Markets were on edge this week as Donald Trump’s August 1st deadline for trade negotiations on US tariffs finally ran out. Trump has already announced tariffs on goods imported from many of America’s largest trading partners, as trade negotiators rushed to strike last-minute deals or extensions before time ran out.

The deadline came more than 120 days after Trump first announced his list of “Liberation Day” tariffs on imported goods on April 2nd. Despite delays, the Trump administration now looks ready to roll out new tariff rates for the countries that didn’t manage to secure a deal before the Friday deadline. White House press secretary Karoline Leavitt announced that two-thirds of the US’s 18 major trading partners already have a deal, and that letters have been sent to an additional 17 nations.

The White House said that countries that have not struck a trade deal, or have not received a letter with a new tariff rate, will hear from the Trump administration by midnight on Friday. Taiwan - the world’s most important semiconductor exporter - was hit with a 20% tariff. Tariffs were raised on Canada, a historic US ally and major trading partner, to 35 per cent. India was hit with a 25 per cent tariff and Switzerland with 39 percent.

Trump said that he would not be extending the deadline this time around. Tweeting “THE AUGUST FIRST DEADLINE IS THE AUGUST FIRST DEADLINE – IT STANDS STRONG, AND WILL NOT BE EXTENDED. A BIG DAY FOR AMERICA!!!” on his version of Twitter – which is called Truth Social, earlier this week. On Thursday he announced that he would delay higher tariffs on Mexico by 90 days.

At midnight this Thursday, US Customs and Border Protection began charging importers the new duties, which range from 10 percent to 50 percent, with additional tariffs being applied to certain industries like pharmaceutical products, copper, steel and aluminum for most countries. The Yale University Budget Lab announced on Monday that U.S. consumers face an effective tariff rate of 18.2% - the highest rate since 1934 – which means that the average household will see additional costs of $2,400 in 2025. That analysis came out before the announcement of additional tariffs on India and the announcement delaying higher tariffs on Mexico.

US and Chinese negotiators agreed earlier this week to push back the deadline for striking a deal after talks failed to find a resolution this week across the many areas of dispute.

Back in April, Trump had claimed to have done “over 200 deals” in an interview with Time Magazine, and trade advisor Peter Navarro had said that “90 deals in 90 days” was possible. The country has fallen far short of that, with only eight deals in 120 days, including one with the 27-member European Union.

The UK was the first country to strike a trade deal with Trump back in May, agreeing to a flat 10 per cent tax which US buyers will pay on most goods imported from the UK. This was possibly the easiest deal to strike for Trump – due to the favorable preexisting trade dynamics between the US and the UK – where Britain only ran a very small trade surplus in goods with the United States – and it would appear that Trump prioritizes goods over services as his 2025 Trade Policy Agenda explicitly calls for a “production economy”, emphasizing manufacturing, agriculture, and energy as the backbone of American prosperity. Britain – like the US runs a Trade deficit, meaning that it imports more goods and services than it exports. In fact it runs the third largest trade deficit in the world – behind only India and the United States.

Within days of the deal being announced, the Financial Times reported that China was upset that it had been structured to squeeze Chinese products out of British supply chains. Chinas Foreign Ministry said that it was a “basic principle” that agreements between countries should not target other nations. According to the FT, China has warned other countries against signing trade deals with the US that threaten Chinese interests.

The US-UK trade deal - was described by President Trump as being “full and comprehensive” - it kept in place the 10 per cent tax on most British imports – in particular – it specified that cars imported from the UK would face a 10% tariff in the United States, which is lower than the 15% rate that Americans will have to pay on cars imported from the EU and Japan. The deal only applies to the first 100,000 British cars imported per year, which is approximately the number of cars that Americans already buy from Britain and every vehicle sold above that quota will be hit with a 25% tax, discouraging any increase in sales.

The feature of the deal that upset China was that the tariff relief for steel and cars bought by Americans included conditions requiring the UK to "promptly meet" US demands on the "security of the supply chains" of steel and aluminium products exported to America. The Chinese worry that this could mean that they could be excluded from supplying British firms that sell to the US. The British government pushed back against suggestions the trade deal could be damaging to China – saying that there was no such thing as a veto on Chinese investment" in the deal.

A British government spokesperson told the BBC that the agreement with the US was "in the national interest to secure thousands of jobs across key sectors, protect British businesses and lay the groundwork for greater trade in the future". Adding that “any external provisions" in the agreement were "not designed to undermine mutually beneficial economic relations with any third country.” This was widely interpreted as a reference to British Steel, which had been owned by China’s Jingye Group until earlier this year. Although the UK government took operational control of the company to prevent the closure of its Scunthorpe blast furnaces, Jingye remains the legal owner. Under the terms of the deal, steel from such facilities may not qualify for tariff relief unless ownership is restructured to meet U.S. standards.

This approach reflects what might be a broader shift in U.S. trade policy under Trump. Tariffs are no longer just a tool for protecting domestic industry—they are being used as a mechanism for enforcing geopolitical alignment. The UK deal, in this sense, might be a prototype for a new kind of trade agreement: one that rewards compliance with U.S. strategic objectives and penalizes economic entanglement with China.

Beijing’s reaction to the UK deal was swift and pointed. Chinese officials warned other countries that they deal with against signing agreements with the US that threaten Chinese interests and China accelerated its efforts to remove foreign components from domestic supply chains. The goal being - to insulate China from future trade disruptions and reduce dependency on foreign technology and inputs. This strategy broadly aligns with China’s long standing “dual circulation” policy, which aims to boost domestic consumption and technological self-sufficiency while maintaining selective engagement with global markets. The UK–US deal, and others like it, have possibly reinforced Beijing’s determination to reduce its risk of being pressured by foreign governments.

China has also been responding diplomatically to US pressure by stepping up engagement with countries in Southeast Asia, the Global South and within the BRICS bloc, offering alternative trade and investment partnerships. At the same time, it has continued trade talks with the U.S., resulting in a 90-day truce in May that temporarily reduced tariffs on Chinese goods from as high as 145% to around 40%. That truce, however, is fragile. Trump has tied further tariff reductions to cooperation on unrelated issues, making it difficult to know if a deal when struck will be stuck to or renegotiated again on a whim.

This transactional approach has left Beijing very wary. Chinese officials have indicated they will raise concerns directly with the UK and U.S. but are avoiding escalation—possibly to preserve room for negotiation or to avoid disruption ahead of a potential Trump–Xi summit later this year. While other Asian countries may be nervous of China, they see that Chinese companies will still invest in their countries while American businesses are retrenching to North America.

The EU’s agreement with Washington, finalized a few days ago, was broader in scope. It imposed a 15% tariff on roughly 70% of EU exports to the U.S., including pharmaceuticals, semiconductors, and cars. In exchange, the EU pledged to buy $750 billion dollars in U.S. energy and invest $600 billion dollars in American industry. Steel and aluminum exports were capped under a quota system, with excess volumes facing a 50% tariff. In return – The EU decided to put no tariffs on US goods. The one sided nature of this deal is somewhat surprising – as the European and US economies are fairly similar in size - and the trade relationships are interrelated in both directions.

Ben Hall argued on the Unhedged Podcast that the asymmetry of the US-EU trade deal stems from the structural and philosophical nature of the European Union itself. The EU was founded to promote free trade and market liberalization among its member states, making it inherently reluctant to impose tariffs or engage in aggressive trade retaliation. This foundational ethos, combined with the EU’s fragmented decision-making process—where divergent national interests often hinder unified action—left Europe unable to respond decisively to the protectionist stance of the US. As a result, the EU accepted a one-sided deal, prioritizing internal unity and stability over economic leverage.

Critics in Paris and Berlin were quick to describe the deal as capitulation. The FT’s editorial board described it as “rubber stamping the U.S. president’s new world order,” arguing that Europe had validated Trump’s bullying trade agenda. The Economist - offered a more pragmatic take, arguing that the EU had secured parity with Japan’s terms and retained its regulatory autonomy over digital services. The real problem, it argued, lies in Europe’s internal frictions—not in the asymmetry of the deal.

The EU’s negotiating position was weakened by internal divisions. France – which like the US runs a persistent trade deficit pushed back against agricultural concessions. Germany which runs a trade surplus - sought to protect its car industry. Eastern European states, who are most concerned with security guarantees, were reluctant to challenge Washington at all. The result was a fragmented front that left Brussels unwilling to push hard.

The corporate response to Trump’s tariff regime has been mixed. Ford reported a surprise quarterly loss in July, citing $800 million dollars in tariff-related costs and warning of a $2 billion dollar hit for the year. BMW, in contrast, has downplayed the fallout. With a major U.S. production base in South Carolina, it has been partially shielded from the worst effects. Apple – the company that has been most heavily hit by Trump’s trade and tariff agenda lost almost $700 billion dollars in market cap since the Liberation Day announcement posted blockbuster quarterly earnings this week. The companies CFO said there had been “some evidence” that sales were boosted by US customers buying early to get ahead of US tariffs early in the quarter.

Other sectors are also feeling the strain. Semiconductor firms have warned that the new tariffs could disrupt global supply chains already under pressure from export controls and geopolitical tensions. Pharmaceutical companies, many of which rely on Chinese active ingredients, are reassessing sourcing strategies. Trade associations have expressed concern about the lack of clarity in some deals. In several cases, tariff relief is tied to opaque “national security” reviews, leaving firms uncertain about compliance. Big businesses are delaying their investment decisions while they wait for guidance on how the new rules will be enforced.

While the Trump administration has touted a flurry of new trade “deals”, legal experts and lawmakers argue these are not actually real trade agreements. Under the U.S. Constitution, only Congress has the authority to regulate commerce with foreign nations and to approve binding trade agreements. Instead, the administration has relied on executive agreements and emergency powers—particularly the International Emergency Economic Powers Act — to unilaterally impose tariffs and negotiate tariff adjustments. These arrangements, critics argue, lack legal standing and bypass the legislative process.

Senator Ron Wyden, the ranking member of the Senate Finance Committee, issued a rebuke last month in a letter to U.S. Trade Representative Jamieson Greer – saying - “The Constitution provides Congress with sole authority ‘to lay and collect . . . duties’ and ‘to regulate commerce with foreign nations’... The President lacks the authority to enter into binding trade agreements absent approval from Congress” He urged the administration to “respect Congress’s constitutional authority over trade and power to write U.S. law,” warning that continued circumvention could provoke legal challenges and undermine the legitimacy of U.S. trade policy.

While the Trump administration has framed its recent executive arrangements as trade “deals,” many of America’s trading partners are still treating them as provisional and politically contingent, rather than as binding international agreements. Countries like the UK, Japan, and Vietnam have entered into what the White House calls “framework agreements” or “tariff understandings,” but these are not treaties ratified by legislatures. Instead, they are temporary arrangements negotiated under pressure, often in exchange for reduced tariffs or exemptions from broader U.S. measures.

European officials have been particularly cautious. A senior EU trade official, speaking anonymously, described the July 2025 agreement as “a tactical pause, not a strategic settlement.” Similarly, Japan’s Ministry of Economy, Trade and Industry issued a statement noting that its agreement with the U.S. “remains subject to further negotiation and domestic review” This ambiguity reflects a broader concern: that these deals could be reversed or invalidated by a change in Trumps mood, by U.S. courts or by a future administration. A federal appeals court is currently reviewing the legality of Trump’s use of emergency powers to impose sweeping tariffs, with analysts warning that the deals may ultimately be ruled “illegal” In effect, many countries are hedging their bets—accepting temporary agreements while preparing for further volatility. As one trade lawyer told CNN, “These aren’t trade deals. They’re ceasefires.”

The inflationary consequences of Trump’s tariffs are beginning to surface. While the US administration keeps claiming that other countries pay these tariffs, that is just not how they work. The tariffs push up the price of imported goods for American consumers – and can be expected to hurt foreign exporters – as the higher prices will likely lead to lower sales – but Americans do pay this tax.

Fed Chair Jay Powell – who was nominated by Donald Trump in 2018 has resisted the president’s calls for aggressive rate cuts. Powell cited uncertainty over the inflationary impact of tariffs, many of which exceed the 10% threshold economists had assumed would be the ceiling. Two Fed governors dissented from the decision not to cut rates, marking the first such split since 1993. Markets interpreted Powell’s stance as hawkish, with short-term Treasury yields rising and the dollar rallying. Analysts at JPMorgan and Citigroup have warned that consumer spending could soften further in the second half of the year as businesses pass on higher input costs. The inflationary impact is not limited to the U.S. European central banks are also monitoring the situation closely, with the ECB warning that higher U.S. tariffs could spill over into global prices. For now, the Fed is holding its ground—but the pressure is mounting.

One of the questions that must be asked, is what is Trumps overall goal with these tariffs? Is he hoping to strike deals—or hoping to use tariffs to raise revenue? The answer might be both. Trump has framed each agreement as a victory for American workers, but the deals also serve a fiscal function. Tariffs now generate tens of billions of dollars in revenue, effectively acting as a tax on imports. The deals are structured not just to rebalance trade flows, but to enforce a new geopolitical alignment—one in which access to the U.S. market may be contingent on distancing yourself from China.

Trump’s tariff policy has never been solely about correcting trade imbalances. While his rhetoric often invokes the language of economic nationalism—protecting American jobs, reviving domestic manufacturing—the pattern of his actions suggests a broader, more coercive use of trade tools. The tariffs on Mexico and Canada were widely seen as a demonstration of power rather than a response to specific economic grievances.

Nowhere is this clearer than in Trump’s move against Brazil. The administration announced a 50% tariff on Brazilian aluminum and agricultural exports, not in response to trade practices, but as retaliation for Brazil’s prosecution of former president Jair Bolsonaro. Trump denounced the Brazilian legal proceedings as politically motivated and accused Brazil’s judiciary of suppressing free speech. This episode underscores how tariffs under Trump have become instruments of ideological alignment and personal loyalty, rather than just as tools of economic policy.

Trump’s approach has significant implications for the global trading system. It undermines the WTO’s most-favored-nation principle, which requires countries to treat all trading partners equally and avoid discrimination. By offering preferential terms to allies who accept U.S. conditions—and penalizing those who do not—Trump is replacing multilateralism with a confusing array of bilateral deals.

While tariffs are often framed as tools of trade policy, they also function as a form of taxation. According to estimates from Yale’s Budget Lab, the U.S. is now collecting tariffs on nearly half of all imports and bringing in tens of billions of dollars in revenue annually. A government can bring in tax revenue however it wants and Trump has paired sweeping income tax cuts with these tariffs, effectively shifting part of the federal revenue burden from domestic earners to consumers of imported goods. This raises the question of whether this an efficient way to collect revenue? Economists generally argue that tariffs are a distortionary and regressive form of taxation, raising prices for consumers and disrupting supply chains—compared to more transparent mechanisms like income tax. Yet for Trump, tariffs offer a politically potent blend of revenue generation and nationalist signaling.

Trump’s tariff blitz is an attempt to reorder global trade around American leverage. Americas allies have been drawn into a new system of conditional market access, where tariff rates are tied to compliance with U.S. strategic objectives. China, meanwhile, is recalibrating its supply chains and diplomatic posture in response. For businesses, the message is clear: the era of frictionless global trade is over. Supply chains are being redrawn, investment decisions are being delayed, and the cost of doing business across borders is rising. It is not at all obvious that these deals are set in stone – they might well be renegotiated constantly in the coming years.

While something did need to be done about America’s persistent trade imbalances, and there are good arguments for moving strategically important manufacturing onshore, the question remains whether the current approach—marked by sweeping and frequently shifting tariffs—is the right one. Tariffs can raise revenue, and Trump has used them to offset income tax cuts, but they are a very blunt instrument. They distort prices, disrupt supply chains, and create uncertainty for businesses and consumers alike. Imported goods often spend 45 days at sea before reaching U.S. ports, and with tariff rates changing unpredictably, importers are left guessing at final costs—undermining planning and investment.

On top of that, it is far from clear that tariffs will achieve their stated goal of reviving American manufacturing. China’s manufacturing workforce alone numbers over 220 million—more than the entire U.S. labor force—and with American unemployment near historic lows, there is limited slack to absorb large-scale reshoring. As Robert Armstrong rightly observed in a recent podcast – which I’ll link to in the description - history suggests that protectionism tends to lead to lower productivity and stifles innovation. It invites rule-bending and rent-seeking, rather than competition and excellence. If the goal is to strengthen the U.S. economy, then the tools must be chosen with care—and wielded with a clear understanding of their long-term consequences.