The Trump administration’s ‘reciprocal tariffs’ have finally come into effect after a four-month pause – this time though shorn of the market convulsions that followed the announcement of the initial tariffs on Liberation Day (April 2). For added measure, a number of key countries and economic areas have secured framework agreements with the U.S. – if only verbally (as of August 8, only two countries, the United Kingdom and Indonesia, have been able to memorialize their understandings with Washington in the form of an agreed joint statement). Be that as it may, there are discernable patterns evident from the past month of helter-skelter dealmaking.
First countries/regions, with a few standout exceptions, have been grouped according to tariff tiers. Advanced economies (EU, Japan, South Korea) are to face a 15% levy, both in terms of reciprocal as well as sectoral Section 232 tariffs. Taiwan (20%) and the UK (10%) are relative outliers while Switzerland (39%) is the glaring outlier, although its rate will almost certainly be reviewed down. African countries and Latin American countries are to generally pay a 15% tariff, with South Africa (30%) and Brazil (50%) being glaring exceptions. The main ASEAN countries (Indonesia, Vietnam, Thailand, Malaysia, Cambodia) fall into the 19-20% bracket. And South Asian countries (Pakistan, Bangladesh, Sri Lanka) are to face a 20% tariff, with the exception of India (25%, and now raised to 50% for importing Russian oil). A few unfortunate stragglers have been hit the hardest – Algeria and Libya, 30%; Serbia, 35%; Laos and Myanmar, 40%; Syria 41%.
Second, there was no first-mover advantage in negotiating their respective tariff rate. Japan’s rate and ‘benefits’ is no different from South Korea’s, even though the former expended vastly more effort in terms of time, energy, resources and flattery in negotiating with Trump; Tokyo, in fact, provided the template that allowed for a quick and hasty U.S.-South Korean deal. Ferdinand Marcos Jr.’s naked cartwheels in the Oval Office to impress Trump won him no advantage over Thailand or Cambodia, who were instead busying themselves with border skirmishes for much of July. Narendra Modi is left counting the costs of his sycophancy; he was an early visitor (February 2025) to the White House and imagined himself to be a Trump whisperer. And many of the “$%&hole countries” of Africa and the “drug dealers, rapists and criminals”-infested countries of Central America, to quote Trump, came away with lower tariffs without having their leaders even show up in the Oval Office at all.
Third, in addition to their tiered tariff rate and a zero-tariff commitment on U.S. goods, Trump won several investment pledges (some vague, others performative), LNG purchase promises, and (anti-China) supply chain security commitments from advanced economies. Controversial behind-the-border regulatory issues were left unaddressed for another day. For their part, the South and Southeast Asian emerging economies appear to have been shoehorned into eliminating or reducing their tariffs on U.S. goods and cross-border electronic transmissions as well as into drawing up (anti-China) ‘rules of origin’ in principle to strip out Chinese intermediate goods from their U.S.-bound export baskets.
Fourth, from a functional standpoint, three objectives seem to have been key. First, is trade deficit reduction. More than 50% of the U.S.’ total goods deficit in 2024 was with five Asia-Pacific countries – China, Japan, Korea, Taiwan and Vietnam. The reciprocal and sectoral tariffs are intended to remedy this deficit – although with rates tiered to peer competitor levels, plus the U.S.’ yawning budget deficit, Trump is likely to be in for a nasty surprise when the deficits for 2025 and 2026 are released. Cue the firing of the trade statistician. Second, is reshoring manufacturing of industrially salient sectors, given that machinery, electrical equipment, motor vehicle and auto parts, and pharmaceutical products accounted for 75% of the U.S. goods deficit in 2025. Sectoral tariffs and investment commitments are to fulfil this objective – although, once again, with rates tiered to peer competitor levels and investment commitments left deliberately vague, success is uncertain. And third, to lock down the security of supply chains in strategic goods (to be read as eliminating Chinese content from these U.S.-centric chains). In this regard, zero-for-zero product tariffs with peer advanced economies and “facilitative rules or origin” with emerging economies is envisaged.
All in all, countries have more-or-less grudgingly capitulated to President Trump’s demands. So long as Trump’s exacting geoeconomic tariff play does not bleed into the geopolitical arena, and crucially into the U.S.’ defense obligations, allies and partners have focused their attention more towards limiting their market access losses (the important cases of Canada and Mexico are yet to be finalized but given their extreme dependence on the U.S. market, one can expect a thorough capitulation on their part too; the China negotiation is proceeding on a separate track, meantime). It is macroeconomics, markets and consumers ultimately who will determine the political fate of the Liberation Day and sectoral tariffs. The former is already flashing amber; the latter will get there in due time.
