Locations Affected: United States, India, Brazil, Canada, Mexico
Ahead of the 01 August trade deal deadline, United States President Donald Trump announced adjusted tariffs on 69 trading partners, with steep tariffs imposed on countries such as Brazil, Canada, India, and Taiwan. The tariffs on exports from the impacted countries range from 10 to 41 percent and will come into effect on 07 August. Some countries, such as South Korea, were able to sign trade deals with the US before the deadline, while others were unable to negotiate with the administration. Certain goods shipped before the deadline will be exempt from the new tariffs. Countries not included in the published list will be subject to a 10 percent US import tax, which is lower than what was previously suggested by Trump. The increased tariffs are part of Trump’s strategy to strengthen the US economy and raise tax revenues. The 01 August deadline increased pressure on countries to negotiate trade deals in order to lower tariff rates.
Tariffs Imposed and Potential Impact
- Canada: In a separate order, the US raised tariffs on Canada from 25 percent to 35 percent, citing Canada’s failure to curb the flow of fentanyl into the US. The US-Mexico-Canada Agreement (USMCA) is exempt from the tariff hike.
- Mexico: Mexico has been granted a 90-day reprieve from a potential 30 percent tariff to negotiate a broader trade pact. The extension followed discussions between Trump and Mexican President Claudia Sheinbaum, and avoids increased rates on most Mexican non-automotive and non-metal goods, in accordance with the USMCA. However, a 50 percent tariff on Mexican steel, aluminium, and copper will remain in place.
- Brazil: Trump imposed a 50 percent tariff on Brazil’s exports but excluded certain sectors such as aircraft, energy, and orange juice.
- India: India faces a 25 percent tariff as well as an unspecified penalty for its purchase of Russian oil. While negotiations are ongoing, they have been severely hindered by disagreements over US access to India’s agriculture sector, which India has vowed to protect due to its labour-intensive nature. A US trade team is scheduled to visit New Delhi on 25 August to continue talks.
Outlook on the Situation
The increased tariffs imposed by the United States are expected to have widespread impacts across various sectors. US consumers have already begun facing price hikes on numerous products since the tariff changes. Although economists have raised concerns about rising inflation, Trump has stated that the tariffs would benefit the US economy in the long term.
India’s GDP and key sectors such as pharmaceuticals, textiles, leather, and automobiles could be adversely affected. As the tariffs on India are now higher than those imposed on other Asian countries like Vietnam and China, the likelihood of export supply chain diversion to India may diminish.
The exceptions granted to Brazil cover some of its most significant exports to the US and are likely to mitigate the potential economic impact. Furthermore, Brazil’s domestic economic resilience and its strengthening ties with other nations—particularly BRICS members—could help cushion the effects.
Canada is likely to continue negotiations with the United States for a new trade deal. China also faces a 12 August deadline to reach a tariff agreement with the US, after the two countries reached a preliminary agreement in May and June to end reciprocal tariffs and halt restrictions on rare earth minerals.
