: 36%
These tariffs were announced by former President Donald Trump in mid-2022 as part of a broader set of reciprocal tariffs targeting multiple countries due to perceived trade deficits and barriers.
The tariff rate for Thailand is the same as the initial rate imposed in April 2022 if no deal was reached before August 1. The tariff for Japan and South Korea was set at 25%. [Sources 1, 2]
These tariffs could have implications for global markets and commodities. For instance, imports from Japan and South Korea account for 5% and 4% of total US goods imports respectively. [Source 3]
The country-specific tariffs announced this week are unlikely to have a significant impact on inflation. However, the average effective tariff rate on all US goods imports would rise by just 0.4 percentage points if the 25% reciprocal rate were to be imposed on imports from Japan, and by a mere 0.2 percentage points if imposed on South Korea. [Source 4]
In other news, the Stoxx Europe Total Market Pharmaceuticals Index is down more than 6% so far this year, and there are concerns that Trump's proposed 200% levy on pharmaceuticals could have more meaningful effects. [Sources 5, 6]
Meanwhile, global asset management firm BlackRock remains bullish on the US outlook, believing "immutable economic laws" such as the US debt dynamics will keep Trump in check. [Source 7]
Further announcements on trade and semiconductor tariffs are expected. Copper prices surged in the US on Tuesday (8 July), and research provider Pantheon Macroeconomics believes the copper tariff will have little impact on US inflation. [Sources 8, 9]
If Trump surprises investors with harsher measures than expected and further agreements are not reached before the new 1 August deadline, equity markets could drop as markets price in some of the same concerns seen in April. [Source 10]
Trump's delay in enforcing tariffs suggests he is keen to make deals. Letters detailing tariffs for 14 countries, including Japan, South Korea, and Thailand, were sent by Trump. [Source 11]
However, if foreign investors decide to start dumping Treasuries and yields spike as a result, the US could face a significant problem. The US debt, which stands at $36 trillion, is held by a significant proportion of foreign investors. [Source 12]
In conclusion, the announced tariffs for Japan, South Korea, and Thailand are a part of a broader trade policy shift. While these tariffs may not have a significant impact on inflation, they could have implications for global markets and commodities, and could potentially impact US-Japanese and US-South Korean relations.
- The tariffs on imports from Japan, South Korea, and Thailand, set to be implemented from August 1, 2022, form part of a larger set of policies influenced by perceived trade deficits and barriers, as announced by former President Donald Trump.
- Global asset management firm BlackRock maintains a bullish stance on the US outlook, believing that certain economic laws like the US debt dynamics will serve as a check on Trump's policies, such as the proposed tariffs.
- Semiconductor tariffs and trade announcements are anticipated, and the potential impact on US inflation, as suggested by research provider Pantheon Macroeconomics, may be minimal for copper tariffs.
- Wrapping up the tariff situation, the announced rates, if enforced, could have implications for both global markets and commodities, and potentially impact relations with trading partners like Japan and South Korea.
- Most notably, a potential concern for the US economy lies in the possibility of foreign investors deciding to sell Treasuries, which, if it occurs, could lead to a spike in yields and present a significant problem for the US, given its massive debt ($36 trillion) that is held by a substantial number of foreign investors.
