The NeverEnding Story

With apologies to the movie of the same name (dating myself here), the Trump administration is in the process of producing its own never-ending story where the plot involves the numerous trade negotiations that have been underway for months. Today, I want to examine that process a bit more closely by looking primarily at countries that have reached agreements and countries that have not. Spoiler alert: These negotiations are going to continue for a very long time.

So far, the administration has announced agreements with the United Kingdom, the European Union, Japan, South Korea, Indonesia, and Vietnam. More or less active negotiations continue with Canada, Mexico, India, and China. Everybody else got a tariff number, which has prompted some of them to seek further talks in the hope of improving their outcomes. All that means more negotiations.

For those countries that made agreements, it is slowly becoming clear that they were half-baked. Two texts have been made public—with the United Kingdom and the European Union—but both contain few actual commitments and many promises to discuss specific issues in the future. In those cases and others, comments from the other countries have made clear there are areas where the two sides explained the agreement differently, and areas where they did not agree at all and kicked the can to future talks. Some examples: The tariff status of UK steel exports remains unclear; South Korea denies it conceded tariff-free market access on beef and rice; Indonesia explains the zero-tariff on imports provision in a much more limited way than the U.S. description; and Japan and the European Union have pressed the United States to honor its commitment to reduce auto tariffs to 15 percent, something that so far has not happened. The text of the agreement with the European Union makes clear that it will not happen until the bloc introduces the legislation necessary to implement the reduced tariffs it has promised. The European Union believes it has received a tariff-rate quota on steel and aluminum, which remains to be negotiated. A major area punted to future talks is the U.S. desire for additional concessions on EU digital trade regulation. Some of the countries believe they were promised more exemptions to the tariffs than they have thus far received. Secretary of Commerce Howard Lutnick said on August 19 that documentation of the Japan and South Korea deals was “weeks away.”

Another big mystery surrounds the various investment commitments made by the European Union ($600 billion), Japan ($550 billion), and South Korea ($350 billion). While Trump seems to believe these countries are just going to give him the money to invest as he pleases, the other countries tell a different story, with the European Union saying any investment will come from private companies, and they will make their own decisions, and Japan saying that most of the $550 billion will be loans and loan guarantees rather than cash. Also missing is clarification on whether these commitments represent all new funds or include investments already made or announced.

The second category—Canada, Mexico, India, and China—are all cases where both sides acknowledge there is no agreement, and further talks are needed. The reasons for the delay are varied, but all four cases are important countries with exceptionally complex issues to negotiate.

The third category—countries that simply received a number—will also feature further negotiations—some with countries like Switzerland that got a big number, and some with other countries simply seeking to do better. Trump has simultaneously suggested he has no further talks in mind but will listen to countries that bring forward new offers.

Looming over all countries is the threat of additional tariffs as a result of the sectoral Section 232 investigations underway. Tariffs have already been placed on steel, aluminum, autos, copper, and lumber (as of last week, including furniture), are imminent on semiconductors and pharmaceuticals, and likely on critical minerals, trucks, aircraft, drones, and polysilicon, and, as of last week, wind turbines. The European Union and Japan, and perhaps South Korea, believe they have been promised tariffs on some of these sectors will, for them, remain at 15 percent, but that remains to be seen, and on autos is already a source of contention. Still unclear is whether these tariffs will be “stackable”—piled on top of each other and adding up to prohibitive levels.

Taken together, it is clear that negotiations are far from over. Several weeks ago, a colleague from another organization remarked that the sad story about these negotiations was that they were never going to be over. He got that right. Between fully baking the agreements ostensibly reached, concluding the ones still pending, considering new proposals, finishing the Section 232 investigations and opening new ones, and coming back to some countries for a second bite, we really are seeing a never-ending story.

Finally, Trump has not only made tariffs a foundation of his economic policy, but he has also weaponized them to become an instrument of foreign policy as well. India and Brazil are current examples, but there will be more, creating more mass confusion in their wake. As I recall, the movie had a happy ending—but also a sequel. It is doubtful we will be so lucky in real life.

William A. Reinsch is senior adviser and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C.

Trade continues to be the hottest policy topic in Washington, which is why we’re bringing back our ⁠Crash Course: Trade Policy with the Trade Guys⁠ this fall. If you missed our spring course, now is the perfect time to register. The course runs October 8–9 at CSIS or via Zoom. Registration is open until October.