The Numbers That Matter: The US now operates with an overall average effective tariff rate of 20.2% (post-August 1), the highest since 1911, while tariffs are generating over $300 billion annually in revenue—nearly 1% of US GDP. The 2024 U.S. goods trade deficit totaled $1.2 trillion, with the administration’s strategy now covering major economies through completed deals and $12–15 trillion in projected investment commitments over the 4-year term.
Current Wins and Losses: The Scoreboard
Clear Wins for the Administration
United Kingdom Trade Deal: President Trump announced what he called a “landmark” trade deal with the United Kingdom on May 8, following a call with British Prime Minister Keir Starmer. The agreement, which Trump described as “a fantastic win for American workers and British industry,” will see the U.S. lower tariffs on British steel, aluminum, and automobiles. In return, the UK has agreed to purchase $10 billion worth of Boeing aircraft and open its market further to American agricultural exports, including beef and ethanol.
European Union Agreement: European Commission President Ursula von der Leyen met Trump at his golf course in Scotland to clinch a deal that would see a 15% baseline tariff on most EU goods, successfully avoiding the threatened 30% rate.
Japan/South Korea Success: Trump secured favorable 15% tariff rates for both Japan and South Korea, with Japan also committing to $550 billion in US investments and agricultural market opening.
Australia Beef Breakthrough: Separately, Australia announced it will reduce restrictions on US beef imports for the first time since mad cow disease restrictions in 2003—a major win for American ranchers who had been blocked from the Australian market for over 20 years.
Indonesia Success: Trump announced a landmark trade deal with Indonesia featuring a 19% tariff rate (down from threatened 32%), with Indonesia eliminating tariffs on 99% of US products and committing to buy $15 billion in US energy, $4.5 billion in agricultural products, and 50 Boeing jets.
Major Investment Victories: The administration secured massive economic commitments globally, including Qatar’s $1.2 trillion commitment, Saudi Arabia’s $600 billion investment, plus major commitments from TSMC ($100B semiconductors), Apple ($500B manufacturing), and the largest AI infrastructure project in history ($500B).
Market Leverage Demonstrated: Stocks surged within minutes of the pause announcement, with the S&P 500 rising 9.52% for its largest one-day gain since 2008. Markets continued to rise after further policy rollbacks, and the S&P 500 set a new all-time high on June 27, 2025, underscoring the administration’s ability to influence markets through trade policy.
Notable Losses and Setbacks
China Escalation: On April 2, the US added a 34% “reciprocal tariff” on most Chinese imports. China matched with a tariff of 34% on American goods, effective April 10, 2025, and suspended negotiations regarding the sale of TikTok. China also began requiring special licenses to export six heavy rare-earths—100% of which are refined in China—and rare-earth magnets, 90% of which are produced in China. This escalated as the US raised tariffs to 145%, and on April 11, China raised to 125% before recent negotiations.
India Setback: Trump announced 25% tariffs on India plus an additional penalty for trade with Russia after five rounds of negotiations failed to reach agreement by the August 1 deadline. Trump said he would impose an additional penalty on India for its trade relations with Russia, which Trump is trying to pressure over its war with Ukraine.
Economic Disruption: The “reciprocal” tariff announcement led to a global market crash. The S&P 500 Index fell over 274 points or 4.88%, the second-largest daily point loss ever, and the Nasdaq Composite fell over 1,050 points or 5.97%, the largest point loss in its history.
BREAKING: August 1 Deadline Enforcement and Final Notifications
Hard Deadline Confirmed: Commerce Secretary Howard Lutnick confirmed that August 1 is a firm deadline: “Nothing stops countries from talking to us after August 1, but they’re going to start paying the tariffs on August 1. That’s a hard deadline, so on August 1, the new tariff rates will come in.”
Final Tally: Despite initial projections of “90 deals in 90 days,” the U.S. has completed eight major deals in 120 days, including one with the 27-member European Union, plus secured extensions for the two largest trade relationships – Mexico and China. While falling short of the numerical target, these agreements and active negotiations cover over 50% of global GDP and nearly 74% of the US trade deficit.
Last-Minute Tariff Letters Sent: Trump has sent final tariff notification letters to countries informing them of their August 1 rates, with tariffs ranging from 10% to 50% depending on the country:
Major August 1 Tariff Rates:
- Brazil: 50% (citing Bolsonaro “witch hunt” and BRICS membership)
- Canada: 35% (despite USMCA partnership, citing fentanyl issues)
- Bangladesh: 35% (down from 37% initially)
- Cambodia: 36% (down from 49% initially)
- Thailand: 36% (unchanged from April, still negotiating)
- Algeria: 30% (unchanged from April)
- Sri Lanka: 30% (down from 44% initially)
- Brunei: 25% (up from 24% in April)
New Copper Tariff: Trump announced a 50% tariff on copper effective August 1, stating “Copper is the second most used material by the Department of Defense! America will, once again, build a DOMINANT Copper Industry.”
Mexico Last-Minute Extension: In a dramatic August 1st phone call with Mexican President Claudia Sheinbaum, Trump secured a last-minute extension for Mexico negotiations, avoiding the threatened 30% tariffs. The breakthrough came hours before the deadline, with both leaders agreeing to continue discussions while USMCA-compliant goods remain exempt from tariffs indefinitely. Mexico’s status as a critical USMCA partner and major trading relationship made this extension strategically essential.
With the administration’s track record of enforcing deadlines after extensions, countries without completed deals by August 1 will likely face their threatened tariff rates, even if negotiations are ongoing. The Aug. 1, 2025, deadline represents the second extension – suggesting limited tolerance for further delays.
China: The Pearl and Separate Timeline
China remains the ultimate strategic target, operating on a different track than other countries. The 90-day truce reached in June lowered tariffs from triple-digit levels to current rates of 20% “fentanyl” + 10% “reciprocal” tariffs, with higher tariffs paused until August 12.
China’s Leverage: Beijing has effectively used its chokehold on rare earth minerals (90% of global magnet production, 100% of heavy rare-earth refining) to pressure the administration into negotiations and secure tariff rollbacks. The June trade framework that created the 90-day truce included a significant technology component: China agreed to resume rare earth exports (which had surged 660% to the US by July) while the US lifted restrictions on Nvidia’s H20 AI chip sales to China. Recent Stockholm talks concluded without extending the August 12 deadline, but both sides indicated continued negotiations are likely.
The Stakes: At about 55% total tariff burden, China accounts for $295 billion (24.6%) of the U.S. trade deficit. The U.S.-China relationship involves not just trade but technology restrictions, rare earth access, and broader strategic competition that makes it fundamentally different from other bilateral relationships.
Developing Nations: Disproportionate Impact
Trump’s July 9 tariff letters revealed stark disparities: Myanmar and Laos face a 40 percent tariff; Cambodia and Thailand face 36 percent, with Bangladesh at 35 percent and Indonesia at 32 percent — all of which are low-income countries.
Inflation Impact: The Great Unknown
Historic Tariff Levels: The current 20.2% average effective tariff rate represents the highest level since 1911, with the US average applied tariff rate rising from 2.5% in January to an estimated 18.2% as of July 2025.
Revenue Generation: Tariffs are generating substantial revenue, with the U.S. recording about $27 billion in tariff-related tax revenue last month, bringing total payments so far this year to more than $100 billion, with projections that tariff revenue could exceed $300 billion by the end of 2025, which would amount to nearly 1% of U.S. gross domestic product. This significant revenue stream helps offset some of the costs while incentivizing the $12-15 trillion in projected investment commitments over the 4-year term that are driving the manufacturing renaissance.
Contested Consumer Impact: Economic models vary wildly on the actual inflationary impact, creating significant uncertainty:
- Household Cost Estimates: Range from $1,270 per household (Tax Foundation) to $4,600 annually (other analysts)
- Price Impact Projections: Various models predict different sectoral impacts, from modest increases to dramatic price jumps in clothing, automobiles, and food
- Real-World vs. Models: Critics of tariffs argue that they will increase the prices Americans pay for imported goods. But the facts argue against this. President Trump’s first-term tariffs did not raise the prices of the affected goods, despite predictions back then that the tariffs would prove inflationary
The Modeling Problem: Traditional economic models have never had to contend with tariffs of this scale and scope – the current 20.2% effective rate is the highest since 1911. These models struggle to account for substitution effects, supply chain adaptations, and the negotiating leverage that tariffs create when applied globally and simultaneously. The unprecedented nature of using tariffs as both revenue generation and geopolitical realignment tools means existing economic frameworks may be fundamentally inadequate for accurate predictions. The wide range of forecasts suggests the true impact remains an open question that will only be resolved through real-world outcomes.
The Administration’s Four Strategic Goals
The tariff strategy serves four interconnected objectives that go far beyond traditional trade policy:
1. Deficit Reduction: Addressing the 2024 U.S. goods trade deficit of $1.2 trillion (3.1% of GDP) through reciprocal tariff structures that pressure trading partners to reduce barriers to U.S. exports while generating substantial tariff revenue.
2. Job Creation & Manufacturing: Incentivizing companies to build manufacturing in the U.S. as a means of avoiding tariff burdens, with President Trump securing nearly $2 trillion in new U.S. investments since taking office. Major commitments include:
- TSMC: $100 billion investment in U.S.-based semiconductor chip manufacturing
- Apple: $500 billion investment creating 20,000 new U.S.-based jobs
- AI Infrastructure: $500 billion in planned private sector investment in the largest artificial intelligence infrastructure project in history
- Qatar: $1.2 trillion economic commitment including $96 billion Boeing aircraft order supporting 154,000 U.S. jobs annually
- Automotive: Stellantis reopening assembly plant in Belvidere, Illinois (1,500 jobs), Honda expected to produce next-generation Civic hybrid in Indiana, Nissan considering moving production from Mexico to the U.S.
3. Reindustrialization: Reversing decades of manufacturing decline by making domestic production cost-competitive through tariff protection, with the goal of rebuilding America’s defense-industrial base and reducing dependence on foreign adversaries for critical supply chains.
4. Dollar Reserve Currency Dominance: Using tariffs and the three-bucket system to reinforce the dollar’s central role in global trade while potentially engineering a “controlled weakening” that makes U.S. exports more competitive without losing reserve currency status – a complex balancing act that Stephen Miran and Scott Bessent believe can strengthen both U.S. manufacturing and financial dominance simultaneously.
The Three-Bucket Implementation Framework
Treasury Secretary Scott Bessent originally outlined the administration’s framework: “We should make it very clear that there is a green, a yellow, and a red bucket and we let everyone know where they are. Here’s what we ask of you and you can choose which bucket you want to be in and here’s what you get for being in the bucket.”
The Original Criteria:
- Green Bucket: Countries willing to fully cooperate with US objectives receive low tariffs, military protection, and preferred US Dollar access
- Yellow Bucket: Countries with mixed cooperation (like India buying sanctioned Russian oil) face moderate tariffs and conditional relationships
- Red Bucket: Non-cooperative countries and strategic rivals face maximum tariffs and exclusion from benefits
As Bessent explained: “If you’re India, you want to have 20% tariffs, you want to buy sanctioned Russian oil, you’re in the yellow box, and by the way, if you keep buying that oil, you’re moving toward the red box.”
Green Bucket (Aligned Partners)
- United Kingdom: Secured preferential trade deal
- European Union: Negotiated 15% baseline tariff, avoiding 30% threat
- Japan/South Korea: Both secured favorable 15% tariff rates with Japan achieving breakthrough Australia beef import access
- Indonesia: Achieved 19% tariff rate with major purchase commitments ($15B energy, $4.5B agriculture, 50 Boeing jets)
- Gulf States: Qatar ($1.2T), Saudi Arabia ($600B) with massive investment commitments
- USMCA Partners: Canada and Mexico (when compliant with agreement terms)
Yellow Bucket (Negotiating Partners)
- ASEAN Nations: Mixed results with Vietnam and Philippines deals secured but others pending
- Other bilateral negotiations: Various countries still working toward agreements
Red Bucket (Adversaries/Non-Compliant)
- China: The primary target with escalating tariff battles and separate August 12 timeline
- India: Failed negotiations result in 25% tariffs plus Russia trade penalties
- BRICS Nations: Brazil, Russia, Iran, and other countries facing additional 10% penalties for anti-American alignment
- Non-Cooperative Developing Nations: Various countries facing 25-50% rates based on compliance issues
Industry Winners and Losers: Six Months In
Clear Winners
Steel and Aluminum Industry: The biggest beneficiaries of the tariff regime. Major American steelmakers like Nucor and Cleveland-Cliffs have reported higher-than-expected revenue, with Nucor’s second-quarter earnings more than doubling partly due to higher steel prices. U.S. Steel has reopened blast furnaces and embarked on major capital projects. The 50% tariffs (increased from 25%) on steel and aluminum have created substantial protection for domestic producers.
Non-Advanced Durable Manufacturing: Long-run output is projected to be 4.6% larger, benefiting from both protection and supply chain reshoring as companies avoid tariff costs.
Defense and National Security Industries: Critical supply chain reshoring for defense-industrial base reduces dependence on foreign adversaries, with companies like Boeing securing major deals (50 jets to Indonesia, UK aircraft purchases).
Domestic Energy Sector: Benefits from reduced competition on energy-related imports while maintaining export opportunities.
Clear Losers
Construction Industry: Facing the steepest declines with output contracting by 4.0% in the long run due to dramatically higher costs for steel, aluminum, and other imported materials. Construction costs have already risen significantly since 2020, and tariffs are exacerbating the problem.
Automotive Manufacturing: Despite 25% protection on finished vehicles, the industry is suffering from higher input costs. Vehicle transaction prices are already very high, and if they go higher due to tariff-inflated steel and component costs, demand dampens, leading to production cuts and job losses. Companies like Ford and GM face the combined impact of tariffs on their supply chains.
Advanced Manufacturing: Surprisingly showing a 2.8% decline despite overall manufacturing gains, as these high-tech industries rely heavily on specialized imported components and materials that aren’t produced domestically.
Agriculture: Output declining by 0.8% as trade wars trigger retaliation against American agricultural exports. President Biden squandered the agricultural trade surplus inherited from President Trump’s first term, turning it into a projected all-time high deficit of $49 billion.
Retail Sector: Retailers are either absorbing higher costs or passing them to consumers through higher prices, leading to decreased consumer spending. Supply chain disruptions are forcing costly alternative sourcing strategies.
Mixed Results
Overall Manufacturing: While total manufacturing output expands by 2.5%, the gains are concentrated in basic manufacturing, while advanced manufacturing contracts. The manufacturing sector lost a combined 14,000 net jobs in May and June despite historic tariff levels, suggesting the job creation effects are slower to materialize than the cost increases.
Mining and Extraction: Contracting by 1.5% as higher equipment and input costs outweigh any protective benefits.
The Bigger Picture: Reshaping Global Order
This isn’t just about trade deficits. Miran offered various ideas for countries to pay the United States for these global “public goods” it provides. They can, for instance, “accept tariffs on their exports to the United States without retaliation.” They could buy more from America or invest in factories here. They could even “simply write checks to [the U.S.] Treasury that help us finance global public goods”.
The administration is attempting to create a completely new global order. A new US centered order that will emerge RIGHT after the current chaos, in which countries are divided in three groups.
What to Watch: Critical Indicators Ahead
August 1 Implementation: Countries without deals will face their threatened tariff rates, marking the administration’s second extension deadline and testing their credibility on future negotiations.
China’s August 12 Deadline: The separate timeline for America’s largest trade competitor will determine whether the rare earth-H20 chip framework can extend into a broader agreement.
Mexico Resolution: Last-minute extensions create uncertainty about USMCA partner treatment and the broader North American trade relationship.
Market Response: How equity markets, currency flows, and business investment react to full tariff implementation will signal economic confidence in the strategy.
Manufacturing Job Creation: Whether the $2 trillion in investment commitments translate into sustained employment gains beyond current mixed results.
Fed Policy Alignment: If monetary policy shifts to support rather than constrain the massive private investment opportunities created by tariff incentives.
The Fed Constraint: Monetary Policy Working Against Trade Policy
The most significant obstacle to unleashing the full potential of the tariff strategy isn’t trade uncertainty – it’s Federal Reserve policy that appears to be working at cross-purposes with the administration’s economic goals.
The Contradictory Fed Logic:
- 2024: The Fed cut rates 3 times when inflation was running much higher than current levels
- 2025: Maintaining elevated rates when inflation is at 2.1% – exactly at the Fed’s stated target
Investment Reality Check: Companies are eager to invest domestically to avoid tariffs (evidenced by $2 trillion in commitments already), but high borrowing costs are making capital deployment expensive precisely when the biggest investment opportunities in decades are emerging.
The Real Constraint: While tariffs create powerful incentives for domestic investment, restrictive monetary policy makes that investment prohibitively expensive to finance. The result is a policy contradiction where fiscal policy (tariffs) encourages investment while monetary policy (high rates) discourages it.
Consumer Confidence Impact: High interest rates may also be constraining consumer confidence, as elevated borrowing costs for mortgages, auto loans, and credit cards dampen spending power despite strong employment and controlled inflation. Lower rates would likely boost both business investment and consumer spending simultaneously.
What Lower Rates Would Unleash: If the Fed lowered rates to match the 2.1% inflation reality, the economy could see:
- Companies accessing cheap capital to build tariff-avoiding facilities
- Consumers with lower borrowing costs driving demand
- Accelerated timeline for the $12-15 trillion investment commitments
- Enhanced consumer confidence supporting the 3-4% growth projections
- Faster job creation than current forecasts
The Bottom Line: The tariff strategy is working – investment commitments are flooding in and inflation remains controlled. The primary constraint on faster economic transformation isn’t trade policy uncertainty, it’s an overly restrictive Federal Reserve that cut rates when inflation was higher but won’t cut them when inflation is at target levels and massive productive investment opportunities exist.
The Tax Policy Multiplier Effect
The tariff strategy’s early success could be dramatically accelerated when combined with the administration’s planned tax reforms and appropriate monetary policy. The potential synergies are compelling:
Competitive Advantage Amplification: Foreign companies already committing billions to avoid tariffs would face an even starker choice with tax reform – invest in high-tax home markets or relocate to a low-tax, high-access U.S. market protected by tariffs.
Capital Formation Acceleration: If the administration eliminates capital gains taxes, reduces corporate rates, AND the Fed aligns monetary policy with the 2.1% inflation reality, the $12-15 trillion investment projections could become conservative estimates. Companies would face a powerful triple incentive: avoid tariffs by investing domestically, keep more returns through lower taxes, and access cheap capital for rapid deployment.
Competitive Advantage Amplification: Foreign companies already committing billions to avoid tariffs would face an even starker choice with coordinated policy – invest in high-tax, high-rate home markets or relocate to a low-tax, low-rate, high-access U.S. market protected by tariffs.
Revenue Neutrality Potential: With $300+ billion annually from tariffs and massive increases in domestic economic activity generating corporate and income tax revenue, aggressive tax cuts could potentially be revenue-neutral while dramatically boosting growth.
Investment Timing: Companies currently announcing investments may accelerate timelines or expand commitments if they know both tax advantages and lower financing costs are coming, creating a virtuous cycle of increased domestic production and job creation.
The combination of “stick” (tariffs), “carrot” (tax cuts), and “fuel” (lower rates) could create the most powerful industrial policy framework since the post-WWII era – if monetary and fiscal policy can work in coordination rather than opposition.
Six-Month Report Card: Assessing the Strategy
Looking at the comprehensive data six months into the tariff regime, the administration’s economic performance presents a surprisingly strong picture across key metrics:
- Jobs: Manufacturing employment stabilizing after initial volatility, with major commitments (1,500 jobs at Stellantis Belvidere, 20,000 from Apple, 154,000 annually from Qatar Boeing deal)
- Inflation: Holding at 2.1% despite predictions of much higher increases from tariff critics
- Wages: Rising in protected industries, particularly steel and aluminum sectors
- Capital Expenditure: $2 trillion in secured investment commitments in just six months, with projections of $12-15 trillion over the full 4-year term driving unprecedented manufacturing renaissance
- Automotive Production: Companies like Honda, Stellantis, and potentially Nissan reshoring or expanding U.S. operations
- Budget Impact: $300+ billion in annual tariff revenue helping fiscal position
- Negotiating Success: Major deals completed with UK, EU, South Korea, Japan, Indonesia
The Confidence Factor: The administration’s projections of 3% growth for the remainder of 2025 and 4% growth in 2026 reflect confidence in the strategy’s trajectory. With $12-15 trillion in investment commitments, $300+ billion in annual tariff revenue, and major diplomatic breakthroughs, recession risk appears well below 30% – contradicting the doom-and-gloom predictions from tariff critics.
The Modeling Paradox: Traditional economic models predicted severe disruption and inflation spikes that largely haven’t materialized, suggesting the unprecedented scale and strategic application of these tariffs is creating different dynamics than historical precedent would suggest.
Grade: A- to B+
The administration deserves high marks for executing a sophisticated restructuring of global trade relationships while maintaining economic stability. The strategic focus on major economies proves more significant than raw deal counts: eight completed agreements plus extensions for Mexico and China cover over 50% of global GDP and nearly 74% of the US trade deficit. The $2 trillion in investment commitments, successful major power negotiations, and inflation remaining near target levels represent substantial achievements despite the complexity of the undertaking.
Points off for: the manufacturing job numbers being mixed despite the investment commitments, ongoing uncertainty affecting business planning, and the strategic contradiction of tariffing USMCA partners while trying to compete with China.
The tariff wars have moved beyond simple trade policy into a fundamental restructuring of global economic relationships. Six months in, the strategy appears to be achieving its core objectives while avoiding the dire predictions of critics. The administration’s focus on the highest-value relationships – covering half the world economy through completed deals and active negotiations – demonstrates strategic sophistication beyond the initial “90 deals in 90 days” rhetoric. Whether this approach leads to sustained American economic dominance or eventual global fragmentation will likely be determined by how successfully the administration can convert these early wins into lasting structural changes.
The bottom line: US markets come at a price. We just learned what it is.
Navigating these unprecedented trade waters requires strategic insight and operational agility. If your supply chain or business operations need guidance through this evolving landscape, I’m here to help. Let’s discuss how these policy shifts impact your industry and explore strategies to turn challenges into competitive advantages.
📞 Ready to adapt? Call me.
