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US: Trade tariff re-escalation
US President Trump unveiled the first wave of tariff letters to 14 countries on 7 Jul, slated to take effect on 1 Aug deadline (extended from 9 Jul). These rates would be “separate from all sectoral tariffs,” meaning, the new tariff will not be stacked on top of any existing/future sector-specific tariffs.
The list contained many Asian countries and included Japan (25%), South Korea (25%), Malaysia (25%), Indonesia (32%), Thailand (36%) amongst others, which is broadly similar (and in some cases slightly worse compared) to the rates announced on Liberation Day. Some of the Asian countries do not run significant trade surpluses with US but are still hit with material tariff rates, likely to mitigate trade diversion/transshipment from China
The US-China 90-day pause in reciprocal tariffs which will end on 13 Aug, will come into view. Trump’s reversion to Liberation Day tariff rates for some economies on 7 Jul has increased the risks for China in addition to US potentially seeking to cut transshipments (targeting goods with Chinese content) through a tiered tariff agreement (such as with Vietnam). We expect a trade deal to be announced (including the tariff rates and finalized terms) or a further extension of the 13 Aug deadline.
Trump issues new tariff rates, warns against retaliation, but still open for negotiations
On Mon (7 Jul), fresh from his victory in the passage of his “One Big, Beautiful Bill” (OBBB) and ahead of the 9 Jul expiration of the 90-day tariff pause, US President Trump unveiled follow-up letters to 14 countries (mostly Asian) announcing updated rates. These included Japan (25%), South Korea (25%), Malaysia (25%), Indonesia (32%), Thailand (36%) amongst others, which are broadly similar (and in some cases slightly higher) compared to the tariff rates announced earlier on 2 Apr Liberation Day (see Chart 1). Trump also signed an executive order extending the tariff pause from 9 Jul to 1 Aug. According to the fact sheet, Trump may send more letters in the coming days and weeks.
Importantly, Trump said these rates would be “separate from all sectoral tariffs,” meaning the new tariff will not be stacked on top of any existing/future sector-specific tariffs. Trump also warned against tariff retaliation, stating that if countries raise tariffs against the US, the US will add the same amount to the announced tariff levels. That said, Trump left the door open for additional negotiations and extensions, saying the 1 Aug deadline was “not 100% firm” and he remained open to continuing to tweak the rates (Trump: “Maybe adjust a little bit, depending …We’re not going to be unfair.”)
Alvin Liew
Senior Economist
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