Trump’s tariff stick hangs over the heads of the three major economies, while the negotiators from the three sides shuttle through the corridors of Washington, holding not only a draft trade agreement but also a domino that could reshape the global supply chain.
During the G7 summit, the leaders of Japan and the United States held talks for only 30 minutes and the two sides failed to reach a consensus on the core tariff issue. After the meeting, Shigeru Ishiba directly stated that “the two sides’ views are inconsistent”, especially emphasizing that “automobiles involve major national interests”, and suggesting that the 25% tariff on automobiles is the biggest obstacle.
This deadlock has directly hit the lifeline of Japan’s economy – automobiles and auto parts account for 34% of Japan’s exports to the United States, with an annual export value of up to 7.2 trillion yen (approximately 45 billion US dollars), and the fate of 1.37 million vehicles exported to the United States remains uncertain.
In exchange for concessions from the US side, Japan proposed to increase imports of US soybeans, open up shipbuilding cooperation, and even played the “investment card”, promising to raise its direct investment in the US from 783 billion US dollars to 1 trillion US dollars.
However, the Trump administration insisted on bundling negotiations, demanding that Japan accept a “package deal” including conditions such as agricultural opening up, while Shigeru Ishiba explicitly refused to imitate the British model and accept a 10% benchmark tariff.
As the deadline for raising the “reciprocal tariff” rate from 10% to 24% in early July approaches and the Japanese Senate election is imminent, the deadlock in the negotiations has evolved into a political crisis for the Shigeru Ishiba government.
Although German media reported that the EU was planning to accept a 10% uniform tariff, a spokesperson for the European Commission promptly refuted the rumors, stating that the reports were “pure speculation” and emphasizing that they were still seeking a “balanced and mutually beneficial solution”.
The actual proposal put forward by the European Union is more targeted: reducing the tariff on passenger vehicles from 10% to 2.5% (on par with that of the United States), and promised to expand the purchase of US liquefied natural gas (LNG) and military equipment, attempting to bind negotiation chips with energy security.
If the negotiations break down, the European Union will activate a retaliation mechanism called the “Anti-Coercion Instrument” (ACI). This tool allows for precise strikes against American tech giants – including imposing additional digital taxes, suspending intellectual property protection, and even restricting access to the financial services industry.
However, this mechanism requires a six-month assessment cycle and may be difficult to respond promptly to Trump’s threat of a “50% tariff on July 9th”.
With a consumption-driven economic structure where commodity exports account for only 20% of GDP (87% for Vietnam), India has a relative advantage in the negotiations. The core demand is that the agreement contains a “stability clause” to ensure that the United States will no longer unilaterally raise taxes in the future. Otherwise, India can resume negotiations or claim compensation.
The negotiations adopt a three-stage strategy: reaching a provisional agreement (covering industrial product access) before July, expanding to 19 fields from September to November, and the final agreement awaiting approval by the US Congress next year.
Facing the United States’ imposition of a 25% tariff on steel and aluminum products (with an annual loss of 1.2 billion US dollars), India submitted a countermeasure list to the WTO, proposing to increase taxes on high-value agricultural products such as beans and nuts from the United States.
At the same time, red lines are drawn in sensitive areas: refuse to open up the market for genetically modified crops, resist the relaxation of price control over medical equipment, and adhere to the policy of localizing data.
Negotiations among the three major economies all point to the same deadline – July 9th, the expiration date of the grace period for “reciprocal tariffs” set by Trump. If no agreement is reached:
Japan: The combination of a 24% comprehensive tariff and a 25% auto tariff may result in a 0.5% loss of GDP.
The European Union: Facing a 50% punitive tariff, the 28.7 billion euro trade surplus in the automotive industry is directly impacted.
India: A 26% tariff will cut its exports to the United States by 5.76 billion US dollars, with electronics, seafood and jewelry being the first to be affected.
The current situation reveals a deeper game: The United States attempts to reconstruct global trade rules with unilateral tariffs, while the three parties counter with differentiated strategies –
Japan adheres to the bottom line of high-end manufacturing, the European Union balances openness and retaliation, and India locks in long-term interests with “stability provisions”. This battle for the dominance of rules is destined to reshape the trade order in the post-globalization era.
The global economy is sliding towards a fragmented trading system: at one end is the unilateral tariff barriers of the United States, and at the other end is the accelerated reconstruction of regionalized supply chains.
Vietnam seized the initiative with a zero-tariff agreement, while Malaysia and Indonesia were eyeing the textile industry greedily. Within the BRICS countries, India attempts to walk a tightrope between “de-dollarization” and maintaining US-India relations.
When the bell rings on July 9th, the framework of the World Trade Organization may face its greatest test since its birth – either disintegrate under American unilateralism or give rise to new rules with multiple poles running in parallel. The outcome of this war without gunsmoke will determine the direction of the global economic flow in the next decade.
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