CURRENT STATUS OF TARIFFS:

US Tariffs: What Comes Next?

The US tariff pause by President Trump originally set to expire on July 9, 2025, has been extended until August 1, 2025. Here is a summary of the situation:

What changed?

• The Trump administration pushed the 90-day tariff pause by 3 weeks, new deadline to August 1st.
• This delay gives countries additional time to finalize bilateral trade agreements with the U.S.
• On Monday, July 7, the Trump administration sent letters to 14 countries outlining new tariff rates. While most of these rates were similar to those established on April 2, the administration has expressed an openness to negotiate. Additional letters may be forthcoming.

What happens on August 1?

• Absent deals or further extensions, steep tariffs will automatically take effect.
• These tariffs could revert to rates as high as 70%, depending on the country and product.
• The baseline 10% US tariff remains in place during the pause.

While the Trump administration can rightly cite interest from over 70 countries seeking trade agreements, the primary players in these negotiations remain China, Mexico, Canada, the European Union, and a few others. Our North American partners, Mexico ($171.9 billion surplus) and Canada ($63 billion surplus), collectively account for over 20 percent of the U.S. trade deficit.⁴

The Trump Administration can accurately talk about 70 nations wanting to deal. But in essence, the main actors are China, Mexico, Canada, the EU…. etc.

Start with our North American partners Mexico ($171.9 billion surplus) and Canada ($63 billion surplus) that alone accounts for over 20 percent of the U.S. trade deficit.

CANADA: Canada’s surplus is almost entirely due to its vast oil and gas sales to the U.S. Almost all of its daily oil exports go to the U.S. This is approximately four million barrels which equates to about half its natural gas shipments.

Here it gets a bit complicated. Canada claims that it sells oil and power at a discount to the northern U.S. But it also has the potential of asymmetrical sky-high tariffs on American dairy products and poultry which are rarely used if the American exports just stay below certain thresholds. But most would consider thresholds themselves a form of tariffs.

Canadian oil deposits are landlocked and far from ports. Canadian crude is heavy, sulfurous, and difficult to refine for many nations’ refineries. In contrast, the huge U.S. market right across the border which makes for discounts to the US as good business sense. American refineries are able handle Canadian crude which makes this a good opportunity for both countries.

To give you an idea of how complex this becomes with our northern neighbor, considerations can pull in other factors. It can be said that Canada doesn’t pull its weight in NATO. It is underinvesting in military readiness at only 1.37 percent of its GDP on defense, stonewalling its 2 percent commitment for over a decade.

Should the Trump administration prompt Canada to invest 2 percent in defense—about $41 billion extra—and buy enough U.S. products to cut its surpluses, say, by $10-20 billion of its current $63 billion, a deal could and should be easily reached.

MEXICO: Mexico’s surplus is large and continues to grow at $171 billion. It is largely created by assembling cars, electronic goods, and appliances sent to it from other countries to enter the U.S. market with reduced taxes.

President Trump could ask Mexico to cut that $171 billion in half, particularly given that Mexican cartels funnel an estimated $10 billion to $20 billion annually into the U.S. through drug smuggling. Their drug factories are designed for U.S. export and contribute to the deaths of 60,000 to 100,000 Americans through opioid overdoses.

With Mexico, there is also the $63 billion in untaxed remittances that Mexico’s expatriates send home. Most senders are illegally residing in the U.S. Additionally, many are subsidized by local, state, and federal American entitlements to free up their cash to be sent home.

In other words, like Canada, there are other issues with Mexico that go beyond trade alone. To even the playing field, Trump may either focus on the cartels, tax remittances, or urge Mexico to buy more U.S. goods in a tripartite effort to reduce the outflow by half.

CHINA:⁵ Trade issues with China were a part of Trump’s first term going back to 2018. China’s surplus with the U.S. is the largest at $300 billion. And it is the most difficult to address, given that Chinese global tentacles have compromised dozens of nations. Still, we retain far greater leverage on Beijing than Beijing has on us. But to use such levers—stopping visas to 300,000 students, delisting Chinese out-of-compliance companies from our stock exchanges, curbing all technological transfers that have military applications and key spare parts for their imported goods—we would then enter a veritable Cold War.

Instead, China should use its over $1 trillion trade surplus to raise the standard of living for its own 1.4 billion consumers. But redirecting its export economy would cut back on its geostatic initiatives of massively rearming, the Belt and Road imperialist adventure, and spreading billions of dollars around in the Western world to influence universities and buying up strategic property.

Unless Trump wishes an all-out trade war, he, for now, should aim at reducing the Chinese surplus by $300-500 billion and seek some trade reforms, given Chinese violations of every international commercial canon.

For any product made outside the United States, tariffs could contribute to raising their costs while products made in the United States will contribute to potential lower costs to consumers. Looking at a few sectors, one can quickly see how complicated and integrated products are today – which is why it is too early to have definitive conclusions on the impact and effectiveness of tariffs.

New U.S. auto tariffs could raise car prices by up to 22% hitting brands like Buick and Hyundai hardest. Tesla, Jeep and Honda may see minimal impact due to U.S.- based production. Many of Buick’s models are produced in China making them vulnerable to import tariffs under the Trump Administration.⁶

Foreign companies like Mercedes have plans to expand production in the United States as a result of potential tariffs. Teslas are the cars with the most parts made in the United States (over 70%). The popular Ford F-150 truck has 50% of its parts coming from outside the United States. All of these factors will contribute to the cost that you can pay for these vehicles in the future.

Other surprising issues as result of potential tariffs include retailers like Walmart and Amazon. Approximately 30% of products sold by Walmart come from China. That is a much lower amount than most Americans would think. The stigma with Walmart is that it sells products from China which are less expensive. But only 30% of the products come from China.

Amazon actually sells more products made in China – which may be understandable because of the online nature of their business. That said, Amazon can actually control their supply chains better than most companies because they can shift their focus from different companies and geographic regions of the world.

Portfolio managers from Franklin Templeton and Putnam have drawn several important conclusions about the effect of tariffs on our country today. Some of these conclusions may surprise you and include the following:⁷

• The stock market has largely priced in tariffs – that may spell more good news on the horizon.
• The market doesn’t like uncertainty. Once more tariff agreements are finalized, good or bad for the U.S., the stock market will adjust making tariffs less of a negative influence.
• So far, consumers and the economy are hanging in there. The economy is still strong, inflation is lower than predicted, revenue to the Treasury is positive…etc.
• The average effect of tariffs is predicted to be about an average 10% increase with the possible increase of another 3-5 % with other tariffs, taxes, and fees. This amount is far less than the 40% amount that was thrown around a few months ago. (Portfolio Managers – Tariff Update – Franklin Templeton and Putnam, July 2025 podcast)

Most likely we will revisit this topic as agreements are finalized and the effect on costs to you, the consumers, are determined.

References:

1. Wall Street Journal, Trump Tariffs Hit Consumer Prices, July 15, 2025, www.wsj.com/opinion/june-inflation-cpi-labor- department-prices-tariffs-donald-trump-economy-e09d0d7d?mod=Searchresults_pos2&page=1
2. CNBC, Treasury Posts Unexpected Surplus in June as Tariff Receipts Surge, July 11, 2025, www.cnbc.com/2025/07/11/ treasury-posts-unexpected-surplus-in-june-as-tariff-receipts-surge.html
3. Tariffs: The Big Picture, www.theepochtimes.com/article/tariffs-the-big-picture-5840034
4. Fidelity Tariff News by Gaggar & Pinneualt, July 9, 2025, www.fidelity.com/learning-center/trading-investing/tariff- extension
5. Post Factum, China-US Trade War, Explained, February 2, 2025, www.postfactum.co.uk/us-china-trade-war-trump-what-is- tariff-with-china-usa-and-meaning-tariffs
6. Visual Capitalist – How Tariffs Will Impact U.S. Car Price$, June 19, 2025, www.visualcapitalist.com/how-tariffs-will- impact-u-s-car-prices-by-brand/
7. An Update on Tariffs, Franklin Templeton Briefing: S. Dover, CFA, Chief Market Strategist, Franklin Templton; K. Lakin, Director of Research, Putnam Investments; M. Salm, Senior Vice President, Portfolio Manager, Franklin Templeton; July 2025, www.eventon24.com