The Deadline For Trump's 'Reciprocal' Trade Tariffs Is Looming

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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 in the United States' naughty corner. 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 US 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 US concessions although they may resort to retaliation to force this outcome. From discussions with our government and academic sources, it appears that Japan and India won't retaliate – but Canada has done so previously and the EU likely will.

Australia's Prime Minister Anthony Albanese initially said he would not negotiate and has repeated US 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 policy makers are also reminding the US of their favourable access to Australia's military infrastructure which could be essential to any US-China 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.

What happens next?

Kevin Hassett, director of the National Economic Council, suggested on Friday that more deals might be signed before July 8.

[Indeed, on Wednesday, July 2, the president announced a deal with Vietnam – one that was immediately criticized as unfavorable to Americans .]

Trump is likely to undermine and/or negate deals as his transactional whims change.

The British, after announcing their US deal that included relatively favourable automotive and steel export market access, watched in horror as Trump doubled tariffs on steel imports to 50%, and reimposed the 25% tariff on the UK.

The UK government was reminded that this US 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 US 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 that Trump cannot change tariffs by decree, then why negotiate with a serially untrustworthy partner?