The announcement of US president Donald Trump's wide-ranging global tariff regime in April has hugely shaken up the world trading environment, but three months on, there remains a huge deal of confusion about how these policies will be implemented.
After the initial announcement, many countries earned a temporary reprieve with Washington delaying the implementation of the tariffs until July 9th. However, this date came and went, with a new deadline set by the administration for August 1st. From last week, the US government began sending letters to partners dictating the terms of new tariffs and warning against any retaliatory measures. So what are the next steps and how is the rest of the world reacting?
What tariffs are key countries facing from August?
Countries with US imports of at least $10 billion a year to have received letters detailing new tariff rates set to apply from August 1st are:
- Canada: 35 percent
- Mexico: 30 percent
- EU: 30 percent
- Brazil: 50 percent
- Indonesia: 32 percent
- Japan: 25 percent
- Malaysia: 25 percent
- South Korea: 25 percent
- South Africa: 30 percent
- Thailand: 36 percent
- Philippines: 20 percent
- Cambodia: 36 percent
Several countries have seen their rates change significantly since Mr Trump's pronouncements in April, indicating that tariff rates are not being set solely based on current trading arrangements.
Brazil, for example, originally faced a ten percent rate due to the US having a trade surplus with the country. However, the 50 percent levies imposed last week reflect Mr Trump's anger at an ongoing criminal case in the country against one of his close allies, former president Jair Bolsonaro.
Meanwhile, Canada's high rate has been partly attributed by the White House to the country's alleged failure to prevent shipments of fentanyl from entering the US.
These may indicate how the administration continues to view the threat of tariffs as a key part of its foreign policy rather than simply a trade issue.
How have key trading partners reacted to the tariff threat?
Few countries have so far come to agreements with the US, despite the administration's hopes for '90 deals in 90 days'. Those that have negotiated include Vietnam, which is set to face a 20 percent rate if a proposed deal is finalized - down from 46 percent in April - and the UK, which will be hit with ten percent levies on most goods.
Most other nations, however, face significant challenges as a result of the new rates. The EU's trade commissioner Maroš Šefčovič, for example, warned that the rate of 30 percent would make it "almost impossible" for current trade volumes to be maintained.
"If [the tariff] stays 30 [percent] plus, simply trading as we know it will not continue, with huge negative effects on both sides of the Atlantic," he said ahead of a meeting of EU ministers to discuss the issue. "I will definitely do everything I can to prevent this super-negative scenario."
To escalate or negotiate? The decisions facing nations
The US government's letters contain warnings that any efforts to respond with retaliatory tariffs will be met with further duties - with the tit-for-tat increase between the US and China earlier this year illustrating how quickly this can ramp up. Therefore, many governments are already discussing whether to attempt further negotiations.
Brussels, for instance, has delayed the implementation of its own tariffs targeting US goods until early August, though it is reported to have drawn up measures that would impose duties on €72 billion worth of US goods.
Mexican president Claudia Sheinbaum has also indicated intentions to seek a deal, though she added there are contingency plans in place.
Markets, though, continue to take a cautious approach to the situation, perhaps mindful that previous deadlines have come and gone and several tariffs have already been enacted and quickly withdrawn. One strategist told CNBC: "We've seen this playbook before, and until there's a clear escalation or a surprise, investors are taking a wait-and-see approach."