By: Marta Bengoa
As his August 1st deadline arrived, U.S. president Donald Trump’s ambitious "90 deals in 90 days" commitment yielded just eight agreements across 120 days. This diplomatic shortfall reflects deeper challenges in using tariff threats as negotiating tools in an interconnected global economy. What began as April's "Liberation Day" announcement has evolved into a complex framework of negotiated settlements that, while avoiding the most severe outcomes initially threatened, creates new economic distortions across multiple trading relationships. The administration's tariff strategy reveals the practical limits of economic coercion when applied to modern supply chains and established trade partnerships.
The numbers tell a more nuanced story than initially projected. Countries that negotiated deals saw significant tariff reductions from the April 2nd baseline rates: the EU dropped from 20% to 15%, Japan and South Korea fell from 24-25% to 15%, and Vietnam plummeted from 46% to 20%. However, some countries faced increases, with Switzerland rising from 31% to 39%, while Brazil maintained its 10% baseline rate with an additional 40% penalty on top. India's tariff rate is being fixed at 25% (reduced from the original 26% that was proposed on April 2nd). These outcomes reflect the administration's selective approach to economic coercion, where diplomatic success often came at the price of substantial investment commitments from trading partners.
For Europe, the negotiated outcomes represent both relief and continued economic pressure. The EU's 15% tariff rate, down from the previously threatened 20%, still represents a significant increase from pre-2025 levels below 2% and poses substantial challenges for the world's second-largest economy. European Commission models suggest this 15% rate could reduce EU GDP by 0.3 percentage points — a substantial drag on an economy projected to grow just 1.5% in 2025. This tariff-induced contraction approaches one-third the magnitude of the energy crisis caused by Russia's invasion of Ukraine, illustrating how trade wars can inflict genuine macroeconomic damage without resorting to military conflict. The European response has been strategically cautious, with preparations for retaliatory measures covering $84 billion worth of American goods now delayed as policymakers assess the actual economic impact before escalating the trade conflict. This approach allows European businesses time to adjust supply chains while maintaining the threat of retaliation if conditions worsen.
The selective nature of deals with traditional allies reveals the transactional nature of the administration's approach. Japan and South Korea negotiated their rates down from 24-25% to 15% by agreeing to substantial investment commitments, with Japan promising $550 billion in U.S. investments and South Korea committing $350 billion. This framework transforms trade relationships into investment requirements where economic sovereignty becomes a negotiable commodity, forcing allies to purchase market access through direct capital commitments rather than traditional trade negotiations.
China, despite being the original target of Trump's trade ire, secured a framework that maintains manageable tariff levels after the dramatic escalation and de-escalation cycle that saw rates briefly reach 125% during tit-for-tat retaliation before settling into a more sustainable arrangement. The China experience demonstrates both the limits of escalatory trade policy and the administration's ultimate recognition that completely severing economic ties with the world's second-largest economy carries unacceptable costs for American businesses and consumers.
The developing world faces a complex pattern of outcomes that reflects both successful negotiations and continued vulnerability. Vietnam achieved a dramatic reduction from 46% to 20% tariffs, though the 20% rate still represents a substantial burden for an economy that sends 26.7% of its GDP to the U.S. market. Vietnam's agreement also included a 40% "transshipping" penalty designed to prevent Chinese manufacturers from routing goods through Vietnamese facilities, demonstrating how tariff policies fragment efficient production systems without creating viable alternatives. India, despite its status as the world's fifth-largest economy, secured only a minimal reduction from 26% to 25% tariffs, though negotiations continue with Indian officials expressing confidence they can reach "a good agreement" by October/November 2025. The sticking points remain India's agricultural protections and dairy sectors, which New Delhi considers "red lines" to protect millions of farmers, while Washington seeks broader market access for American agricultural products. Countries like Cambodia negotiated their rate down to 19% from the original 49% threat, while Bangladesh still confronts 35% rates. Even with these reductions, Cambodia's garment industry, which employs over 800,000 workers — predominantly women — faces significant pressure from tariffs that could trigger factory closures and unemployment. For nations climbing the development ladder, these tariffs represent existential threats to growth strategies built around export-oriented manufacturing.
For American consumers, the tariff structure amounts to a regressive tax increase that contradicts the administration's populist rhetoric. The Yale Budget Lab calculates that all 2025 tariffs combined impose an average household cost of $3,800 annually, with lower-income families bearing disproportionate burdens of $1,700 per year. These figures reflect the fundamental reality that tariffs function as consumption taxes, hitting hardest those who spend the highest proportion of their income on imported goods like clothing, electronics, and household items. The latest Consumer Price Index data shows inflation rising to 2.7% annually in June, up from 2.4% in May — the highest rate since February and still above the Federal Reserve's 2% target. While it remains difficult to isolate specific tariff impacts within broader price movements, the substantial tariff increases implemented throughout 2025 will inevitably pass through to consumer prices as businesses adjust to higher import costs.
Perhaps most concerning is the administration's failure to consider second-order effects that amplify these direct costs. Higher tariffs contribute to inflationary pressure precisely when the Federal Reserve seeks to maintain price stability, with every $10 increase in related costs adding half a percentage point to inflation rates. With over 30% of surveyed chief financial officers now identifying trade and tariffs as their most pressing business concern, investment uncertainty threatens to compound the direct costs of higher import prices. Currency effects have provided an unexpected twist that undermines the administration's economic assumptions — rather than strengthening as tariff proponents predicted, the dollar has depreciated approximately 9.3% against the euro since January 2025, falling from around 0.97 to 0.85 by August. This depreciation, driven by trade policy uncertainty and broader economic concerns, has made U.S. exports more competitive but has also increased the cost of imports, amplifying rather than offsetting tariff-induced price increases for U.S. consumers.
Legal challenges add another layer of uncertainty. The Court for International Trade has ruled that tariffs imposed under the International Emergency Economic Powers Act are unlawful, potentially affecting the bulk of the administration's trade measures. If sustained, this ruling could reduce effective tariff rates from 13-14% to approximately 5%, providing significant relief for American consumers and businesses.
As the dust settles from the August 1st deadline, the administration's approach has transformed what was marketed as trade policy into domestic fiscal policy. The tariff framework now functions as an elaborate consumption tax system, with rates varying by country of origin rather than economic logic. American families face a new reality where their tax burden depends not on their income or consumption choices, but on the diplomatic success of trading partners they never elected. With an additional $3,800 in annual household costs, this represents a significant tax increase implemented without congressional approval and disproportionately affecting those least able to afford it. The August reckoning reveals how quickly trade policy can morph into regressive taxation, leaving American consumers to finance geopolitical posturing through their grocery bills and household budgets while the rest of the world revolves in uncertainty.
Marta Bengoa is a Non-Resident Fellow at ORF America.