China’s defiant stance in negotiating a tariff truce with the US has convinced some countries they need to take a tougher position in their own trade talks with US President Donald Trump’s administration.
The pause reached a week ago gave structure to what promises to be prolonged and difficult rounds of talks between Washington and Beijing, which still faces average US import taxes of nearly 50 percent, when past levies are factored into the 30 percent rate agreed to in Geneva, Switzerland.
Yet Trump’s willingness to retreat so much from the earlier 145 percent duty on China surprised governments from Seoul to Brussels that have so far stuck with the US’ request to negotiate rather than retaliate against its tariffs.
Illustration: Mountain People
After China’s tough negotiating tactics earned it a favorable — albeit temporary — deal, nations taking a more diplomatic and expedited approach are questioning whether that is the right path.
“This shifts the negotiating dynamic,” said Stephen Olson, a former US trade negotiator who is now a visiting senior fellow with the ISEAS-Yusof Ishak Institute in Singapore. “Many countries will look at the outcome of the Geneva negotiations and conclude that Trump has begun to realize that he has overplayed his hand.”
Left for now at 10 percent, the higher bespoke rates are to kick in unless deals are signed or postponements are granted before a 90-day suspension ends in July.
While officials are loathe to signal publicly any hardening of their approach, there are signs, particularly from larger nations, that they are realizing they hold more cards than previously thought and can afford to slow the pace of negotiations.
Trump himself indicated last week — near the halfway point of the 90-day reprieve — that there is not time to do deals with about 150 countries lining up for them. So the US might assign the higher tariff rates unilaterally in the next two to three weeks.
While Trump also said that India was prepared to lower all tariffs on US goods, Indian External Affairs Minister Subrahmanyam Jaishankar told reporters that trade talks are ongoing and “any judgement on it would be premature.”
Indian Minister of Commerce and Industry Piyush Goyal was scheduled to arrive in the US this weekend for further negotiations.
“There are many countries that may learn from China that the correct way to negotiate with President Trump is to stand firm, remain calm and force him to capitulate,” said Marko Papic, chief strategist of GeoMacro at BCA Research.
Japanese trade officials are scheduled to visit Washington this week. Japanese Minister of Economy, Trade and Industry Yoji Muto skipped a regional meeting last week in nearby South Korea that US Trade Representative Jamieson Greer attended.
Top negotiator Ryosei Akazawa, who leads Japan’s tariff task force, earlier this month said that he is hoping to reach an accord with the US next month, but local media reports indicated that an agreement is more likely to be reached in July, ahead of an upper house election.
Policymakers in Tokyo might be starting to think that it is preferable to take time rather than make major concessions to wrap up things up quickly.
“Everyone in the queue is wondering: ‘Well, why have I been lining up?’” said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis. “This deal let China jump the queue and also doesn’t have clear benefits for the US, so it’s doubly painful for other countries watching.”
Even US officials are signaling that negotiations will take longer. US Secretary of Commerce Howard Lutnick told Bloomberg TV that talks with Japan and South Korea will take time. US Secretary of the Treasury Scott Bessent last week said the EU suffered from a lack of unity that was impeding talks.
“I think the US and Europe may be a bit slower,” Bessent said on Tuesday last week at the Saudi-US Investment Forum in Riyadh.
On Sunday, he sounded optimistic about talks more broadly, adding that “we didn’t get here overnight.”
“With a few exceptions, the countries are coming with very good proposals for us,” Bessent said in an interview on CNN’s State of the Union. “They want to lower their tariffs, they want to lower their nontariff barriers, some of them have been manipulating their currency, they’ve been subsidizing industry and labor.”
Officials in Brussels viewed the US-China tariff announcement as leaving high tariffs in place and limited on several fronts, people familiar with EU discussions said.
The meager negotiating gains for the US and the lack of a clear end game during the 90-day reprieve showed how limited Trump’s appetite is to keep ratcheting up the pressure on Beijing, the people said on condition of anonymity to discuss private deliberations.
“The trade landscape is becoming more fragmented” and “the deals achieved so far are not completely addressing the situation,” the European Commissioner for Trade Valdis Dombrovkis said in an interview in London on Thursday last week, referring to the China tariff truce and a UK-US outline of a deal announced days earlier.
In Latin America, where developing economies want to preserve Chinese investment and export access to the US market, leaders are trying to walk a careful line as the two heavyweights square off.
Brazilian President Luiz Inacio Lula da Silva, who previously said negotiation came before retaliation, on Wednesday last week brushed off concern that forging deeper ties with China would prompt a negative US response after a state visit to Beijing that saw him sign more than 30 agreements.
Colombian President Gustavo Petro, also in Beijing last week, signed on to China’s Belt and Road Initiative in a bid to boost trade and investment for his country, even as his top diplomat stressed the US remains the nation’s main ally.
The US-China arrangement might also show nations that the Trump administration is not immune to the pressures of domestic economic headwinds caused by tariffs.
“The economic pain is more immediate and broad-based in the US and this deal can be seen as the Trump administration acknowledging that,” Nomura Holdings Inc global markets research head Robert Subbaraman said.
Only nations with economic heft and limited reliance on trade with the US might be able to act on that, said Bert Hofman, professor at the National University of Singapore and a former World Bank country director for China.
“It’s pretty risky for most countries to be tough on the US,” Hofman said by telephone.
A prime example of that is Canada, which Oxford Economics last week said had effectively suspended almost all of its tariffs on US products. Over the weekend, Canadian Minister of Finance Francois-Philippe Champagne disputed that, saying the government kept 25 percent retaliatory tariffs on tens of billions of dollars in US goods.
Seventy percent of the countertariffs implemented by Canada in March are still in place, he said in a social media post on Saturday.
The government “temporarily and publicly paused tariffs” on some items for health and public safety reasons, he said.
Still, because China’s clout remains substantial as the world’s factory floor, other countries might have “to use more creative pieces of leverage,” Papic said.
For Vietnam, one-third of its economy depends on trade with the US, and that lack of leverage means there is not scope to do much more than talk tough.
Vietnam, which was among the first nations to offer purchasing additional US goods such as Boeing Co aircraft to close the trade surplus, slammed Trump’s tariffs earlier this month as “unreasonable.”
If larger nations want to get confrontational, one area where they might have room is on services trade, Moody’s Analytics Asia-Pacific economics head Katrina Ell said.
The EU, Singapore, South Korea and Japan are among nations that have the biggest services trade deficits with the US, Moody’s Analytics data showed.
“China has too much leverage over the US for the US to continue with its hardline stance, whereas that’s not the case for many other economies,” Ell said by telephone. “That’s what we need to keep in mind is leverage and who has that leverage.”
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