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Ninety deals in 90, no watch, 113 days, and we seriously this time
The deadline, to absolutely nobody’s surprise, was not a deadline at all. Countries were intended to negotiate a trade agreement with the US tomorrow, or to face the mutual rates at a level in detail on that famous piece of poster board in April. Now the big day was first reduced to Augustus. Whether it could be: Minister of Finance Scott Bessent, whose most important task is in policy, often first states September. Just like the president himself, the deadlines of the administration must be taken seriously, but not literally. “Seriously”, because if Trump had to decide to enforce a deadline, the impact can be seismic. “Not literally” because he probably won’t do that.
What will the next three and a half weeks (and probably more) be? Today we have a taste of this, when the president announced that Japan and Zuid -Korea would be confronted with 25 percent from the first of the month, subject to change “depending on our relationship with your country”. This sounds scary. The couple are the largest trading partners of the US after Canada, Mexico and the EU. They formed almost 9 percent of American import and 7 percent of American exports in 2024.
But the market, instead of panicking, gave the equivalent of a depressive shrug. The S&P 500, already in a decreasing pattern when the announcement struck, dropped another fifth of one percent. The dollar reinforced 0.7 percent against the Korean won and one percent against the yen. In Tokyo and Seoul, shares opened on a revival: the Korean Kospi index rose more than 1.4 percent in the first two hours of acting, while the Japanese Nikkei 225 index rose with a more subdued 0.4 percent. The modest movements are perfectly rational. Firstly, the new rates would not greatly increase the effective rate percentage in both countries. Paul Ashworth of Capital Economics explained to customers in a note that the new rates
Not money on goods subject to Trump’s product -specific rates, where cars are good for 34 percent of the entry from both countries, which are already subject to a levying of 25 percent that Trump has more than once threatened to increase to 50 percent. Add exempt electronics and medicines and. . . If Trump follows his threat, the total effective rate percentage for the entry of the US would increase from 15.5 percent to 16.6 percent.
And why would markets panic at the moment about any statement of the administration? Even the agreements concluded appear wide open for further negotiations. As Liz Ann Sonders of Charles Schwab brought us for the most part, they are “frameworks, no trade agreements”. Historically, trading agreements need 18 months to signally sign, and another 40 to 45 months to implement, she notes. The rare export of the earth “deal” with China was really just a de-escalation-the government Trump has not released any details of the agreement, and China still involves exports to American companies, according to the Wall Street Journal.
The China negotiations are a special case. The deals with the UK and Vietnam can tell us more about what other countries can hope. But again, the US-UK agreement was just a framework. It reduced the taxes on British car manufacturers and exempt space products from rates, in exchange for more beef, ethanol and industrial import. Our colleague Alan Beattie let it drain as follows:
Politically, you can see why a relatively small open economy with the US military and safety dependence would take a chance on a legally non -binding agreement and a few small beef and bio -ethhanolquota trade in for protecting the niche but politically striking car and steel electioners.
However, there is a signal in the agreement. The US had a trade surplus with the VK last year and yet the agreement did not remove the universal rate of 10 percent. So other countries can expect that the floor is not below 10 percent.
The recent agreement with Vietnam is closest to a “correct” deal: a right 20 percent rate for Vietnamese exports, no tasks on American exports and a rate of 40 percent on finished goods intended to focus on China. The reservation is that the Vietnamese economy is very different from that of South Korea and Japan. It is smaller and poorer and last year only imported $ 13 billion to American goods. South Korea and Japan, on the other hand, are richer and are good for a larger part of American exports; The sum for each country alone is more than five times that of Vietnam. That, and the important American military alliances with every country, these countries give a stronger negotiating position.
The US stock and bond markets seem to have reached the conclusion that moderate rates – 10 percent on all trading partners, a little more about China and a few specific sectors – are not important for economic growth or profit, or they will be mitigated if they do. And they have simply ignored Trump’s continuous threats of more serious rates. The big question is therefore whether investors have set up for a great disappointment when Trump – encouraged by the indifference of the markets and the resilience of the economy – is suddenly determined.
Sonders of Charles Schwab wonders whether there can also be a “Trump call” in addition to the Trump (also known as the Taco trade):
With the market that has done just as well as since 9 April, with economic data and inflation data that may not yet show the full effect of rates, but not to a certain extent. . . Is that the set -up for the willingness of the administration to continue to press things from a rate perspective?
We think this is worth worrying about you.
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