Tariff Talk

Near-global reciprocal tariffs go live at 12:01 AM EST on August 1. These changes primarily include increases to the current 10% rate and, in many cases, decreases from the initial April 2 rate. Many of these adjustments were communicated via formal letters to partner countries and are expected to take immediate effect. However, multiple countries are in various stages of negotiating trade agreements that also include tariff changes effective August 1. As these agreements have not yet been formalized, their terms are not final and are likely to be updated as negotiations conclude. Many also include provisions for further tariff reductions based on balanced trade performance.

This morning, the tariff with Mexico was placed on a 90-day pause. Please note that these details can and likely will change, whether through a formal trade agreement or a notified rate change by the White House.

Pending trade agreements include Japan, South Korea, Indonesia, the Philippines, Vietnam, and the EU. The UK is also in negotiations but is not impacted by the August 1 changes. The data released on the EU deal underscores the need for formal guidance. The European Commission has shared language indicating that an annex of commodities (including chemicals, pharmaceuticals, and natural resources) will be exempt from the reciprocal tariff. Additionally, there will be a 15% ceiling on tariffs: “Establishing a single, all-inclusive U.S. tariff ceiling of 15% for EU goods. As of 1 August, the U.S. will apply this maximum tariff on the vast majority of EU exports. It is an all-inclusive tariff rate and represents a ceiling, including the U.S. most-favoured nation (MFN) tariff that was previously stacked on top of additional tariffs the U.S. introduced.” White House fact sheets have not yet provided further details on the ceiling or the exclusion list.

Brazil’s change will take effect on August 6 and includes an in-transit exclusion for goods already on the water by that date. An annex list will exclude commodities such as silicon metal, pig iron, civil aircraft, Brazil nuts, orange juice, wood pulps, and others from the new tariff. Still pending clarification is how this increase will be implemented. Rather than a simple rate change, the declaration outlines a 40% tariff under a new IEEPA emergency, which will be added to the existing 10% reciprocal tariff for a total of 50%. Formal details on the implementation are pending, including whether the exclusions will apply to the 40%, the 50%, or both.