Trump’s New Tariff Strategy Sparks Global Concern
President Donald Trump has taken a bold step in his ongoing trade policy by announcing a 25% tax on goods imported from Japan and South Korea, along with new tariff rates for a dozen other nations. These tariffs are set to take effect on 1 August. The move is part of a broader strategy that has placed the president at the center of a global economic drama, raising concerns about potential impacts on economic growth and the risk of recession.
Trump shared letters addressed to the leaders of various countries on his social media platform, Truth Social. These letters warned against retaliatory actions, such as increasing their own import taxes. If any country decides to raise its tariffs, Trump threatened to add those increases to the existing 25% charge.
In his letters to Japanese Prime Minister Shigeru Ishiba and South Korean President Lee Jae Myung, Trump wrote, “If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge.” This approach highlights the administration’s stance on trade, emphasizing protectionism and the need to support domestic manufacturing.
Despite the threats, Trump has shown a willingness to negotiate, indicating that the uncertainty surrounding these tariffs will likely continue. He told reporters, “I told you we’ll make some deals, but for the most part we’re going to send a letter.” This suggests that while negotiations may occur, the focus remains on imposing tariffs.
South Korea’s Trade Ministry has responded by stating it will accelerate negotiations with the United States to achieve a mutually beneficial deal before the 25% tax on its exports takes effect. This reflects the urgency of the situation and the potential impact of these tariffs on trade relations.
The proposed tariffs vary across different countries. Imports from Myanmar and Laos would face a 40% tax, while Cambodia and Thailand would see a 36% rate. Serbia and Bangladesh would be taxed at 35%, Indonesia at 32%, and South Africa and Bosnia and Herzegovina at 30%. Kazakhstan, Malaysia, and Tunisia would also face a 25% tax. Trump included the word “only” before revealing the rates, implying a level of generosity, though this has been met with skepticism.
The letters sent to foreign leaders followed a standard format, but one letter to Bosnia and Herzegovina initially addressed its leader, Željka Cvijanović, as “Mr. President,” highlighting a notable oversight. Trump later corrected the error, underscoring the importance of accuracy in diplomatic communications.
Trade talks have yet to yield several significant deals, and the White House press secretary, Karoline Leavitt, emphasized that Trump is creating “tailor-made trade plans for each and every country on this planet.” This approach deviates from the more formal practices of previous administrations, as Trump continues to use social media to share letters with foreign leaders before mailing them.
Wendy Cutler, vice president of the Asia Society Policy Institute, described the tariff hikes on Japan and South Korea as “unfortunate.” She pointed out that both countries have been close partners in economic security matters, offering valuable contributions in areas such as shipbuilding, semiconductors, and energy cooperation.
Trump still faces outstanding differences on trade with the European Union and India, among other trading partners. Talks with China, where exports are taxed at 55%, remain a long-term prospect. The office of South African President Cyril Ramaphosa stated that the tariff rates mischaracterize the trade relationship with the US, although the country remains committed to diplomatic efforts for a balanced trade relationship.
Higher tariffs have prompted market worries, leading to a 0.8% drop in the S&P 500 stock index and increased interest rates on 10-year US Treasury notes. Trump declared an economic emergency to unilaterally impose the taxes, claiming they address past trade deficits. However, many US consumers value goods from Japan and South Korea, raising questions about the effectiveness of these measures.
The constitution grants Congress the power to levy tariffs under normal circumstances, though executive branch investigations can also result in tariffs if imposed on national security grounds. Trump’s ability to impose tariffs through an economic emergency is under legal challenge, with the administration appealing a ruling that said the president exceeded his authority.
It remains unclear what strategic gains Trump achieves by challenging two crucial Asian partners, Japan and South Korea, which could counter China’s economic influence. In his letters, Trump noted, “These tariffs may be modified, upward or downward, depending on our relationship with your Country.”
With the new tariff rates set to go into effect in roughly three weeks, Trump is setting up a period of potentially turbulent talks between the US and its trade partners to reach new frameworks. Analysts suggest that while there may not be a major escalation, the situation will likely remain unchanged.
Market reactions to Trump’s initial announcement of tariff rates on dozens of countries, including 24% on Japan and 25% on South Korea, were mixed. To calm markets, Trump introduced a 90-day negotiating period, during which goods from most countries were taxed at a baseline 10%. So far, the rates in the letters sent by Trump either match his 2 April tariffs or are generally close to them.
The 90-day negotiating period technically ends on Wednesday, even as multiple administration officials suggested the three-week period before implementation is akin to overtime for additional talks that could change the rates. Trump signed an executive order to delay the official tariff increases until 1 August.
Congressional trade agreements historically take years to negotiate due to complexity. Administration officials have indicated that Trump is relying on tariff revenues to offset the tax cuts he signed into law on 4 July, a move that could shift a greater share of the federal tax burden onto the middle class and poor.
Josh Lipsky, chair of international economics at The Atlantic Council, believes a three-week delay in imposing the tariffs is unlikely to allow for meaningful talks. He sees it as a signal that Trump is serious about most of these tariffs and it’s not all a negotiating posture.
Trade gaps persist, and more tariff hikes are possible. Trump’s team promised 90 deals in 90 days, but so far only two trade frameworks have been produced. The outline of a deal with Vietnam was designed to box out China, while the United Kingdom framework would spare that nation from higher tariff rates on steel, aluminium, and autos.
The US ran a $69.4bn trade imbalance with Japan and a $66bn imbalance with South Korea in 2024. These deficits represent the difference between what the US exports to a country relative to what it imports. According to Trump’s letters, autos would be tariffed separately at the standard 25% worldwide, while steel and aluminium imports would be taxed at 50%.
This is not the first time Trump has tangled with Japan and South Korea on trade, and the new tariffs suggest his past deals during his first term failed to deliver on his administration’s hype. In 2018, the administration celebrated a revamped trade agreement with South Korea as a major win, and in 2019, Trump signed a limited agreement with Japan on agricultural products and digital trade.
Trump has also indicated that countries aligned with the policy goals of BRICS would face additional tariffs of 10%, further complicating the landscape of international trade relations.