US-China-EU Tariffs

We are witnessing critical geopolitical developments, with U.S. trade policy entering a new phase—one that affects not just relations with China and the European Union, but the entire global economy.

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All of this, of course, is happening in an environment where markets are trying to navigate uncertainty, high interest rates, geopolitical risk, and expectations for falling inflation and potential decisions from the Federal Reserve.

U.S. – CHINA

The week kicked off with a meeting that could shift the balance of global trade. In Stockholm, negotiators from the U.S. and China sat at the same table in an attempt to prevent the return of high tariffs that had been temporarily “frozen” by the previous trade agreement.

U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are working against a tight deadline: by August 12, a new deal must be reached—or the tariffs will return, and at nightmare levels. Specifically, 145% on U.S. goods entering China and 125% on Chinese goods entering the U.S.

China is demanding a significant reduction in U.S. tariffs, which currently total 55%, and also wants restrictions lifted on technology exports. The U.S., on the other hand, is pushing for something more strategic: a shift in China’s economic model—from export-driven to one based more on domestic consumption, increasing demand from Chinese households.

The talks in Stockholm didn’t yield a major breakthrough. However, they may have laid the groundwork for a potential summit between Donald Trump and Xi Jinping in the fall. Such a meeting could shape the future of relations between the two superpowers for years to come.

GLOBAL TARIFFS

At the same time, Trump made another big announcement: blanket tariffs—a 15% to 20% tariff on all countries that haven’t negotiated bilateral trade agreements with the U.S.

“I can’t sit around doing 200 different deals. If you want to trade with the U.S., you’re going to pay,” Trump declared, just ahead of the critical August 1 deadline for countries that had not yet agreed to specific tariff terms.

This shift mainly affects smaller economies—Latin America, the Caribbean, Africa—which had expected to fall under a default 10% tariff rate. Now, that benchmark is rising, and Trump appears determined to impose these new tariffs without further negotiation.

It’s worth noting that some countries, like Brazil and Laos, are already facing tariffs as high as 40–50%.

U.S. – EU

Unlike many other nations, the European Union managed to strike a deal with the U.S. before the deadline. The agreement includes a 15% tariff on more than half of European goods, including automobiles. However, critical sectors like aircraft, pharmaceuticals, and some chemicals are exempt.

Trump presented the deal as a major win, noting that it avoided the previously planned 30% tariff. Additionally, the EU committed to purchasing $750 billion worth of American energy and investing another $600 billion into the U.S. economy.

European governments responded with cautious optimism. Ireland described it as “stability,” Italy mentioned “avoiding immediate conflict,” while Germany expressed satisfaction over the reduction in auto tariffs from 27.5% to 15%.

The deal may not have been ideal for the EU, but it certainly prevents a trade escalation that would have been costly for both sides. Now we will have to wait to see the agreement probably on Friday and after that the EU member states have to pass it into law , that will be hard because everyone wants changes.