{"id":42647,"date":"2025-07-28T13:00:08","date_gmt":"2025-07-28T13:00:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/42647\/"},"modified":"2025-07-28T13:00:08","modified_gmt":"2025-07-28T13:00:08","slug":"the-tariffs-clock-counts-down","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/42647\/","title":{"rendered":"The Tariffs Clock Counts Down"},"content":{"rendered":"

Before the EU deal, one of the biggest agreements struck in recent days was with Japan. Trump announced<\/a> the deal on Tuesday, but the exact terms are still murky. According to a Truth Social post by Trump, the agreement<\/a> set the U.S. tariff rate on Japanese imports at 15 percent\u2014a welcome reduction from 25 percent Trump had previously threatened, but higher than the 10 percent levy that was in place while the countries negotiated. The Trump administration\u2019s 25 percent global auto tariff will also drop<\/a> to 15 percent for Japanese cars as part of the deal, and there will be no quota on the total number of imports. Trump also said that Japan would reduce barriers to the import of American cars and rice, and the U.S. ally would invest $550 billion into an investment fund to be used, supposedly<\/a>, at Trump\u2019s discretion. The president claimed the U.S. would \u201creceive 90 percent of the profits,\u201d describing the investment as \u201cseed money.\u201d<\/p>\n

However\u2014in what may be a troubling sign for all the White House\u2019s trade agreements\u2014the deal is more wobbly than Trump made it sound. There is no written deal between the two countries, and Japan has already contradicted some of Trump\u2019s claims. According to Japan, the U.S. would receive<\/a> profits from the investment fund proportional to its contributions and assumption of risk\u2014a stark difference from Trump\u2019s claim that Japan was fully financing a fund that gave the lion\u2019s share of the profits to Washington. Moreover, the deal was reportedly a product<\/a> of a hasty, 70-minute meeting between Trump and Japan\u2019s chief negotiator. \u201cThe Japanese are describing [the fund] in vastly different terms than the president,\u201d Justin Wolfers, a professor of public policy and economics at the University of Michigan, told TMD.<\/p>\n

The discrepancy makes it difficult to tell what, exactly, the agreement actually entails. \u201cThere\u2019s just no information whatsoever,\u201d Mark Zandi, chief economist of Moody\u2019s Analytics, told TMD. \u201cI doubt, at the end of the day, it\u2019s going to result in any increased investment in the United States.\u201d<\/p>\n

Looking beyond issues with the investment fund, the deal itself may also be less favorable for Americans than it initially seemed. The Japan agreement is unlikely to cause a significant change in demand for American cars or revenue to American rice farmers, according to Wolfers. And, of course, it results in tariffs that, while lower than what Trump initially threatened, are still significantly higher than tariff rates in recent history.\u00a0<\/p>\n

\u201cNearly everyone was charging us tariffs of about 2 percent. We were charging them tariffs of about 2 percent,\u201d Wolfers said. \u201cWhatever tariff we end up charging Americans who import goods from Japan, it\u2019s enormously higher than it was. If I look at the Japan agreement, what is economically meaningful is the tax on Americans who buy from Japan has gone from 2 percent to 15 percent.\u201d<\/p>\n

Similar deals have been struck with other countries, as well, but the results are a mixed bag. The United Kingdom reached a trade deal in May that kept<\/a> levies at 10 percent, Vietnam received<\/a> a rate of 20 percent, and the Philippines and Indonesia both landed<\/a> at rates of 19 percent. The tariffs were not dramatically different from the April \u201cLiberation Day\u201d numbers<\/a>\u2014Indonesia and Vietnam dropped the most, from 32 percent and 46 percent, respectively. But the Philippines\u2019 tariff at the time was 17 percent, and the U.K. rate was 10 percent, making the new deal a downgrade for the Philippines and a lateral move for Britain.<\/p>\n

And with details not set in stone, the U.K. has also already faced issues<\/a> with its agreement, particularly around restrictions on steel. Prime Minister Keir Starmer is set to meet with Trump<\/a> on Monday to discuss the issue, as well as to seek a carveout from possible future pharmaceutical tariffs. The EU isn\u2019t particularly satisfied with its deal, either. The bloc\u2019s leaders were reportedly hoping<\/a> for a rate that was 5 percentage points lower. \u201c15 percent is not to be underestimated,\u201d von der Leyen told reporters yesterday<\/a>. \u201cBut it is the best we could get.\u201d\u00a0<\/p>\n

China, on the other hand, faces a separate deadline<\/a> of August 12 to reach an agreement with the U.S., although the date is expected to be extended another 90 days. Mexico and Canada are also wild cards, as the two major trading partners haven\u2019t yet reached a deal with the U.S. If negotiations fail to produce an agreement by the end of the month, products from Canada could be slapped with<\/a> 35 percent tariffs, and goods from Mexico 30 percent. In a foreboding sign, Trump cast doubt<\/a> on whether a deal could be reached with Canada at all when talking to reporters on Friday. \u201cWe haven\u2019t really had a lot of luck with Canada,\u201d he said. \u201cI think Canada could be one where there\u2019s just a tariff, not really a negotiation.\u201d<\/p>\n

\u201cWe\u2019re back to where we were on Liberation Day,\u201d Zandi said. \u201cThe tariffs have been up, down, all around, but when you look at the actual effective tariff rate\u2014the rate that is being paid by U.S. consumers and businesspeople\u2014it\u2019s close to what the president put forward on Liberation Day.\u201d The overall U.S. average effective tariff rate started<\/a> at 2.4 percent in January, rose to its peak of 28 percent in April, and currently stands at 16.6 percent before the August 1 deadline. After the deadline, the rate will jump to 20.2 percent.\u00a0<\/p>\n

\u201cWe\u2019ll see slower growth and higher inflation over the course of the next six to 12 months. A good rule of thumb is that for every 1 percentage point increase in the effective tariff rate, that\u2019ll raise inflation \u2026 10 basis points,\u201d Zandi said. Using this method, a nearly 18-point increase in the effective tariff rate from January would increase inflation by roughly 1.8 percent. \u201cIt\u2019s going to be a pretty uncomfortable economy, and it\u2019s going to be very vulnerable to anything else that goes wrong,\u201d Zandi said. \u201cThe most likely scenario is we navigate through without a downturn, but it\u2019s not going to feel very good. But all the risks are to the downside.\u201d\u00a0<\/p>\n

The Wall Street Journal reported last week<\/a> that corporations have largely absorbed the costs of Trump\u2019s tariffs thus far, accepting lower profit margins before raising prices for consumers. But that phenomenon may be coming to an end. \u201cI think ultimately, it won\u2019t continue,\u201d Morris Cohen, a professor of manufacturing and logistics at the Wharton School at the University of Pennsylvania, told TMD. \u201cI think there will be prices that will go up across the board. \u2026 That\u2019s part of the reason we\u2019re in a holding pattern for some companies because they don\u2019t want to be caught being the first one, or maybe the only one to raise the price and be left at a disadvantage.\u201d\u00a0<\/p>\n

No matter what, though, companies\u2014and global trading partners\u2014are going to have to wrestle with the fact that the high tariffs are, in fact, going to take effect. \u201cCutting through the noise, tariffs are up, and they\u2019re up a lot, and they\u2019re going to go higher,\u201d Zandi said. \u201cThere\u2019s no TACO here. It\u2019s actually happening.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Before the EU deal, one of the biggest agreements struck in recent days was with Japan. Trump announced…\n","protected":false},"author":2,"featured_media":42648,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[3995,28,103,12,101,5335,8148,3471,26,759,447,644,34241],"class_list":["post-42647","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-asia","tag-business","tag-canada","tag-donald-trump","tag-economy","tag-european-union","tag-howard-lutnick","tag-japan","tag-mexico","tag-tariffs","tag-trade","tag-trump-administration","tag-trumps-trade-war"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/42647","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=42647"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/42647\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/42648"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=42647"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=42647"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=42647"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}