Confused by the Flurry of Trade Deals? Here’s the Bottom Line

U.S. President Donald Trump has truly flooded the zone on trade and tariffs since he took office in January. With the homework due by Friday’s self-imposed August 1 deadline, there’s been a string of conflicting statements and claims on U.S. import duties.

From the White House, we hear that the self-proclaimed “Dealmaker-in-Chief” has landed a string of successes, ushered in “America’s Golden Age” of economic growth … oh, and secured world peace, too.

What are the details of these deals? Don’t sweat that small stuff! These are the biggest and best trade deals ever. It’s all the best it’s ever been!

But I like to look to the markets for a spin-free response. And it’s clear investors aren’t enthused over these trade deals, which frankly all risk falling apart.

Korea Matches Japan but Stocks Stall

There’s been a flurry of action overnight. South Korea has matched Japan in securing a 15% tariff rate on shipments to U.S. shores. According to Trump on social media, South Korea will “give” US$350 billion to the United States “for Investments owned and controlled by the United States, and selected by myself, as President.”

Notably, Korean car companies will also share the same 15% U.S. import duty that Japanese car companies secured last week. That, perversely, puts cars made completely in Korea or Japan at an advantage over U.S.-assembled cars that use parts from Canada or Mexico, which face a 25% import duty.

We would expect a jump in Korean markets, right? Nope. Investors are nonplussed. The benchmark Kospi inched 0.3% lower on Thursday. Korean stocks had been the stars of 2025 so far, up 35.3% this year, but only 5.6% in July as this deal neared.

That’s lackluster performance for a month when markets in Southeast Asia are up double digits, as I noted in my last story. Korean chipmaker Samsung Electronics SSNLF has driven the gains in Seoul, up 33.7% this year as the company finally gets its act together on high-end Artificial Intelligence chips. This week, it secured a US$16.5 billion deal to supply AI chips to Tesla TSLA.

The major Korean auto exporters sold off heavily Thursday. Kia KIMTF (KR:00270) plunged 7.3% on Thursday alone, and affiliate Hyundai Motor HYMTF (KR:005380) shed 4.5%. Both are virtually flat this year. Why? Well, the two companies face as much as US$5 billion in extra costs even after securing this “great” import rate.

India Hit With Disappointing 25% Duty

India, meanwhile, now faces a 25% across-the-board tariff, starting Friday, the August 1 deadline for trade talks to conclude. Indian stocks will sell off then, since that’s worse than any other Asian nation that’s achieved any kind of agreement?

No. Indian stocks are down just 0.3% in the form of the Nifty 50. That mimics Korea, despite Korea’s “better” terms, and echoes the slight slip in the S&P 500 the day before.

And what’s this, the deal with India isn’t done? “We’ll see what happens,” Trump says, noting that talks continue — but also threatening a “penalty” because India buys energy and military equipment from Russia. “STOP THE KILLING IN UKRAINE,” he posted on social media.

Indian Prime Minister Narendra Modi held a high-profile summit at the White House in February, one of the first leaders to meet with Trump 2.0, after the heads of Japan and Israel. So Delhi will be disappointed at the lack of progress, with trade negotiators holding out hopes of duties in the range of 15% to 20%.

If there’s any logic to the trade deals, it’s likely India should face a higher rate. It has only recently begun to improve market access for multinationals, and does charge some of the world’s highest tariffs. But to link the tariffs to weapons sales and a war where India is not involved makes little sense.

I cover Asia, so I’ll just briefly mention the punitive 50% tariff threatened for Brazil. Trump links those tariffs to the trial of former president Jair Bolsonaro, who refused to accept 2022 election results as his supporters stormed the federal government, calling for a military-backed coup. Again, nothing to do with actual trade.

No Text on Any of This

Why do I say all these deals risk falling apart? Well, we’ve seen Vietnam and the Philippines reject the terms posted by Trump on social media. Both nations seek to continue talks, as I noted in my last story.

There is no text to examine on any of these deals. No hard and fast terms. That’s why we can’t make sense of the claim that Korea will “give” money for investment into the United States.

We have already seen backtracking from Japan on similar claims, over the massive US$550 billion commitment outlined alongside its hard-fought pact secured last week. The details have always been in flux, as I noted as Trump announced the pact.

Despite a “fact sheet” from the White House stating Japan will invest that amount “directed by the United States,” chief Japanese trade negotiator Ryosei Akazawa says only 1% to 2% will be direct investment from the Japanese government. The rest will form loans to companies that are setting up or expanding U.S. operations.

Akazawa himself points out there’s no signed text, despite that fact sheet, an unusually blunt statement for a diplomat. He also says the beneficiaries of Japan’s lending won’t necessarily be Japanese. “For example, if a Taiwanese chipmaker builds a plant in the U.S. and uses Japanese components or tailors its products to meet Japanese needs, that’s fine too,” he explains, without specifics.

It’s likely, then, that the Japanese government will simply be lending to investment that would have happened anyway. Akazawa surely has in mind that Taiwan Semiconductor Manufacturing Co. TSM (TW:2333) has already pledged to invest US$65 billion to build three chip “fabs” in Arizona.

The European Union deal follows the same pattern: a 15% tariff on most European imports into the United States, and US$600 billion in investment. Europe and South Korea also agree to buy U.S. energy.

Bottom Line: Higher Costs

There’s plenty still to come. Malaysia expects a deal to come on Friday, lowering the 25% threatened tariff. Thailand and Cambodia are also in line after agreeing a ceasefire in their border skirmish. And of course talks with China, the original target of Trump’s tariff ire, continue.

There’s a handy tariff tracker here from The New York Times. It needs plenty of updating!

Trump is using the deals to score points at home. And just as fast as deals are announced, politicians in Tokyo, Manila and Seoul look to walk the details back, to appeal to their voter base. For instance, the Philippines says it has not accepted zero tariffs on all U.S. farm goods.

So we were skeptical on the Money Talk podcast yesterday, hosted by Peter Lewis. I chirped in alongside insightful comments from David Roche, the global strategist at Quantum Strategy. You can here our takes on the market reaction here, if you fancy listening to the episode.

Let’s not miss the forest for the trees: U.S. tariffs are shooting up at a faster pace than ever before. Off a very low base of 2.8% at the start of this year, the average U.S. tariff has now jumped exponentially to 18.4%, according to the Yale Budget Lab, the highest level since 1933. That’s when the Smoot-Hawley Tariff Act helped usher in the Great Depression.

These are U.S. taxes, charged by U.S. Customs, that will be paid directly by the U.S. company doing the importing, and ultimately by U.S. consumers.

The Yale lab estimates each U.S. household will be worse off to the tune of US$2,400 in annual income. Tariffs will likely drive down U.S. economic growth by 0.5% this year and next, and 0.4% per year in the long run, an annual hit of US$115 billion.

Markets are being very complacent about this impact. The car companies face the trade impact directly, and we’ve seen massive losses from the likes of General Motors GM. It took a US$1 billion profit hit in a single quarter for Q2, and says the effects will get worse, potentially rising as high as US$5 billion if not offset. Stellantis STLA warns of a US$1.7 billion hit this year — and as the parent of Jeep and Chrysler, this is a company meant to benefit from reshoring of U.S. manufacturing.

The whole world doesn’t revolve around imports and exports, of course. But these hits to the bottom line are negative. The hit to U.S. household income is negative. The disruption to corporate planning is negative.

The White House may champion the flurry of confusing pacts this week. It’s a self-imposed destruction of wealth, and there’s a whole lot more that can go wrong from here than can go right.

At the time of publication, McMillan had no positions in any securities mentioned.