With just over a week to go until the end of US president Donald Trump’s 90-day tariff pause next Wednesday (9 July), the US administration is seeking to complete more limited deals with trading partners.
Since April’s Liberation Day tariff announcement in April, only a single trade deal has been struck – the US-UK Economic Prosperity Deal (EPD) – with a ‘trade truce’ to limit spiralling tariffs also agreed with China.
Mirroring the US-UK EPD, the US is now reportedly seeking smaller deals that reduce reciprocal tariffs on trading partners to a 10% baseline duty rate, with sector-specific agreements to be negotiated at a later date.
However, sticking points have arisen in ongoing negotiations with major trading partners, presenting a challenge to the upcoming 9 July deadline.
India
Despite being one of the first nations to enter US trade negotiations, with prime minister Narendra Modi visiting Washington in February, India is yet to sign a deal.
Trump boasted last week of a deal that will “open up India” – a notoriously tough negotiator on trade, especially protective of its agricultural sector. Indian officials have warned of “very big red lines” around farm and dairy protections.
Sources close to the talks told the FT that India is on track to receive agricultural exemptions, including for wheat and dairy.
Following the pattern set by the UK’s deal, India will also aim to avert the 26% reciprocal tariff set to be imposed next week in exchange for the 10% baseline rate.
There have been signs that a deal may be concluded soon, the head of India’s trade delegation was in Washington this week, with a call from foreign minister S Jaishankar anticipated today or tomorrow.
India has also made concessions on energy, agreeing to import more US natural gas. This follows reports of increased oil imports from the US in February, despite having access to cheap supplies from Russia.
Last month the Times of India reported that, in May, Russian supplies of oil reached a 10-month high, accounting for 38% of India’s imports.
Diplomatic costs
Although closer to crossing the line, a deal may not do much to improve US-India relations.
Speaking to Politico, former Indian ambassador to the UN, Syed Akbaruddin, said that the Trump administration’s bullish approach had actually undermined bilateral ties, with criticism of any eventual deal to be expected within India.
“A trade bargain that could have been a win-win deal now risks being portrayed by those who oppose it as a tribute, not a partnership”.
Japan
Ongoing talks with Japan appear to have reached a stalemate, as the nation refuses to budge on key sectoral concessions.
The FT reports that Tokyo is also standing firm on agriculture in its own US tariff negotiations, with Japan’s chief cabinet secretary Yoshimasa Hayashi saying that the country will not “think about doing anything that would sacrifice the farm sector”.
Trump has targeted the trade surplus Japan runs on rice, with the Asian nation imposing a levy on any imports above a 770,000 tonne limit.
Ahead of the 9 July deadline the country is seeking to avert a 24% reciprocal tariff rate but also has its auto sector to consider. Car exports to the US are now subject to a 25% tariff rate, with cars representing 20% of Japan’s total exports and 28% of its US-bound sales. US tariffs are forecast to cost Japan US$17bn in exports.
So far, Japan has sought a complete exemption from the 25% tariff, but Trump has repeatedly highlighted the trade surplus it runs with the US in this area as “not fair”. Speaking to Fox New on Sunday he said that the country is “going to pay a 25% tariff on your cars”.
“They won’t take our cars, right? And yet we take millions and millions of their cars into the United States”.
Other nations
A number of nations have offered concessions on tariff and non-tariff barriers in efforts to secure a deal.
Yesterday Canada announced that it would scrap its Digital Services Tax, due to enter force the same day, to bring the US back to the negotiating table. Trump had threatened to “terminate” talks in light of the large impact the tax would have had on US tech firms.
Indonesia has also agreed to ease its strict import licensing requirements on goods such as industrial raw materials, plastics and other chemical products in order to appease the US.
A number of countries have asked for an extension to the 9 July deadline, including South Africa and South Korea.
This week, US treasury secretary Scott Bessant said that the decision to delay tariffs rests with Trump, who has not indicated that he will extend the deadline. Speaking to Bloomberg Television, he said:
“We have countries that are negotiating in good faith, but they should be aware that if we can't get across the line...we could spring back to the April 2 levels".
