In One Sentence

• On June 16, Canadian Prime Minister Mark Carney and U.S. President Donald Trump agreed during the G7 summit in Alberta to pursue a new economic and security deal within 30 days, despite ongoing tensions over U.S. tariffs that Carney has vowed to challenge.
• At the G7 summit, President Trump and U.K. Prime Minister Keir Starmer signed the implementation terms of their economic prosperity deal, which lowers U.S. tariffs on British autos and aerospace imports while deferring final decisions on steel and pharmaceuticals, and aims to strengthen bilateral ties amid ongoing global tariff tensions.
• G7 leaders announced a new critical minerals action plan to secure supply chains by promoting investment, responsible mining, and international cooperation, and thereby counter non-market distortions and strengthen economic and national security.
• President Trump observed that the EU and Japan had yet to offer fair terms for their respective trade deals and warned of impending tariffs on pharmaceuticals too, while his economic team remained in Canada to continue negotiations after his early departure from the meeting.

Mark the Essentials

• In his meeting with German Chancellor Merz, President Trump demanded the European Union buy more U.S. oil and gas as part of the ongoing effort to rebalance trade relations. 
• Canada’s Mark Carney noted that his country has not agreed to a swift trade deal with the U.S. because it opposes President Trump’s tariff-first approach, arguing that such tariffs harm both economies and violate existing agreements like USMCA. Ottawa is pushing for a full removal of tariffs while working to align with the U.S. on shared economic security goals.
• The U.S. has rejected the European Union’s legal argument put forth at the WTO supporting its $85 billion in retaliatory measures, arguing that the Trump administration’s tariffs are not safeguard measures under WTO rules and thus cannot legally trigger retaliation under the Agreement on Safeguards. Washington also claims the EU has failed to meet consultation requirements, while the EU insists it acted in full compliance after the U.S. refused to engage. 
• Japan’s top trade negotiator Ryosei Akazawa said talks with the U.S. “remain in a fog,” emphasizing that while the July 9 ‘reciprocal tariff’ pause deadline is significant, it is not a firm deadline for reaching a deal. Tokyo continues to seek removal of U.S. tariffs on Japanese cars but is wary of making politically sensitive concessions ahead of its July 20 Upper House elections.
• The European Union remains engaged in trade negotiations with the U.S. and has expressed a preference for a mutually beneficial agreement, but is reluctant to accept a deal that includes unilateral concessions or preserves Trump’s 10% baseline tariff. While progress has been made on nontariff issues, EU officials are still pushing for a broader agreement that addresses tariffs, ahead of the looming July 9 deadline.

Keeping an Eye On…

• So, did the world learn anything further on President Trump’s priorities regarding his reciprocal and sectoral tariffs, now that he has had the chance to meet (briefly) with key counterparts and trade partners at the G7 summit in Canada. Well, not much additionally. The unhelpful news on the tariffs front, and in the on-going negotiations, only reinforced what is – or should be – already known about Trump’s priorities.
  
  First, the president’s enthusiasm for striking deals is tempered by his lack of enthusiasm for compromise. For Mr. Trump, quick ‘wins’ to calm financial markets and ensure certainty of investment prospects for business is good. Trade deficit reduction and the reshoring of industrially salient industries is even better. When push comes to shove, the latter will not be substantially traded off for the former. The extent to which Donald Trump is personally invested in deficit reduction and local production should not be underestimated; it has been an animating fixation through his adult life. And his second presidency presents a last opportunity to leave an enduring mark in this regard. The reciprocal and sectoral tariffs are not a mere tactical caper to win a modicum of additional market access for U.S. goods abroad. The Japanese, in particular, appear to have misjudged his enthusiasm for a deal, hoping that negotiating in good faith and dangling deepened cooperation on economic security measures in areas of rare earths, shipbuilding and semiconductors as a bargaining chip would suffice to bring a deal home (and an escape from Trump’s tariffs) by his self-appointed July 9th deadline.
  
  Second, the auto and steel sectors loom large in Trump’s consciousness. They are symbols of U.S. manufacturing that must be reshored to the maximum extent practicable. This cannot be good news to the Germans, Japanese or the South Koreans. In 2024, German auto exports to the U.S. totaled approx. $27 billion or 0.6% of German GDP, and it was also the sixth largest source of U.S. steel imports. Japanese auto exports to the U.S., meanwhile, totaled approximately $40 billion in 2024, and along with auto parts account for 34% of Japan’s total exports to the U.S. And South Korea topped the list of car exporters in 2024 with 1.5 million units exported. The German (and EU), Japanese and South Korean negotiations with the administration will not be resolved as easily as was the case with the United Kingdom (see next point), given that the UK is a modest auto exporter as well as the rare case of an advanced economy that runs an overall goods trade deficit with the U.S. With 75% of the U.S. goods trade deficit in 2024 composed of motor vehicle and auto parts, pharmaceutical products, machinery, and electrical equipment, expect Ireland’s $50 billion pharmaceutical goods exports – a classic case of offshoring and profits shifting by affiliates of U.S. multinationals – to come due for reshoring. Section 232-based national security tariffs on pharma are expected to be announced soon.
  
  Third, a hard line has been drawn in particular on autos. Auto tariffs will not be coming down to their original 2.5%, come what may. While the 25% Section 232 auto tariff is negotiable, a baseline 10% tariff rate – and that too for in-quota imports only – is to remain, regardless. At least, this is what the United Kingdom will face. Out-of-quota tariff will stay at 27.5% (2.5% MFN auto tariff rate + 25% Section 232 auto tariff rate). The design of the tariff-rate quota for South Korean, German and Japanese vehicles is anybody’s guess but will likely be an uncompromising one, given that South Koreans, Japanese and Germans export 15 times (1.5 million), 14 times (1.4 million) and 6 times (600,000) the number of cars to the U.S., respectively, compared to the UK. Tokyo’s argument that the additional reciprocal tariff surcharge of 14% on Japan should be reduced or eliminated to reflect expanded FDI commitments in the U.S. auto sector has made limited headway. By contrast, the steel tariffs may be negotiable. A new trading union for steel and aluminum with zero tariffs is to come into effect with the UK, premised on the security of supply chains and “ownership of relevant production facilities”. The UK may be a poor reference point though; it does not feature among the top 10 steel exporters to the U.S. With Trump determined to achieve a sustained capacity utilization rate of 80% by the domestic industry, the U.S.’ top five import partners (Canada, EU, Mexico, S. Korea, and Brazil provide 75% of the imports) will likely have to swallow hefty tariffs. Similarly hefty tariffs are to be assessed on steel derivative items too, such as refrigerators-freezers, washing machines, dishwashers, etc., based on their value of steel content. These derivative tariffs will hit China particularly hard.
  
  Fourth, non-tariff and behind-the-border barriers, such as digital services taxes, food safety standards, conformity assessments, etc. are not a priority for the time being. Goods trade and tariffs, Trump’s abiding fixation, is the overwhelming priority. These NTBs were kicked into the long grass in the UK agreement and a similar placeholder deal with the European Union is in the making. Make no mistake: the Trump administration has no love lost for the EU’s supposedly “extorti[ve] and unfair [digital sector] fines and penalties” or the OECD’s supposedly unfair extraterritorial tax harmonization rules. Modernizing the global taxation system for the 21st century holds no interest to Mr. Trump. To the contrary, the administration is arming itself with a ferocious ‘revenge tax’ provision in the ‘Big Beautiful Bill’, currently doing the rounds on the Hill, to strike back when these fines and penalties come due (although latest reporting suggests this provision is being dropped from the BBB; besides Section 891 of the tax code, though unused since 1934, already provides for somewhat comparable penalties). But this is a weapon to be wielded another day; it is all about deficits and tariffs today. Besides, the U.S.’ objection to foreign digital services taxes has been strongly communicated to counterparts, per Secretary Bessent.
  
  Finally, China was not present at the G7 Summit in Canada but was very much on the table of discussion. Both Japan and the EU have offered cooperation in the semiconductor and critical minerals sectors which, to be fair, would be a continuation of cooperative undertakings initiated during the Biden administration. Additionally, the Europeans have offered cooperation in aviation and the Japanese in shipbuilding. The terms of the UK deal moreover require London to align its supply chain security standards with on-going and future U.S. Section 232 investigations. Given the ever-lengthening list of such investigations (active ones include copper, timber and lumber, semiconductors, pharmaceuticals, trucks, processed critical minerals, and commercial aircraft and jet engines), the UK’s – and third country – trade ties with China cannot but be impacted, going forward. It begs the question, too, as to why allies and partners should have to burn their (trade policy) bridges with China or follow the U.S. down its path of casual disregard of multilateral trade and treaty law, especially if the Trump administration chooses to later pursue its own sweetheart market purchases deal with Beijing? Be that as it may, the various negotiations so far have been illuminating in that they shed light on President Trump’s priorities and tactics. But with just a little over two weeks to go before his Liberation Day tariff pause expires, there is dismally little to show by way of results.

Expanded Reading

• U.S., EU Near Deal on Nontariff Trade Irritants, The Wall Street Journal, June 20, 2025
• Japan’s trade negotiator says US tariff talks are ‘in a fog’, Reuters, June 19, 2025
• G7 Leaders In Alberta Release Critical Minerals Action Plan, Canadian Mining Journal, June 17, 2025
• Trump Says EU Not Offering Fair Trade Deal, Japan being ‘Tough’ Too, Reuters, June 17, 2025
• Carney Says He and Trump are Aiming for a Canada-US Deal inside 30 Days, Reuters, June 16, 2025
• US and UK Announce a Trade Deal, But Steel Imports are Still Being Negotiated, Associated Press, June 16, 2025
• Trade Deal between Canada and the U.S. Could Come within 30 Days, Ottawa Says, Yahoo Finance, June 16, 2025
• U.S.: EU-Proposed Retaliation at WTO Invalid as Tariffs aren’t Safeguards, Inside US Trade, June 11, 2025
• President Trump Participates in a Bilateral Meeting with the Chancellor of Germany, The White House, June 5, 2025