United States

If Trump keeps changing his mind on tariffs, why bother negotiating at all?

Image Credits: UnsplashImage Credits: Unsplash

The 90-day clock has run out. What was once a bold declaration by the Trump administration to secure "90 trade deals in 90 days" has resulted in a quieter outcome: just two confirmed agreements—with Vietnam and the United Kingdom—and a placeholder framework with China. Instead of unleashing sweeping new tariffs, the White House delivered formal letters to 14 trade partners largely reaffirming April's positions and quietly extended the negotiation deadline to August 1.

For many observers, this apparent climbdown marks the latest chapter in a familiar cycle: maximalist trade threats yielding to pragmatic extensions. But to treat this as merely a diplomatic pause would be to miss the deeper implication. The episode signals a profound ambiguity in US trade posture—one that partners, markets, and sovereign allocators are watching with increasing skepticism.

The reciprocal tariff policy was launched with uncompromising language. Countries with trade surpluses against the United States were warned that unless they lowered their barriers, they would face reciprocal tariffs of up to 200%. The message was clear: level the playing field or pay the price.

But the gap between Washington's rhetoric and its actions has only widened. The July 1 milestone passed without new tariffs taking effect. Instead, it brought procedural extensions and vague acknowledgments of progress. Even China, the most high-profile counterpart, was granted breathing room under a non-binding framework.

For policy professionals, this divergence between signal and execution carries weight. Trade partners now have little incentive to make rapid concessions. If hard deadlines consistently dissolve into extensions, then the credibility of the US threat mechanism erodes—weakening future negotiating leverage.

This is not the first time a Trump-era trade policy has softened on contact with execution. The 2018-2019 trade war with China saw dramatic tariff hikes followed by piecemeal "Phase One" accords that ultimately underwhelmed. The North American Free Trade Agreement renegotiation produced USMCA—largely a rebranding exercise with modest substantive gains. In both cases, what began as unilateral pressure tactics ultimately became cycles of escalation, negotiation, and watered-down compromise.

But the global context has changed. Unlike 2018, today's trade partners have broader hedging options. ASEAN states are accelerating regionalization. The EU is strengthening intra-bloc trade autonomy. And China, while burdened by domestic slowdown, continues to deepen ties with the Global South. The reciprocal tariff policy, once framed as a position of strength, now risks becoming an instrument of diminishing returns.

How are regional actors interpreting this shift? Singapore and Saudi Arabia offer instructive contrasts. Singapore has moved cautiously, reinforcing bilateral US trade dialogues while investing in ASEAN self-reliance. The Gulf states, meanwhile, have focused less on tariff exposure and more on capital linkages—expanding direct investments in US clean tech, AI, and logistics rather than trade-intensive verticals.

China's reaction to the July letters has been muted, but strategic. The framework agreement buys Beijing time. It also signals that the US is willing to prioritize managed optics over confrontation. That read will inform China's stance not just in this round of talks, but in future geopolitical negotiations—on semiconductors, rare earths, and digital infrastructure.

Meanwhile, smaller economies like Vietnam are maneuvering with precision. By finalizing a deal early, Hanoi not only escaped the uncertainty clouding other markets but also signaled its willingness to anchor supply chain shifts from China to Southeast Asia. The UK's deal, driven by post-Brexit urgency, was more about political necessity than long-term alignment.

Institutional allocators are treating the reciprocal tariff story not as a trade event, but as a signaling event. And the signals suggest caution.

Sovereign wealth funds such as Temasek and GIC have trimmed exposure to US transportation and agriculture equities—sectors vulnerable to tariff retaliation and demand shocks. Instead, they've redirected flows toward supply-chain infrastructure in Mexico, Poland, and Indonesia. These shifts are subtle, not panicked—but they reflect a recalibration of perceived risk.

Middle Eastern funds, while continuing to deploy capital into US assets, have increased their preference for direct deals over portfolio plays. The rationale is clear: tariff-driven volatility can be mitigated when owning logistics terminals or AI labs outright, rather than through passive funds exposed to macro tremors.

Currency markets, by contrast, remain unshaken. The dollar has held steady against Asian currencies, suggesting traders do not expect an imminent trade blowup. But derivative flows tell a different story: increased hedging against renminbi fluctuations and a moderate uptick in options pricing around August. These are not signs of panic—but they are signs of positioning.

At its core, the Trump reciprocal tariff campaign reveals a structural tension between political signaling and enforceable outcomes. The White House may need the optics of toughness heading into an election cycle, but trade negotiators are still operating within a world of legal constraints, multilateral obligations, and mutual dependency.

This dynamic explains the strange duality of the policy: maximalist threats followed by incremental extensions. It is not necessarily incoherent. It may be a deliberate two-track strategy: use bold declarations to shape the media cycle while using time extensions to quietly negotiate a manageable outcome.

Yet this strategy carries risk. For trade partners and institutional investors, it creates ambiguity that is hard to hedge. If policies are announced with urgency but implemented with ambivalence, then trust in US economic posture is weakened. The result is not just slower deal-making, but a long-term reputational cost to American reliability in trade matters.

By extending the deadline to August 1, the administration has bought itself time—but also set a new trap. If the next round of talks yields little beyond more deferrals, the reciprocal tariff strategy will lose what little coercive credibility it retains.

For Asian policymakers, the near-term focus will be on contingency planning. Countries are revisiting bilateral fallbacks, strengthening regional trade corridors, and accelerating domestic substitutions in tariff-exposed sectors. For global allocators, the August milestone is not about tariff levels per se—it is about observing whether the US can still use trade policy as a strategic lever, or whether the instrument is now dulled by inconsistency.

The broader implication is this: trade threats without structural follow-through don’t just fail to deliver economic wins. They corrode policy signaling itself. And in a global system where signaling drives capital behavior, that is no small erosion.

The Trump reciprocal tariff episode may seem like a marginal trade maneuver. In practice, it is a revealing test of US economic posture in a shifting global order. The fact that only two deals were concluded is not, in itself, a failure. But the gap between the promise of "90 in 90" and the reality of two-plus-a-framework sends a broader message. It tells the world that US trade policy is performative until proven otherwise.

Partners are adjusting. Capital is watching. And future negotiations—on everything from chips to climate—will carry the memory of how this episode played out. This isn’t just about tariffs. It’s about whether the United States can still act as a credible orchestrator of trade discipline. Right now, the signal is mixed—and the costs of that ambiguity are mounting.


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