The aggressive tariff initiatives of the United States under President Donald Trump are now entering a critical stage, as significant trade partners throughout Asia rush to finalize last-minute agreements ahead of the impending August 1 deadline.
From New Delhi to Tokyo, there is increasing pressure on negotiators to achieve results that will protect their nations from substantial tariff increases, while Washington is also considering restrictions on Chinese transshipments via regional allies.
India-US trade discussions
India’s trade delegation, headed by chief negotiator Rajesh Agrawal, has recently completed its fifth round of discussions in Washington, with the American team anticipated to travel to New Delhi next in a final attempt to reach a breakthrough.
The primary points of contention include India’s unwillingness to open its agriculture and dairy sectors, and the US’s hesitance to reduce tariffs on Indian steel, aluminum, and automobiles.
Although both parties are reportedly contemplating postponing contentious matters to a later stage, no formal agreements have been established. A formal tariff notice from Washington is still pending, contributing to the prevailing uncertainty.
In April, Trump had threatened to impose a 26 percent tariff on Indian imports but delayed implementation to facilitate negotiations.
Marcos Jr visits the White House
In the meantime, President Ferdinand Marcos Jr of the Philippines is set to meet Trump this evening (Tuesday) in a bilateral meeting that officials indicate may encompass discussions on trade and defense collaboration.
While Manila has not encountered the same degree of tariff threats as other Asian countries, the meeting is anticipated to highlight the US’s shift towards the Indo-Pacific, and Manila’s alignment with Washington on regional security issues could enhance trade relations.
Japan’s leading negotiator in Washington
In a significant development, Japan’s chief trade negotiator Ryosei Akazawa engaged with US Commerce Secretary Howard Lutnick in Washington on Monday evening for over two hours.
Japan’s cabinet secretariat characterized the discussions as “frank and in-depth” and indicated that the goal was to reach a “mutually beneficial agreement”. Akazawa is in Washington for the eighth round of negotiations, yet no tangible outcomes have been realized since talks commenced in April.
Japanese Prime Minister Shigeru Ishiba faces increased pressure following his coalition’s electoral defeat on Sunday. In the absence of an agreement, tariffs on Japanese exports to the US are set to escalate to 25 percent on August 1, up from a baseline of 10 percent and an initial proposal of 24 percent, as reported by Bloomberg.
Loopholes exploited by China face examination
A concurrent challenge for the Trump administration involves addressing trade practices it alleges are being utilized by China to bypass US tariffs. As per Bloomberg Economics, China has increasingly funneled goods to the US through third countries like Vietnam and Mexico. The proportion of China’s value-added manufacturing routed this way surged to 22 percent in 2023 from 14 percent in 2017.
“Trade flows through third countries are significant and have mitigated the impact of current US tariffs,” wrote Bloomberg Economics analysts Chang Shu, Rana Sajedi, and David Qu. “Stricter regulations on these shipments would amplify the repercussions of the trade war and could diminish growth prospects in the long run.” Analysts project that targeting such transshipments could influence up to 70 percent of China’s exports to the US and reduce more than 2.1 percent of China’s GDP.
Malaysia and Vietnam are considering their alternatives.
In the meantime, Malaysia is advocating for a lower tariff rate that aligns more closely with those provided to Indonesia and Vietnam, while resisting US pressures regarding electric vehicles, foreign ownership, and reductions in subsidies. Prime Minister Anwar Ibrahim has explicitly stated that the government has established a “red line” concerning policies that benefit Malays and indigenous populations.
Similarly, Vietnam has encountered challenges in its interactions with Washington. Reports indicate that officials in Hanoi were caught off guard in early July by a US declaration that it had consented to a 20 percent tariff rate. According to recent comments from Vietnamese officials, negotiators are still engaged in finalizing the details of that agreement.
