Proponents of global, unfettered trade remain in frigid waters with President Trump’s latest tariff ultimatum. Major Asian allies such as Japan and South Korea are trying to persuade the U.S. to relax tariffs that would negatively impact their export-dependent economies. President Trump announced that they have until August 1 to agree on new terms or face steep levies on imports into the U.S.
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Both Asian powerhouses have substantial trade surpluses with the U.S. and were already under pressure to address current steel, aluminum, and autos levies. Yet, Japan and South Korea do have some leverage as they are home to global companies willing to invest in the U.S. and share expertise in shipbuilding and semiconductors. U.S. negotiators initially aimed to strike deals with several close allies, but the U.K. is the only country to have reached a trade agreement.
The U.S. is seeking more favorable market access for rice, soybeans, and wheat exports. Japanese and South Korean farmers are a powerful lobby, and the political climate with the coming parliamentary elections in Japan brings substantial political risks. South Korea’s government turned over in June, and the new left-leaning coalition is publicly confident they can reach an agreement, but did express concerns with President Trump’s latest ultimatum.
While U.S. negotiators are aiming for expedited deals, the Trump administration is also pressing many Asian countries to limit their economic ties to China. The largest trading partner for both Japan and South Korea, China is a fundamental player in furthering economic integration for most of Asia. Developing nations like Bangladesh rely on raw material imports from China to produce finished goods for the U.S., and while the U.S. clearly wants to weaken Beijing, it remains unclear if the rest of Asia is interested or economically able to follow Washington’s lead.
South Korea’s president has indicated a willingness to bargain with the U.S., rather than insisting on a return to zero tariffs on key products. Meanwhile, Japan is miffed that it is being treated similarly to other Asian trade partners despite its close relationship with the U.S. It’s an evolving landscape, but the new “tariff world order” appears to be the status quo for the foreseeable future.
