Clipped from: https://www.thehindubusinessline.com/opinion/editorial/trade-deals-its-advantage-america/article69868940.ece
A three-fold rise in US tariffs seems to be the ultimate aim
US President Donald Trump with European Commission President Ursula von der Leyen, after an announcement of a trade deal between the U.S. and EU, in Turnberry, Scotland, Britain (file photo) | Photo Credit: EVELYN HOCKSTEIN
In what is very significant ‘progress’ the US has reached agreements with two huge economies: Japan and the European Union (EU). There are many details that will be open to interpretation and discussion but the broad outcomes are entirely favourable to the US. President Donald Trump has said that global tariffs are likely to settle between 15-20 per cent.
The agreements will expand US market access to Japan and Europe while being able to ‘persuade’ them to invest vast sums of money in industries that America regards as being of importance. Trump has said that Japan has agreed to invest $550 billion in the US and that 90 per cent of the profits will not be repatriated to Japan. This total amount will be a combination of equity, loans, and guarantees from state-backed institutions. Regardless of the actual mix the fact remains: a big boost to the American capital account. This should serve America well because its own savings rate at about 4.5 per cent is not enough to meet its investment and therefore employment needs. On tariffs there is confusion. While America says it will charge 15 per cent, Japan has made some clarifications regarding the incidence. It also says the total tariff will be capped at 15 per cent. The most significant aspects are in respect of automobiles, auto parts and expanded American access to Japan in rice with safeguards. Japan has traditionally had a highly protected market in rice. On the whole, Trump has been able to arm-twist Japan into submission.
It’s a similar story with Europe. The two have agreed to a 15 per cent tariff on most European goods. That includes the pain points — automobiles and pharmaceuticals. Besides that the EU has agreed to buy $750 billion of American energy — oil and gas. But this will be spread out over three years. Not just that. Like Japan, the EU, too, has agreed to invest around $600 billion in the US. Furthermore, the two have agreed to zero tariffs on a whole range of industrial goods. The details will be several and have to be worked out but the general template is now clear: you charge America lower tariffs but it will charge you more than it has been doing. And as a sweetener, the rich amongst you must invest in America. All other countries with whom America has struck a deal have had to agree to this.
India and even China are unlikely to be exceptions to the general rule. Only the UK has been allowed a levy of 10 per cent on most exports to US, the minimum rate applicable on all imports into America. In short it’s a clear victory for the US against the rest of the world. After all, it used to charge around 2.5-3 per cent before the ‘Liberation Day’ order came along. The extra revenue is likely to be around $1.5-2 trillion over the next five years. That will help stabilise US public finances. As far as India is concerned, the devil lies in the details of this intricate game of give-and-take.
Published on July 29, 2025
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