Asia’s export-dependent economies received more time but little reprieve, as US President Donald Trump shifted his tariff deadline to Aug. 1 and rounded the rates he’s set for Japan, South Korea and others.
In his first wave of letters to key trading partners, Trump set levies of 25% on goods from Japan and South Korea. He also signed an executive order holding off the new duties until Aug. 1.
The extension leaves Asia’s economies squarely in the US administration’s tariff sights while giving officials a little over three additional weeks to negotiate lower rates. Complicating such accords is the prospect of separate sectoral tariffs on products including cars, chips and pharmaceuticals that are critical industries for economies across Asia.
“It’s regrettable that the US has announced higher tariff rates,” Japanese Prime Minister Shigeru Ishiba said in Tokyo. “We’ll continue talks with the US, protecting our national interests while actively seeking the possibility of a deal and benefits for both the US and Japan.”
Ishiba spoke as he discussed the state of play with cabinet ministers at a meeting in Tokyo Tuesday morning.
In response to the delay, South Korea said it will fix rules and regulations to address US demands to lower non-tariff barriers.
“We see this letter as a de facto extension of the grace period for imposing reciprocal tariffs until Aug. 1,” South Korea’s Industry Ministry said in a statement on Tuesday, vowing to accelerate negotiations to reach a mutually beneficial agreement.
The 25% across-the-board tariff announced by Trump on all shipments from South Korea matches the level that was set to be implemented on July 9. Japan’s new rate is a percentage point higher than that originally announced on April 2.
Even though Japan and Korea are two of America’s closest allies in Asia, they’re both dealing with complex domestic circumstances where cutting trade deals might be risky politically. South Korean President Lee Jae Myung only took office on June 4, and elections in Japan’s upper house later this month made Ishiba’s government reluctant to offer too much in concessions.
Asked why Trump had chosen to hit Japan and South Korea first, White House Press Secretary Karoline Leavitt said it was “the president’s prerogative.”
“Those are the countries he chose,” she added.
Asia’s MSCI regional stock benchmark posted a modest gain in early trading Tuesday as shares in Japan and South Korea rose as much as 0.3%. Contracts for the S&P 500 index edged lower. The yen gained slightly after posting its biggest loss in almost two months in the prior session.
“If the tariffs stay in place they likely have a major detrimental impact on Japanese companies that export to the US, particularly the automakers,” said James Halse, CEO & CIO at Senjin Capital Pty Ltd. “That negative impact likely cascades up the supply chain to their suppliers in Japan who may not export to the US themselves.”
Japan was initially seen as a promising partner for a quick deal, but the negotiations hit a roadblock over car tariffs. The sector accounts for most of the US trade deficit with Japan while being a key growth driver for Tokyo.
Trump also announced 25% rates on Malaysia, while Laos and Myanmar would face a 40% levy. Other nations hit with levies included Indonesia with a 32% rate, Bangladesh with 35%, and Thailand and Cambodia with duties of 36%.
Later at an event at the White House, Trump said that “for the most part” he was content to simply impose the duties, even as he indicated he was continuing negotiations, including talks with India that could soon wrap up.
“We’ve made a deal with the United Kingdom, we’ve made a deal with China, we’ve made a deal — we’re close to making a deal with India,” Trump said. “Others we met with, we don’t think we’re going to be able to make a deal. So we just send them a letter.”
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