Japan and the Philippines take the number of countries that have concluded trade deals with the United States to five, ahead of an August 1 deadline set by President Donald Trump to avoid punitive tariff rates.
The agreed levies are often higher than the new base rate of 10 per cent that the United States has applied to most countries since April, but far less than the levels the Trump administration has threatened to impose if no deal is reached.
While many details remain to be negotiated under the deals, it is clear that countries made considerable concessions to reach an agreement with the United States.
Japan: 15 Per Cent
Under the terms of the trade deal with Japan that Trump called “massive,” the country’s exports will be taxed at 15 per cent instead of the threatened 25 per cent rate.
Crucially, Tokyo managed to have an existing and painful 25 per cent tariff on its automobiles, an industry accounting for eight per cent of Japanese jobs, cut to 15 per cent.
Moody’s Analytics analyst, Stefan Angrick, said 15 per cent was still much higher than the low single-digit rates in effect before Trump returned to the White House.
“Relative to that, it’s not exactly good news. I think 15 per cent is a much, much higher tariff rate than many, many were expecting. And it’s important to keep that in mind,” he noted.
The 50 per cent tariffs on Japanese steel and aluminium will continue to apply.
The White House said that under the deal, Japan would make $550 billion in investments in the United States.
These will be in areas including energy infrastructure, semiconductor and drug manufacturing, the mining and production of critical minerals, as well as commercial and military shipbuilding.
Washington said the United States would retain 90 per cent of the profits from these investments and that Japan would buy $8 billion worth of US goods, including farming produce, aviation fuel, and 100 Boeing planes.
The White House also said Japan would lift “longstanding restrictions” on US cars and trucks — which sell poorly in Japan — and boost US rice imports by 75 per cent.
“The magnitude of the concessions made by the Japanese government could make one fear very complicated negotiations with others like the European Union,” said analyst Bastien Drut at CPR Asset Management in Paris.
Philippines: 19 Per Cent
Under an accord announced by the White House, the Philippines obtained a tariff reduction of one percentage point on its goods entering the United States.
Products from the Southeast Asian country, a major exporter of high-tech items and apparel, will face a 19 per cent levy.
Britain: 10 per Cent On Average
London and Washington concluded a deal in May that sees a 27.5 per cent tariff rate on cars dropped to 10 per cent for the first 100,000 vehicles per year, which is a big win for Jaguar Land Rover.
The deal also benefits the British aerospace sector, in particular jet engine manufacturer Rolls-Royce, which won a tariff exemption.
London is still negotiating exemptions for its steel and aluminium products from the 25 per cent rate in force.
But Britain had to open its market further to US ethanol and beef.
The rest of its products are subject to the 10 per cent base rate.
Vietnam: 20 Per Cent
Vietnam reached a deal at the beginning of July with the United States, its main export market for products including clothing and shoes, that will see its shipments subject to a 20 per cent tariff, instead of the threatened 46 per cent rate.
But a 40 per cent tariff will hit goods passing through the country to circumvent steeper trade barriers.
US goods won’t face any tariffs to enter Vietnam.
Indonesia: 19 Per Cent
Under the deal reached last week, Indonesian goods entering the United States will be hit with a 19 per cent tariff, lower than the threatened rate of 32 per cent.
Certain Indonesian goods not available in the United States could face even lower rates.
According to Washington, nearly all US goods will be able to enter Indonesia tariff-free.
Moreover, it said Jakarta had agreed to recognise US standards for car and pharmaceutical imports.
It also agreed to drop an effort to tax data flows and ease export restrictions on critical minerals.
The deal followed Indonesia’s making concessions earlier in July with pledges to buy more US agricultural goods and oil.
AFP
