US tariff policy is back on the agenda today, with one major deal struck earlier this year said to be at particular risk. US President Donald Trump has also been speaking to Politico for a major interview in which he criticised European leaders and suggested tariffs could both rise and fall in the future.
US-Indonesia deal at risk
The US’ trade deal with Indonesia is at risk of collapse, according to reporting by the FT, after it accused the Asian nation of “backtracking” on commitments made when the deal was struck earlier this year.
Jamieson Greer, the US trade representative, believes Indonesia is not living up to promises made in July, according to people familiar with the talks. Those speaking to the FT added:
“Indonesia is outright saying they cannot implement what they agreed to and need to renegotiate the initial commitments to be nonbinding.”
This, they said, is “extremely problematic” and is “not being well-received” by the US administration:
“Indonesia may be at risk of losing its deal.”
Indonesia is reported to be reluctant to cut non-tariff barriers on imports of US goods, as well as to enact commitments on digitalisation of trade.
Indonesian co-ordinating minister for economic affairs Airlangga Hartarto is to speak to Greer this week in a bid to save the deal, while an economic ministry spokesperson said “there are no specific issues in the negotiations”.
The deal agreed in July imposed a 19% tariff on Indonesian exports to the US, lower than a threatened rate of 32%, while Indonesia lowered a range of tariffs it imposes on US goods and promised to dial up purchases of US aircraft, agricultural products and liquefied natural gas (LNG).
In a conversation with Politico this week, Greer criticised those suggesting the US’ tariff policy had been muddled, accusing them of wanting to “go back to how it was before”. “That’s not going to happen,” he said, adding that “there’s a strategy” behind the programme.
Trump interview
A major new interview with Trump saw him accuse European nations of weakness on Russia and domestic issues including immigration.
The president said he “wants to see a strong Europe”, but of Europe’s leaders, he told Politico’s Dasha Burns:
“I think they’re weak. But I also think that they want to be so politically correct. I think they don’t know what to do. Europe doesn’t know what to do.”
Trump also addressed recent changes to the US tariff regime that we covered in last week’s check-in on the programme, where there were reductions in levies on agricultural goods, including coffee and bananas, as the US struck mini-deals with Latin American nations.
“They’re very small carve-outs. It’s not a big deal,” he said, indicating that he would reduce tariffs on “some” other goods in the future while increasing rates on others. He defended the overall tariff programme, stating that “because of tariffs, all of the car companies are coming back” and suggesting that “we could have kept the chip market” with a different trade approach in the past, adding that previous presidents had “no business sense”.
Customs Union vote
A total of 13 Labour MPs voted in favour of talks about joining an EU customs union.
A bill presented by the Liberal Democrats to Parliament would require the government to commence negotiations on a bespoke customs union with the bloc, though it is unlikely to pass without the support of the government and prime minister Sir Keir Starmer has said joining such a union is “not currently our policy”.
Liberal Democrat leader Sir Ed Davey said Starmer “must now listen to Parliament and the public, drop his self-imposed red lines and finally go for proper growth through an ambitious trade deal with the EU”.
The vote was tied on the bill before deputy speaker Caroline Nokes voted in favour in order to provide more scope for debate.
Conservative MP Simon Hoare said joining an EU customs union would imperil trading relationships elsewhere, and that there is no “appetite for it”.
Elsewhere in the headlines
· Australia began enforcing a world-first ban of social media for under-16s in a move that has caused controversy with large technology firms
· US tariff policy is also in the spotlight in Thailand, where renewed clashes with Cambodia have raised questions over whether trade policy can enforce peace
· EU nations are looking to fast-track efforts to permanently freeze €210bn in Russian assets using emergency powers, which would bypass any veto from opposed countries including Hungary
Yesterday in trade
· The EU sought to simplify new corporate sustainability rules
· Trump permitted the export of specific advanced Nvidia chips to China – though Beijing is itself considering limiting access to the chips to encourage nationals self-sufficiency
· There was a US$12bn ‘bridge payment’ to the US agricultural sector to help it manage the fallout of the government’s tariff policy
