Trump announces new tariffs on 14 countries: The full picture explained, in 3 points

Which countries are the worst hit by the new tariffs, and on what basis were these countries chosen? What is the road ahead from here? We explain, in 3 points.

What tariffs did Trump announce on Monday?

Major US trading partners and allies, Japan and South Korea, were slapped with 25% tariffs.

Myanmar and Laos face the highest tariffs at 40%, Cambodia and Thailand 36%, Serbia and Bangladesh 35%, Indonesia 32%, South Africa and Bosnia and Herzegovina 30%, and Kazakhstan, Malaysia and Tunisia face tariffs of 25%.

Near-identical letters were sent to all these countries, which say that the US wants to correct its trade deficit with them (trade deficit means the US imports more from these nations than it exports), and will thus be levying taxes at a new rate.

This tariff is separate from the sectoral tariffs the US has announced, which are taxes on specific sectors such as on automobiles, steel, etc.

The letter also says that “goods transshipped to evade a higher Tariff will be subject to that higher Tariff”. Transshipment here means that countries facing higher tariffs could route their goods to the US through a third country facing lower tariffs.

The letter also warns against retaliation, saying, “If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added” to the tariff announced at present.

However, it leaves open room for negotiations, saying, “If you wish to open your heretofore closed Trading Markets to the United States, and eliminate your Tariff, and Non Tariff, Policies and Trade Barriers, we will, perhaps, consider an adjustment to this letter.”

Why has Trump chosen these 14 countries?

After first announcing his dramatic tariffs, Trump paused them for 90 days and asked countries to strike trade deals with the US in that period. This 90-day deadline is set to expire tomorrow, but only two, sketchy deals have been signed, with the UK and Vietnam.

In effect, the latest announcement pushes the deadline for the negotiations to August 1, while increasing pressure on America’s trading partners by coming good on the threat of slapping higher tariffs on a few chosen countries.

The US government has not announced why it chose these 14 countries. However, Trump had been criticising Japan recently for the slow progress on negotiations. Last week, he had told reporters, “We’ve dealt with Japan. I’m not sure if we’re going to make a deal. I doubt it with Japan. They’re very tough. You have to understand they’re very spoiled.” Japan — like India — does not want to open up its agriculture sector to American imports and possibly hurt its farmers.

Similarly, the deal with South Korea too was not progressing. While these countries are big trading partners for the US, they wanted exemptions on specific sectors, such as cars. The US is a big importer of automobiles, while Trump wants the domestic car manufacturing industry to regain its lost dominance.

“Almost all of Korea’s tariffs are at zero for US imports, leaving them with less to offer the US than India or Vietnam with high tariffs,” Wendy Cutler, vice president of the Asia Society Policy Institute and former negotiator of the South Korea-U.S. Free Trade Agreement, said, as quoted by Korea Times. “This announcement is a chilling message to others. It suggests the US will not be open to reprieves from the Section 232 sectoral tariffs, including on autos.”

Six of the 14 countries (Myanmar, Laos, Indonesia, Cambodia, Malaysia, Thailand) are members of the group ASEAN, which has close ties with China.

Trump has long criticised countries he says have strong protections for their own industries, keeping imports out through high walls of tariffs. He claims these countries “take unfair advantage” of America’s openness to trade and export far more than they import.

What next?

It is not clear, because of Trump’s frequent flip-flops and because his authority to slap these tariffs in the first place is facing a legal challenge in the US.

However, the tariffs are likely to spur other countries to conclude deals with the US faster. The countries targetted on Monday have also expressed willingness to continue negotiations.

Tariffs are additional taxes paid by the trader importing goods from outside the country. Most pass on this increased cost to consumers. If all the tariffs go through, American consumers will have to pay a lot more for several goods that go to the US from other countries. They may then choose not to buy those goods at all, or in lesser quantities, leading to losses for the exporters. Countries with export-driven economies, like Bangladesh, will be hit very heavily because of these tariffs, but other nations will feel some pain too.