Leonardo Morales, Senior Fellow, MSI²
A great uproar was created by left-leaning media around the world following the announcement of new tariffs on countries negotiating with the United States that did not reach an agreement before August 1st.
Many accepted Washington's tax rate without protest, especially those who will pay between 10% and 15%.
In several cases, such as Mexico, which trades 80% of what it produces with the U.S., Trump has been patient and has extended the negotiation deadlines in search of beneficial bilateral agreements for both parties. Because the occupant of the White House does not want abuses but rather what is fair, what should have been settled decades ago. He has also extended deadlines and allowed talks to occur on a pragmatic basis with China, seeking a common understanding.
The tariffs take effect on August 7th. Many thought Trump was only warning or threatening (the key term from his political opponents) and that in the end, he would have to yield to so many international pressures. A gross error!
As millions of Americans already know, Trump doesn’t bet to lose, much less to change course. Not even a close death made him take a step back. On the contrary. He also doesn’t have much time to play, so when he sees no responses, he makes decisions or accelerates strategies. This is what happened with Europe.
Some criticize the President of the European Union, especially French President Emmanuel Macron, who has been keen on building prominent visibility by contradicting Trump, especially after the famous slap from his marital partner. Macron wants to show determination and independence, and immediately lamented the supposed weakness of Ursula Von Der Leyen in front of Trump.
Historic Agreement
The formula was simple. Von Der Leyen understood very well the message from the U.S. president, because at the current moment, Europe is not in a position to impose and attack like a lion. There are too many things at stake and the president—without many options—used the scale.
In the history of the United States, after the deal with China in 2020, no such a significant and relevant trade agreement had been achieved like the one obtained by President Donald J. Trump with the European Union and its 27 member countries.
The agreement involves a 15% tariff on European products entering the U.S. and a commitment for investments of more than $600 billion in addition to what had been previously agreed in various sectors of the American economy until 2029.
The above strengthens the consolidation of the U.S. dollar as the world's reserve currency, against the intentions of BRICS (socialist bloc) member countries to destroy Washington's financial hegemony.
While some economists aligned with the economic policies of the previous Joe Biden administration make negative predictions, reality dictates otherwise.
The U.S. economy grew by 3% between April and June (second quarter), as Treasury Secretary Scott Bessent and White House economic advisers had predicted.
However, liberal media continue with their agenda to promote uncertainty about tariffs and the strategic shift of the U.S. in global trade. So does the Chairman of the Federal Reserve, Jerome Powell, who has become a thorn in the President's side.
Powell proposed—for the fifth consecutive time—to keep the country's benchmark interest rate unchanged in the range of 4.25% to 4.50%, in an open challenge to Republicans and the head of the Oval Office, who are asking for a significant reduction in interest rates so that the economy moves faster, while Americans and businesses have better access to loans and credits.
Despite the decision of the Central Bank, Trump does not stop his plans.
Blow to Russia and escalating tensions with Putin
The economic treaty with the EU also implies purchasing $750 billion or more in energy (oil, gas, coal, etc.) from North America, replacing Russian oil and hydrocarbons.
As chess moves go, Russian President Vladimir Putin turned to India—a historical ally—but Trump has already put them in his sights and seeks another checkmate move against someone who has made him waste too much time ordering multiple attacks from the Kremlin against Ukraine in the last two months, far from the expectations of the head of the Oval Office in Washington.
Russia has launched more drone attacks against Ukraine in July than in any other month since the invasion.
After misguided comments, which did not amuse Trump, from former Russian president Dmitry Anatolievich Medvedev (2008-2012) and Prime Minister (2012-2020), there was an immediate reaction.
"I have ordered two nuclear submarines to be positioned in the appropriate regions, just in case these foolish and incendiary statements are more than that," Trump wrote on his platform Truth Social.
The White House's response arises because Medvedev is not a retired politician. He now serves as Vice Chairman of the Security Council of the Russian Federation, and his words represent a very serious threat.
The Kremlin felt the jab from Washington. The pact with the EU, particularly the energy component, is the biggest economic and financial blow that President Vladimir Putin has received, greatly surpassing all the ineffective sanctions imposed by the previous Biden administration.
The Kremlin's reactions came immediately. And the level of tensions has escalated.
Russian Diplomacy
The head of Russian diplomacy, Sergei Lavrov, estimated hours after the announcement that the agreement between the United States and the European Union represents a "very hard blow to the European industry." But in reality, it means a hammer blow to Moscow, which had already foreseen this and that is partly why Putin's reaction is to continue his offensive in Ukraine as retaliation for Trump's actions in global trade and specifically with Europe; with a striking impact on Moscow.
"This approach will lead to a ‘greater deindustrialization’ of Europe, to an investment flow from Europe to the United States, and of course, it will be a very hard blow," expressed Chancellor Lavrov, steeped in frustration.
President Trump has always practiced a conciliatory tone—even with the enemies of the U.S.—but without falling into the tactics of false friends; he did not do so during his first term when the Russian leader walked hand in hand with his American counterpart. Now Putin seems emboldened by the war and acts intoxicated with power, something Trump did not count on.
What Putin has indicated is that he wishes to continue with the war until he fulfills all his objectives (as he has reiterated before) or that he is shaken by the weakness of the previous administration and its inability to stop him. The top Russian leader also does not have many options to where he has gotten with Ukraine.
Russia has exhausted in Kiev its old reserve arsenal and has renewed it almost completely, according to experts. This has been one of the Kremlin's strategies in the war.
Trump has felt deceived and disappointed by the Russian chief, who promised to end the war. On the contrary, Putin has intensified attacks against Ukraine and civilian sectors in the last three months.
"I really felt it was going to end. But every time I think it's going to end, it comes back again. "I'm no longer that interested in talking (to him) again," said the occupant of the White House.
Unlike the 50 days that he had given Moscow to end the war, Trump has now given a 10 to 12-day ultimatum. If not met, he will take direct action against Moscow and countries that trade with it, which would have a significant additional impact on the ex-Soviet economy.
There lies part of the relevance of this trade agreement with the EU and the effect on the end of the war in Ukraine, which Trump has not been able to conclude through negotiations with the involved parties.
The trade treaty with the EU forces like never before Putin to cede in his position towards Kiev or face real and immediate consequences. This is precisely what makes the Russian leader very uncomfortable. By some trump-like magic, he now finds himself in trouble.
The new tariffs and "America First"
On August 1st, Trump signed the presidential order regarding new tariffs imposed by Washington on nations that have not reached a pact with the world's number one economy, amid a new order for international trade and under the new economic policies of the White House. Countries will begin to pay on August 7th.
Before that date, Trump warned India of a 25% tariff if it did not come to an agreement with Washington and signed a decree that raises tariffs on Brazilian imports to 50%.
The White House considers that the actions of the ultra-leftist Brazilian government, Luiz Inácio Lula da Silva, "constitute an unusual and extraordinary threat to national security, foreign policy, and the economy of the United States."
"The persecution, intimidation, harassment, censorship, and politically motivated prosecution of the Brazilian government against former Brazilian President Jair Bolsonaro and thousands of his supporters are serious human rights violations that have undermined the rule of law in Brazil," indicated the government statement.
Washington asserts that members of the Brazilian government "have executed unprecedented measures to tyrannically and arbitrarily coerce American companies into censoring political speech, expelling users from their platforms, providing confidential data of American users, or modifying their content moderation policies."
The highest tariff rates will be applied to Syria (41%), Laos and Myanmar (40%), Switzerland (39%), and Iraq and Serbia (35%).
"President Trump has begun to recalibrate decades of failed trade policy for the United States", stated a White House release.
Recently, the U.S. Congress approved the budget to finance the mega economic plan of the Republicans and Trump, which is based on the “America First” platform.
The tariffs, a centerpiece of Trump's economic project, have turned 180 degrees on the [false free global trade], which was neither truly free nor fair.
In these two scenarios, the U.S. has been on the losing side for more than six decades. On one hand, paying high taxes on exporting its products amid numerous markets closed to North America; on the other, dozens of nations with levies below 10% and others at almost zero under the category of "favored nations members of the World Trade Organization".
Among this broad group were the 27 countries that make up the European bloc, to which Washington charged a symbolic 4.8% tariff on average, compared to more than 30% and 70% charged on the majority of American exports. Some products were even taxed over 80% and 100% in several countries under the status of "important and strategic" trade partners with Washington.
The European Community imposed significantly higher levies than the U.S. in the chemical, automotive, technology, manufacturing, agriculture, and livestock industries.
Before his return to the White House, Trump promised a radical change in international trade, especially with fair benefits for the U.S.
“The extensive era of abuse and the disadvantage of the U.S. in global trade has ended. It will never return,” he has said on several occasions, the American president who has so far delivered more than 90% of his major campaign promises.
The approval rating of his administration among Republicans is at 88% on average, according to recent polls.
This is the highest popular support for conservatives to a Republican president, even surpassing the successful leader Ronald Reagan. Overall support is at 63% in the last survey published by leftist network CNN, an unprecedented level just six months into his term.
Trade with the European Union
The trade agreements signed with Japan, Indonesia, the Philippines, Vietnam, the United Kingdom (four countries), and the European Union (27) total 35 nations that chose to negotiate with Washington before paying the fee set by the White House.
Many, with levies between 10% and 15%, are willing to pay and have avoided the negotiating process.
It remains for the members of the European Council to meet and approve Ursula Von Der Leyen's understanding with Trump in Scotland.
The trade of goods and services between the EU and the U.S. has doubled in the last decade and registers about $2 trillion. This figure represents more than $4.28 billion daily in bilateral exchange across the Atlantic and accounts for 45% of global trade, according to the World Trade Organization (WTO) and the International Monetary Fund (IMF).
Trump had complained that Europe was not opening its market to many U.S. products and not sufficiently to others like vehicles made in the U.S. Currently, 30% of European imports come from American companies, according to statistics from the European Central Bank (ECB).
The deal achieved by Trump is so...outstanding that the Hungarian conservative president Viktor Orbán declared: “We suspected it would happen, because the president of the U.S. is a heavyweight in negotiations, while Mrs. Ursula Von Der Leyen is a featherweight.”
He added that Von Der Leyen's deal with Trump “is far below what the United Kingdom achieved.”
"It wasn't Trump who made a deal with Ursula Von Der Leyen, rather, Trump had Von Der Leyen for breakfast," the right-wing Hungarian leader noted with a smile to international media.
Most members of the European Union defended the deal sealed with the United States in order to avoid an escalation of trade war, which would have brought serious consequences for the Old Continent bloc, at a time of extreme economic weakness of its main engine: Germany; and other internal problems despite its trade surplus of 198 billion dollars.
The pact provoked divided reactions among its members, ranging from praise of the understanding to criticisms framing it as a capitulation to Washington’s power.
The false fear regarding the impossibility of trade agreements spread by the left and far-left media has once again sunk, and each deal achieved by Trump and his negotiating team led by Treasury Secretary Scott Bessent has imposed victory after victory, shattering all "catastrophe" predictions from the opponents of the White House.
This is the case with the agreement with Japan, the world's fourth-largest economy, and with the United Kingdom. Both signatures pressured Von Der Leyen directly to extend a hand to the Republican leader in less than an hour of dialogue.
Trump, Bessent, and U.S. Trade Representative Jamieson Greer have woven a geopolitical strategy that is hard to break, always backed by economic, military, and technological power.
Some of the particularities
The European Union knew, just like Trump and his advisors, that companies in the Old Continent bloc were facing a severe working capital problem due to imminent overproduction capacity if the agreement was not signed. They also knew that - if the deal with the U.S. was not signed - Japan and the United Kingdom would absorb a significant market share toward Washington. Important economists, including Daniel Lacalle, consider this.
As part of the deal, Tokyo opened its market completely for the first time to the U.S., as did Vietnam, and now the European Union adds to this regarding U.S. products in the fishing industry, which include Alaska pollock, Pacific salmon, and shrimp.
The U.S. will also have greater access in Europe to its agricultural exports above 8 billion dollars, and products such as soybean oil, planting seeds, grains, and nuts are introduced, as well as cocoa, tomato sauces, and other processed foods.
One of the essential points of the agreement sealed between the EU and the U.S. refers to 0% tariffs on both sides for a range of strategic goods such as the aerospace industry and its spare parts, some chemicals of essential value for factories, semiconductor equipment, crucial raw materials, and high-value agricultural productions for export and consumption.
The 50% tax on steel imported from the EU is not included in the current agreement, nor are pharmaceuticals, which will be subject to new negotiations between both parties in the coming weeks.
Among trading partners, the bloc had a better chance of a quick agreement since it only had to lift its trade barriers and accept reciprocal tariffs in the face of the great complexity of its commerce.
The trade deficit and the decline of U.S. manufacturing had worsened in the last two decades - among other causes - due to these tariff and non-tariff barriers from dozens of countries, including the 27 members of the European community.
“President Trump is right again regarding the injustices of global trade. Countries are, for the first time facing the U.S., recognizing their unequal barriers in international exchange. Those who have refused to do so will face higher taxes, and those who have taken a step toward equity will have lower taxes and differences compared to others,” says renowned economist Lacalle.
The best example is "the United Kingdom with a 10% tariff due to its bilateral agreement with the U.S. The European Union refused to lift its environmental barriers, and that is why it will pay a 15% tax," explains the expert.
Other benefits
But the direct advantages are not only for the coffers and companies of the U.S., but for consumers who in the coming months will see a wide range of new international products in the retail and wholesale sector.
The balance that Trump wanted in global trade will be readjusting as more agreements are signed or large-scale tariff collections are promoted starting in August.
In just four months, Washington has collected over 115 billion dollars in tariff taxes; and this is just the beginning.
From now on, American companies will compete without barriers in new and established markets, bringing more attractive and higher quality products into a healthier and legitimate competition.
With the removal of these tax barriers in Europe and other international markets, products become cheaper instead of more expensive, as analysts linked to liberal trends and leftist and far-left media have been claiming for months.
These barriers cost the European Union more than one trillion dollars annually. For the service and manufacturing sectors, they represent a price increase of 110% and 45% respectively, according to a report by the European Chamber of Commerce, backed by the International Monetary Fund (IMF).
Facilitating truly free trade benefits consumers on both sides of the Atlantic. Exporting companies know they can absorb 15% tariffs, which means that prices, rather than increasing, would decrease in a broader competition.
The same happens with Japanese companies, those from the United Kingdom, Indonesia, the Philippines, Vietnam, and others.
A long road remains for the White House plans, but the first six months of management have been extremely intense and fruitful so far; during which there has been a rapid advance against all odds, but above all because the current administration has been able day by day to sow the central pillars of the "America First" platform.
Sources: AFP, Reuters, International Monetary Fund, economic analysis by Daniel Lacalle, documents from the WTO and the White House.
Leonardo Morales Coca
Principal Researcher | Investigative Journalist
Leonardo Morales is a veteran journalist and editorial leader with over 30 years of experience in political and economic journalism in the Americas. A graduate of the University of Havana with a degree in journalism, Morales began his career in 1992 at CMHW Radio in central Cuba.
In 2003, Morales joined The Miami Herald and El Nuevo Herald, serving as editor for nearly 16 years. Specialized in American and international politics and economics, he directed the coverage of major impactful events and occurrences. He also was the lead editor of the 36-page Bloomberg supplement of El Nuevo Herald, where he provided in-depth economic reports and analyses. Simultaneously, he worked as a news producer and writer at Univisión, one of the leading Spanish-language networks in the United States.
In 2020, Morales was appointed U.S. Politics and Economy Editor at Diario Las Américas, collaborating in both the weekly print edition and the digital platform. Over the last five years, he has written hundreds of research and analysis articles, widely cited by national and international media. His reports have become a trusted source for comments on radio and television, as well as for academic and political debates on economic and political trends.
Comments