AUSTIN – It’s not easy to catch Washington’s formidable trade lobbies and relentless, scoop-hungry journalists off-guard. Yet on July 22, US President Donald Trump did just that.
On a day when analysts were poised to dissect a potential deal with the Philippines, awaited after President Ferdinand Marcos Jr’s visit to the White House, Mr Trump blindsided everyone
“We just completed a massive deal with Japan, perhaps the largest deal ever made,” he said on his social media platform Truth Social.
“Japan will invest, at my direction, $550 billion into the United States, which will receive 90 per cent of the profits. This deal will create hundreds of thousands of jobs – there has never been anything like it,” he added. The amount is around S$703 billion.
Confirmed by Japan’s chief negotiator Ryosei Akazawa, the deal slashes US tariffs on imports from Asia’s second-largest economy to 15 per cent, well below the 25 per cent threat that loomed after the July 9 tariff pause ended.
Japan will also accede to a key White House demand and open its market to American cars, trucks, rice and certain other agricultural products.
As a consolation to Japan’s powerful carmakers, their exports to the US will attract lower tariffs of 15 per cent.
The announcement
which had been previewed only hours earlier on Truth Social.
Mr Trump said Philippine exports to the US will be subject to a 19 per cent tariff – higher than the 17 per cent initially proposed in April but lower than the 20 per cent threatened earlier in July. In contrast, the Philippines will levy zero tariffs on US goods.
Threaten steep tariffs to make others buy more and invest more
On the same day, further details emerged on the July 16 agreement with Indonesia, South-east Asia’s largest economy.
Key provisions included the
with certain goods containing content from “non-market economies” (read: China) to be tariffed at 40 per cent.
It was also agreed that Indonesia would provide critical minerals to the US and purchase Boeing aircraft and American farm products.
Such details are still missing from the first deal struck by the Trump administration with Vietnam in early July.
While negotiations are reportedly still under way, Mr Trump’s July 2 Truth Social post revealed key terms of the Vietnam deal, including a 20 per cent tariff on Vietnamese exports to the US and a 40 per cent tariff on trans-shipped goods, in exchange for Hanoi’s commitment to eliminate all tariffs on American exports.
Within the span of a month, thus, the White House has unveiled deals not only with Asia’s second-largest economy but also with three key Asean economies.
For the Asian partners yet to strike deals, such as India and Singapore, these deals set a precedent and create pressure to negotiate similar terms to avoid punitive tariffs and maintain strong trade relations with the US.
High-level talks between the US and South Korea are scheduled for July 25, with Seoul considering politically sensitive concessions, for example in agriculture and autos, to avert steep US tariffs, which stand at 25 per cent but have been postponed to Aug 1.
As part of a broader US effort to reset global trade relationships, it would seem that Mr Trump’s aggressive tariff strategy is delivering some visible results.
All four deals share a common goal: opening markets to American goods to cut trade deficits and support domestic industries.
Two other trends are also clear: Mr Trump’s steep tariff threats have been effective, and despite falling short of the promised 90 deals in 90 days, analysts are noting a surprising surge in agreements.
“I was very surprised to hear this deal announced today,” Dr William Chou, the deputy director of Hudson Institute’s Japan Chair, told The Straits Times.
The US$550 billion on top of Japan’s current US$860 billion foreign direct investment in the US would make Japan the top investor in the US, head and shoulders above any other country, he noted.
Will there be purchase, investment agreements in deal with China?
The deals with Asian partners have also attracted the notice of those monitoring US-China trade.
“There was a lot of attention on what would come out of these deals, especially (with) Vietnam, on trans-shipment and rules of origin. Unfortunately, the devil is in the details and we don’t have any details,” said a source, who spoke on the condition of anonymity because he advises American companies engaged in business with China.
But the Japan agreement signals that the US is expecting purchase agreements in trade deals and that has huge significance for a highly anticipated visit to China by Mr Trump, he added.
During a press conference alongside Mr Marcos, Mr Trump hinted at a visit to China “not too far into the future” to meet Chinese President Xi Jinping. But no firm date has been set yet, and Chinese imports could be subject to tariffs higher than 50 per cent unless new agreements are reached.
China’s Commerce Ministry announced on July 23 that Vice-Premier He Lifeng will be in Sweden on July 27-30 for trade talks with US officials, after US Treasury Secretary Scott Bessent announced on July 22 the Stockholm negotiations.
“Many of us are wondering if there will be a focus on purchase agreements similar to the phase one trade deal with China in Trump’s first term,” said the source.
The huge investment component in the Japan deal has also sparked the idea that a deal with Beijing might involve large investment commitments from China.
“President Trump in the Oval Office has welcomed Chinese investment in the US. This is obviously in contrast to the hawks in his administration and in Congress, but Trump is ultimately the one that determines China policy,” said the source.
However, Dr Chou said a direct geopolitical implication of the flurry of trade deals – with Japan, Indonesia, Vietnam, the Philippines, and likely soon South Korea – is expected for China.
He said it meant that China can no longer use trade as a wedge issue between the US and Indo-Pacific countries.
“Given the White House’s desire to negotiate a good deal with China – and in the wake of China’s use of rare earths as economic coercion in the past few months – these trade deals by the White House strengthen Washington’s negotiation position with Beijing,” Dr Chou noted.
“I think the administration’s demonstration of its priorities, the 10 per cent baseline and long-term frameworks for balanced trade, (has) become increasingly clear to trading partners,” he said.
“Combined with Trump’s willingness to live with tariffs and the news of customs duties of US$27 billion last month, it provided impetus for trading partners to strike a trade deal.”
Customs duties fetched about US$27 billion in June, three times higher than in the same month of 2024, after Mr Trump levied across-the-board 10 per cent tariffs on imports in April on top of other selective duties.
On an annual basis, tariff collections have hit US$113 billion, a rise of 86 per cent over 2024.
Minimising imports doesn’t augur well for any economy
Less impressed was Mr Frank Lavin, a senior fellow at the Hoover Institution, a veteran trade negotiator and former US ambassador to Singapore.
“It is hard to fully understand Trump’s ultimate goals because at times he talks about the trade balance, at times he talks about reciprocity of tariff rates, at times he talks about reshoring American manufacturing, and at times he talks about increasing tariff revenue to the US government,” Mr Lavin said.
“There are any number of contradictions among those four goals,” he said. For instance, if the goal of high tariffs is to boost US manufacturing by disincentivising imports, tariff revenues will fall in tandem with declining imports.
It seems that his overriding goal is a form of mercantilism, attaining greater market access for US firms, and reducing market access to foreign firms.
“It is not clear how this will help the US economy,” he said.
Economists believe that maximising exports while minimising imports in an interconnected global marketplace does not augur well for any economy, regardless of its size. Such policies risk economic inefficiency and trade wars and shortchanging consumers.
