Tariff Talk: U.S. Reaches More Trade Deals

Lots of action on the tariff front since last week:

• The United States and the European Union reached a high-stakes trade agreement that will impose a flat 15 percent tariff on most EU exports, including automobiles, narrowly avoiding a transatlantic trade war that threatened to destabilize the global economy. The deal, announced July 27 by President Donald Trump and European Commission President Ursula von der Leyen at Trump’s golf resort in Scotland, comes just days before a scheduled tariff hike and is set to take effect August 1. While Trump claimed the tariff would apply to “automobiles and everything else” except pharmaceuticals and metals, von der Leyen later clarified the 15 percent rate would be comprehensive and non-cumulative, covering a wide range of goods including drugs, semiconductors, and vehicles. She also said existing metals duties would be reduced and governed by a new quota system. European leaders welcomed the pact, with German Chancellor Friedrich Merz noting it spared Germany’s critical export economy from further damage. The German auto industry, already facing steep 27.5 percent tariffs, was expected to benefit from the more predictable trade terms.
  
  
• President Donald Trump also announced a trade agreement with South Korea that will impose a 15 percent tariff on South Korean exports to the United States while securing a $350 billion investment pledge from Seoul. The deal, revealed July 30 on Trump’s social media platform, follows months of tense negotiations and allows South Korea to avoid a threatened 25 percent tariff hike set to take effect August 1. Trump said the new tariff would not apply to American goods and highlighted that South Korea had agreed to accept a wide range of U.S. products, including cars, trucks, and agricultural goods. That acceptance is expected to involve recognizing American motor vehicle safety standards without additional South Korean requirements. The investment pledge echoes a similar $550 billion commitment made by Japan earlier this year and will be managed directly by Trump, with funds aimed at bolstering U.S. infrastructure and industrial capacity. While the agreement is seen as a breakthrough in preserving economic ties with one of America’s top trading partners, questions remain over whether South Korean automakers will receive tariff relief on cars and parts—a key sticking point in the talks. Hyundai, most affected by the previous tariffs praised the deal.
       
• And finally, President Donald Trump said he would extend Mexico’s current tariff rates for 90 days to allow more time for trade talks, temporarily shelving a planned 30 percent tariff hike that was set to begin August 1. The move follows a phone call with Mexican President Claudia Sheinbaum and comes after Trump previously insisted there would be no deadline extension. Mexico will continue to face a 25 percent tariff on cars and fentanyl-related goods, and a 50 percent levy on steel, aluminum, and copper exports. Trump said Mexico agreed to eliminate certain non-tariff trade barriers immediately. Sheinbaum called the conversation “really good” and said both sides now have three months to reach a long-term agreement. Since the start of negotiations, Mexico has sought a measured response strategy, in contrast to other countries that quickly retaliated against U.S. tariffs. While most Mexican exports remain shielded under the United States-Mexico-Canada Agreement, frustration has grown within the Sheinbaum administration as new U.S. tariffs hit major industries. Cabinet officials have made repeated visits to Washington for talks with Commerce Secretary Howard Lutnick and others. No meeting between Trump and Sheinbaum is currently planned, though further talks are expected closer to the new deadline. They also discussed joint investments in U.S. companies and ways to address the U.S. trade deficit with Mexico, but no final agreements were reached. Meanwhile, Trump has finalized tariff agreements with several countries in recent days and walked back proposed 50 percent tariffs on Brazilian goods, which will now remain at 10 percent. Mexico, now the United States’ top trade partner, continues to argue for preferential treatment, with 83 percent of its U.S.-bound goods exempt from tariffs as of May.