Everything to know about Trump's tariff letters — and why it's a radical approach

President Donald Trump today posted letters to the leaders of seven countries, informing them that he plans to impose new tariffs on their exports to the U.S. beginning Aug. 1.

In letters posted to social media, Trump informed the leaders of Japan, Kazakhstan, Laos, Malaysia, Myanmar, South Africa and South Korea that "the United States of America has agreed to continue working with" their countries, "despite having a significant Trade Deficit with your great Country." He later added, "Our relationship has been, unfortunately, far from Reciprocal," as justification for the new tariff rates.

The new tariff rates are:

• Japan — 25%
• Kazakhstan — 25%
• Laos — 40%
• Malaysia — 25%
• Myanmar — 40%
• South Africa — 30%
• South Korea — 25%

White House press secretary Karoline Leavitt said that "approximately" 14 letters are expected Monday, with more to come in the following days. The letters posted so far are all nearly identical to each other, aside from country names and tariff rates.

Leavitt also said Trump will sign an executive order Monday officially pushing back a July 9 deadline for trade deals he set in the spring to Aug. 1, and said countries are continuing to negotiate with the U.S.

The White House has clarified that the new tariffs will not be imposed in addition to the various tariffs Trump has imposed on broad classes of goods. For example, steel and aluminum — currently tariffed worldwide at 50% — from any of these countries will still be tariffed at 50%.

While Trump often frames tariffs as being paid by other countries — in the South Korea letter, he informs Lee that "we will charge Korea" a 25% tariff — that is not the case. Tariffs are taxes paid to the U.S. government by companies in the U.S. for imported goods or components. As a result, the cost of tariffs is often passed on to consumers in the form of higher prices.

Trump has regularly said that these rates were meant as retaliation against other countries' protectionist measures.

In his letters, Trump added that goods that are transshipped — that is, that are made elsewhere but shipped through any of the seven countries — will be subject to higher tariffs. And should either country decide to impose a reciprocal tariff, Trump said "whatever the number you choose to raise them by, will be added onto the 25% tariff that we charge."

However, Trump informed the countries that their goods could avoid these new tariff rates if their countries' companies choose to manufacture their goods in the U.S.

A brief history of Trump's recent tariff talk

The new tariff letters are the result of months of uncertainty, stemming from an April 2 executive order in which Trump imposed tariffs on nearly every country worldwide. Trump announced those tariffs with a Rose Garden event, calling April 2 "Liberation Day." The new taxes included high rates on goods from some of America's biggest trading partners, such as Vietnam and Japan.

A week later, after stock markets plummeted and economists warned of dire consequences, Trump announced he was lowering the tariffs to 10% for 90 days. After that "pause," as he called it, he set tariffs to jump back to those "Liberation Day" levels on Wednesday, July 9.

In the interim, the president repeatedly said he would make tariff deals with individual countries before July 9, at one point promising "90 deals in 90 days." Only two deals have been announced to date, however, with the UK in early June and with Vietnam on July 2.

The newly announced tariff rates do not differ widely from where Trump set those countries' rates on April 2. The biggest difference is with Laos, whose faced a tariff of 48% as of April 2. The new rate is 40%.

Trump is taking an unorthodox approach to tariffs

Imposing tariffs this high and this quickly — not to mention threatening and announcing them via social media — represents a highly unorthodox and potentially risky approach to trade. Trump prefers bilateral trade deals over the multilateral deals that past administrations pursued, like the Trans Pacific Partnership, a trade agreement that would have included 12 Asia-Pacific countries. That deal was complex, the result of nearly a decade of negotiation — talks started in 2008, in the George W. Bush administration, and continued through Barack Obama's two terms to when Trump took office in 2017, when he pulled the U.S. out of TPP talks.

That means Trump's tariff deals also happen much more quickly than many past U.S. trade dealings, with the president using the size of the U.S. economy to pressure other countries to come to agreements. He also focuses on bilateral trade deficits as a measure of how positive a trade relationship is, though mainstream economists believe it to be a poor measure.

The potential benefits of these tariff deals include reducing other countries' trade barriers, like tariffs and other regulations, giving U.S. exporters more consumers to sell to.

But the costs are real, and will be paid upfront by U.S. companies, who will likely pass some of those costs on to consumers.

The deal Trump struck with Vietnam, for example, sets tariff rates at 20% for Vietnamese goods. That is lower than the 46% Trump imposed on April 2, but it is also far higher than where tariffs were prior to Trump taking office. Back then, average U.S. tariffs on Vietnamese goods were around 3%.

That means the cost for U.S. consumers of goods from Vietnam — which include machinery, appliances, clothing, and shoes — may soon be markedly more expensive than they have been.

In addition, bilateral deals may not be the most efficient way to achieve Trump's goals.

"U.S.-Vietnam trade restrictions would today be very, very low if Trump hadn't walked away from TPP in 2017," said Scott Lincicome, an expert in trade at the libertarian think tank Cato Institute.
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