U.S. President Donald Trump’s 90-day pause on implementing so-called “reciprocal” tariffs on some 180 trading partners ends on July 8. How are countries responding to the threat, and will the tariffs be re-applied from July 9?
The United States is demanding four things from all trading partners, while offering little in return. So these negotiations are anything but “reciprocal.”
The main demand is to rebalance bilateral goods trade between the U.S. and other countries. Nations with trade surpluses – meaning they export a greater value of goods than they import from the U.S. – will be encouraged to import more from the U.S. and/or export less to it.
The U.S. is also pushing countries to eliminate a range of “non-tariff barriers” that may affect U.S. export competitiveness. These barriers are drawn from the United States Trade Representative’s March 2025 report and include a variety of perceived “unfair” practices, from value-added taxes (such as the Goods and Services Tax) to biosecurity standards such as those Australia applies to agricultural imports.
In a nod to the “tech bros,” (alleged) restrictions on digital trade services, such as Australia’s media bargaining code, and digital service taxes must be removed, along with taxes on the tech giants. On June 30, Canada dropped a new digital service tax on firms such as Google and Meta after Trump suspended trade talks.
Countries must also agree to reduce reliance on inputs from China in any exports to the United States. That means companies that moved manufacturing from China to countries such as Vietnam during Trump’s first term trade wars will face challenges in sourcing input components from China.
Put together, this is a difficult package for any government to accept without securing something in return. Trump has been fond of saying the United States holds “all the cards” in trade negotiations. But in reality, the negotiating partners fall into three basic categories.
It’s not known precisely how many countries are negotiating bilateral deals with Washington. Between 10 and 18 countries are priority “targets,” or to use an early, colorful phrase, were targeted as the “Dirty 15.”
Category 1 likely comprises many more countries than those on the United States’ naughty list. These countries were saddled with large reciprocal tariffs despite the tariff formula’s evident shortcomings. To paraphrase Trump, these countries don’t hold the cards and have limited negotiating power.
They have no choice but to make concessions. The smarter ones will take the opportunity to make reforms and blame the bully in Washington. Mostly these are developing countries, some with high dependency on the U.S. market, including the poorest such as Bangladesh, Cambodia, and Lesotho.
To make matters worse, they must keep one eye on China for fear of retribution in case Beijing perceives any promises to reduce dependence on Chinese inputs would compromise Chinese interests.
Category 2 consists of countries that “hold cards,” or have some degree of leverage. Some, such as Canada, Japan, India, and the EU, will secure limited U.S. concessions although they may resort to retaliation to force this outcome. From discussions with our government and academic sources, Japan and India likely won’t retaliate, but Canada has previously and the EU likely will.
Australia’s Prime Minister Anthony Albanese initially said he would not negotiate and has repeated U.S. reciprocal tariffs “are not the act of a friend.” However, the Australian government is wisely looking to bolster its negotiation cards, such as creating a critical minerals strategic reserve. No doubt policymakers are also reminding the U.S. of their favorable access to Australia’s military infrastructure which could be essential to any China-U.S. military confrontation.
China is category 3.
The Chinese government is determined not to kowtow to Washington as they did in Trump’s first term. The so-called “Phase 1 deal” was signed but instantly forgotten in Beijing.
Beijing has several cards, notably dominance of processed critical minerals and their derivative products, particularly magnets, and the United States’ lack of short-term alternative supply options. After China expanded export controls on rare earths and critical minerals, shortages hit the auto industry around the world and Ford was forced to idle plants.
Kevin Hassett, director of the National Economic Council, suggested on June 27 that more deals may be signed before July 8. But Trump is likely to undermine and/or negate them as his transactional whims change.
The British, after announcing their U.S. deal that included relatively favorable automotive and steel export market access, watched in horror as Trump doubled tariffs on steel imports to 50 percent, and reimposed the 25 percent tariff on the United Kingdom.
The U.K. government was reminded that this U.S. administration cannot be trusted. That is why countries negotiate binding trade treaties governed by domestic and international laws.
Many countries are waiting on the outcomes from various U.S. court battles testing whether the president or Congress should have the power to impose unilateral tariffs. After all, if there is a chance the Supreme Court rules Trump cannot change tariffs by decree, then why negotiate with a serially untrustworthy partner?
The Japanese government, for example, recently announced it is pausing trade negotiations after the U.S. demanded increased defense spending.
On June 29, Trump suggested he would simply send letters to foreign nations setting a tariff rate. “I’m going to send letters, that’s the end of the trade deal,” he said.
That does not bode well for countries negotiating in good faith. It’s likely tariffs will be reimposed and bilateral negotiations will drag on to September or beyond, as Treasury Secretary Scott Bessent has said.
After all, even the U.S. government has limited bandwidth to process so many simultaneous negotiations. Category 2 trading partners will increasingly test their own political limits. And the rest of the world is hoping for a favorable Supreme Court ruling that may, like the character Godot in the play “Waiting for Godot,” never come.
This article was originally published on The Conversation. Read the original article. 