China’s defiant stance in negotiating a tariff truce with the U.S. has convinced some countries they need to take a tougher position in their own trade talks with the Trump administration.

The pause reached a week ago gave structure to what promise to be prolonged and difficult rounds of talks between Washington and Beijing, which still faces average U.S. import taxes near 50% when past levies are factored into the 30% rate agreed to in Geneva, Switzerland.

Yet U.S. President Donald Trump’s willingness to retreat so much from the earlier 145% duty on China surprised governments from Seoul to Brussels that have so far stuck with the U.S.’s request to negotiate rather than retaliate against its tariffs.

After China’s tough negotiating tactics earned it a favorable — albeit temporary — deal, nations taking a more diplomatic and expedited approach are questioning whether that’s the right path.

"This shifts the negotiating dynamic,” said Stephen Olson, a former U.S. trade negotiator who’s now a visiting senior fellow with ISEAS-Yusof Ishak Institute in Singapore. "Many countries will look at the outcome of the Geneva negotiations and conclude that Trump has begun to realize that he has overplayed his hand.”

Left for now at 10%, the higher bespoke rates will kick in unless deals are signed or postponements are granted before a 90-day suspension ends in July.

While officials are loathe to signal publicly any hardening of their approach, there are signs particularly from larger nations that they’re realizing they hold more cards than previously thought and can afford to slow the pace of negotiations.

South Korea’s leading presidential candidate, Lee Jae-myung, said there’s no need to rush for an early agreement in trade negotiations with the U.S., criticizing the interim government for what he called a hasty engagement with the Trump administration.

Trump himself indicated last week — near the halfway point of the 90-day reprieve — that there isn’t time to do deals with about 150 countries lining up for them. So the U.S. may assign the higher tariff rates unilaterally in the next two to three weeks.

While Trump also said that India was prepared to lower all tariffs on U.S. goods, the nation’s External Affairs Minister Subrahmanyam Jaishankar told reporters that trade talks are ongoing and "any judgment on it would be premature.”

Indian Commerce Minister Piyush Goyal was scheduled to arrive in the U.S. this weekend for further negotiations.

"There are many countries that may learn from China that the correct way to negotiate with President Trump is to stand firm, remain calm and force him to capitulate,” said Marko Papic, chief strategist of GeoMacro at BCA Research.

Japan’s rethink

Japanese trade officials are scheduled to visit Washington this week. Japan’s Trade Minister Yoji Muto skipped a regional meeting last week in nearby South Korea that U.S. Trade Representative Jamieson Greer attended.

Top negotiator Ryosei Akazawa, who leads Japan’s tariff task force, said earlier this month that he is hoping to reach an accord with the U.S. in June, but recent local media reports indicate an agreement is more likely be reached in July, ahead of an Upper House election.

Policymakers in Tokyo may be starting to think that it’s preferable to take time rather than make major concessions to wrap up things up quickly.

"Everyone in the queue is wondering, ‘Well, why have I been lining up?’” said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis. "This deal let China jump the queue and also doesn’t have clear benefits for the U.S. so it’s doubly painful for other countries watching.”

Even U.S. officials are signaling that negotiations will take longer. Commerce Secretary Howard Lutnick told Bloomberg TV that talks with Japan and South Korea will take time. Treasury Secretary Scott Bessent last week said the European Union suffered from a lack of unity that was impeding talks.

"I think the U.S. and Europe may be a bit slower,” Bessent said Tuesday at a Saudi-U.S. Investment Forum in Riyadh.

On Sunday, the Treasury secretary sounded optimistic about talks more broadly, adding that "we didn’t get here overnight.”

"With a few exceptions, the countries are coming with very good proposals for us,” Bessent said in an interview on CNN’s "State of the Union." "They want to lower their tariffs, they want to lower their nontariff barriers, some of them have been manipulating their currency, they’ve been subsidizing industry and labor.”

EU skepticism

Officials in Brussels viewed the U.S.-China tariff announcement as leaving high tariffs in place and limited on several fronts, according to people familiar with EU discussions.

The meager negotiating gains for the U.S. and the lack of a clear end game during the 90-day reprieve show how limited is Trump’s appetite to keep ratcheting up the pressure on Beijing, the people said on condition of anonymity to discuss private deliberations.

"The trade landscape is becoming more fragmented” and "the deals achieved so far are not completely addressing the situation,” the European Commission’s top economic official, Valdis Dombrovkis, said in an interview in London on Thursday, referring to the China tariff truce and a U.K.-U.S. outline of a deal announced days earlier.

In Latin America, where developing economies want to preserve both Chinese investment and export access to the U.S. market, leaders are trying to walk a careful line as the two heavyweights square off.

Visiting Beijing

Brazilian President Luiz Inacio Lula da Silva, who previously said negotiation came before retaliation, on Wednesday brushed off concern that forging deeper ties with China would prompt a negative U.S. response after a state visit to Beijing that saw him sign more than 30 agreements.

Colombian President Gustavo Petro, also in Beijing last week, signed on to China’s Belt and Road initiative in a bid to boost trade and investment for his country, even as his top diplomat stressed the U.S. remains the nation’s main ally.

The U.S.-China arrangement may also show nations that the Trump administration isn’t immune to the pressures of domestic economic headwinds caused by tariffs.

"The economic pain is more immediate and broad-based in the U.S. and this deal can be seen as the Trump administration acknowledging that,” said Robert Subbaraman, head of global markets research at Nomura Holdings Inc.

But only nations with economic heft and limited reliance on trade with the U.S. may be able to act on that, according to Bert Hofman, professor at the National University of Singapore and a former World Bank country director for China. "It’s pretty risky for most countries to be tough on the U.S.,” Hofman said by phone.

A prime example of that is Canada, which Oxford Economics said last week had effectively suspended almost all of its tariffs on U.S. products. Over the weekend, Canada’s Finance Minister Francois-Philippe Champagne disputed that, saying the government kept 25% retaliatory tariffs on tens of billions of dollars in U.S. goods.

He said 70% of the countertariffs implemented by Canada in March are still in place, according to a social media post Saturday. The government "temporarily and publicly paused tariffs” on some items for health and public safety reasons, he said.

Still, because China’s clout remains substantial as the world’s factory floor, other countries may have "to use more creative pieces of leverage,” according to Papic.

Lacking leverage

For Vietnam, one-third of its economy depends on trade with the U.S., and that lack of leverage means there isn’t scope to do much more than talk tough.

Vietnam, which was among the first nations to offer purchasing additional U.S. goods such as Boeing aircraft to close the trade surplus, slammed Trump’s tariffs earlier this month as "unreasonable.”

If larger nations do want to get confrontational, one area where they may have room is on services trade, said Katrina Ell, Moody’s Analytics head of Asia Pacific economics.

The EU, Singapore, South Korea and Japan are among nations that have the biggest services trade deficits with the U.S., Moody’s Analytics data show.

"China has too much leverage over the U.S. for the U.S. to continue with its hard-line stance whereas that’s not the case for many other economies,” Ell said by phone. "That’s what we need to keep in mind is leverage and who has that leverage.”

Source: Bloomberg

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