China-US Trade Truce Prompts Nations to Consider Tougher Tactics

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Policymakers in Tokyo may be starting to think that it’s preferable to take time rather than make major concessions to wrap up things up quickly.

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“Everyone in the queue is wondering, ‘Well, why have I been lining up?’” said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis. “This deal let China jump the queue and also doesn’t have clear benefits for the US so it’s doubly painful for other countries watching.”

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Even US officials are signaling that negotiations will take longer. Commerce Secretary Howard Lutnick told Bloomberg TV that talks with Japan and South Korea will take time. Treasury Secretary Scott Bessent last week said the European Union suffered from a lack of unity that was impeding talks.

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“I think the US and Europe may be a bit slower,” Bessent said Tuesday at a Saudi-US Investment Forum in Riyadh. 

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On Sunday, the Treasury secretary sounded optimistic about talks more broadly, adding that “we didn’t get here overnight.”

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“With a few exceptions, the countries are coming with very good proposals for us,” Bessent said in an interview on CNN’s State of the Union. “They want to lower their tariffs, they want to lower their non-tariff barriers, some of them have been manipulating their currency, they’ve been subsidizing industry and labor.”

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EU Skepticism

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Officials in Brussels viewed the US-China tariff announcement as leaving high tariffs in place and limited on several fronts, according to people familiar with EU discussions.

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The meager negotiating gains for the US and the lack of a clear end game during the 90-day reprieve show how limited is Trump’s appetite to keep ratcheting up the pressure on Beijing, the people said on condition of anonymity to discuss private deliberations.

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“The trade landscape is becoming more fragmented” and “the deals achieved so far are not completely addressing the situation,” the European Commission’s top economic official Valdis Dombrovkis said in an interview in London on Thursday, referring to the China tariff truce and a UK-US outline of a deal announced days earlier.

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In Latin America, where developing economies want to preserve both Chinese investment and export access to the US market, leaders are trying to walk a careful line as the two heavyweights square off.

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Visiting Beijing

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Brazil President Luiz Inacio Lula da Silva, who previously said negotiation came before retaliation, on Wednesday brushed off concern that forging deeper ties with China would prompt a negative US response after a state visit to Beijing that saw him sign more than 30 agreements. 

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Colombia’s President Gustavo Petro, also in Beijing last week, signed on to China’s Belt and Road initiative in a bid to boost trade and investment for his country, even as his top diplomat stressed the US remains the nation’s main ally.

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The US-China arrangement may also show nations that the Trump administration isn’t immune to the pressures of domestic economic headwinds caused by tariffs.

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“The economic pain is more immediate and broad-based in the US and this deal can be seen as the Trump administration acknowledging that,” said Robert Subbaraman, head of global markets research at Nomura Holdings Inc. 

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But only nations with economic heft and limited reliance on trade with the US may be able to act on that, according to Bert Hofman, professor at the National University of Singapore and a former World Bank country director for China. “It’s pretty risky for most countries to be tough on the US,” Hofman said by phone. 

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A prime example of that is Canada, which Oxford Economics said last week had effectively suspended almost all of its tariffs on US products. Over the weekend, Canada’s Finance Minister Francois-Philippe Champagne disputed that, saying the government kept 25% retaliatory tariffs on tens of billions of dollars in US goods.