On July 14, President Trump stated the U.S. has “barely started” with tariffs. This follows his announcements over the weekend on increased tariffs rates on Mexican and European imports.
Tariffs on EU, Mexico Announced
On July 12, President Trump announced a new set of tariffs against both Mexico and the European Union to go into effect on August 1. Imports from both the EU and Mexico will face a tariff rate of 30% exclusive of current and proposed Section 232 tariffs for sectoral imports like steel, aluminum, autos, pharmaceuticals, copper, semiconductors, critical minerals, aircraft and trucks. It remains unclear whether Mexican goods exported under the USMCA will continue to be exempted from tariffs.
EU Tariffs and Response
The letter from President Trump to President Von der Leyen stated that large and persistent trade deficits between the US and the EU were the reason for the tariffs and demanded tariff-free access to the EU for American goods.
The response from EU officials, while critical of the new tariffs, has been conciliatory with President of the EU Commission, Ursula von der Leyen and Trade Commissioner Marcos Sefcovic expressing optimism that a deal could yet be struck by the August 1 deadline.
The EU announced that it will be delaying countermeasures that were initially set to go into effect July 14 until August 1 as negotiations continue. The already approved countermeasures would target approximately $25 billion of American exports, while a second round of retaliation is currently being developed by the bloc. At its most extreme, potential European retaliation could include tariffs on digital service exports from the US and increased tech regulation that could significantly impact America’s tech giants.
The European Union is also openly working to formally coordinate responses to the US imposed tariffs among other G7 partners such as Canada and Japan. The EU is also seeking to diversify its trading partners and is touting an agreement to advance on a significant trade deal with Indonesia as evidence that the bloc can offer countries a more stable trade partner than the US.
Mexican Tariffs and Response
The trade letter issued by President Trump, while acknowledging that Mexico has assisted in securing the US-Mexico border, stated that the country had not yet done enough to stymie the flow of fentanyl northwards into the US. President Trump states that success in reducing this flow may result in the modification of the tariff schedule.
The letter makes no note of whether or not there will be changes to how compliant goods exported under the USMCA agreement. Nearly 83% of US imports from Mexico were exempt from tariffs in May, primarily due to USMCA provisions.
Mexican leadership, while expressing their disappointment at this setback continue to signal their openness to negotiation and are working to solidify a new deal with the US. Mexican President Claudia Sheinbaum stated that it is important for Mexico to “keep a cool head,” as negotiations continue.
Trade Letters Released To Date
- European Union: The EU now faces a 30% tariff, which was previously announced as a 20% tariff on Liberation Day.
- Mexico: Mexico now faces a 30% tariff, previously it was announced as a 25% tariff.
- Canada: Canada now faces a 35% tariff, which was previously announced as a 25% tariff.
- South Korea: South Korea faces a 25% tariff, consistent with the announcement on Liberation Day.
- Japan: Japan faces a 25% tariff, which was previously announced as a 24% tariff on Liberation Day.
- Thailand: Thailand faces a 36% tariff, consistent with the announcement on Liberation Day.
- Indonesia: Indonesia faces a 32% tariff, consistent with the announcement on Liberation Day.
- Malaysia: Malaysia faces a 25% tariff, which was previously announced as a 24% tariff on Liberation Day.
- Cambodia: Cambodia faces a 36% tariff, which was previously announced as a 49% tariff on Liberation Day.
- South Africa: South Africa faces a 30% tariff, consistent with the announcement on Liberation Day.
- Laos: Laos faces a 40% tariff, which was previously announced as a 48% tariff on Liberation Day.
- Myanmar: Myanmar faces a 40% tariff, which was previously announced as a 44% tariff on Liberation Day.
- Kazakhstan: Kazakhstan faces a 25% tariff, which was previously announced as a 27% tariff on Liberation Day.
- Tunisia: Tunisia faces a 25% tariff, which was previously announced as a 28% tariff on Liberation Day.
- Bangladesh: Bangladesh faces a 35% tariff, which was previously announced as a 37% tariff on Liberation Day.
- Serbia: Serbia faces a 35% tariff, which was previously announced as a 37% tariff on Liberation Day.
- Bosnia and Herzegovina: Bosnia and Herzegovina face a 30% tariff, which was previously announced as a 35% tariff on Liberation Day.
- Philippines: The Philippines faces a 20% tariff, which was previously announced as a 17% tariff on Liberation Day.
- Moldova: Moldova faces a 25% tariff, which was previously announced as a 31% tariff on Liberation Day.
- Iraq: Iraq faces a 30% tariff, which was previously announced as a 39% tariff on Liberation Day.
- Sri Lanka: Sri Lanka faces a 30% tariff, which was previously announced as a 44% tariff on Liberation Day.
- Brunei: Brunei faces a 25% tariff, which was previously announced as a 24% tariff on Liberation Day.
- Algeria: Algeria faces a 30% tariff, consistent with the announcement on Liberation Day.
- Libya: Libya faces a 30% tariff, which was previously announced as a 31% tariff on Liberation Day.
- Brazil: Brazil faces a 50% tariff, which was previously announced as a 10% tariff on Liberation Day.
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Are you concerned about the impacts of the outlined trade issues? Please contact Sarah Helton, Michael Best Strategies’ Trade Practice Lead at sarah.helton@michaelbest.com for assistance.