Is Trump’s trade strategy working?

It's time for a quick trade update, because the president's extended deadline expires this Friday (1 August), at which point capitals without a deal theoretically face higher US tariffs.

Lots is happening as we speak, so here’s what you need to know:

1. 🇨🇳 China

Beijing and DC today (Monday) kick off their third round of talks in Stockholm. And word is we'll likely just see another extension of their 90-day truce (which ends 12 August) rather than anything transactional (like China's old pledges to buy more US soybeans) let alone structural (like China curbing its own vast industrial over-capacity).

So why kick the can down the road again? This de-escalated stand-off, while painful, is still both a) manageable (shipping flows attest to that), but also b) necessary to unwind their deep interdependence, whether on China's rare earths, or America's chips.

So we’re unlikely to see any big updates until Trump and Xi potentially meet at (or just before) Korea's APEC summit in October. That takes us to the world’s second-largest economy...

2. 🇪🇺 The EU

Just days out from the US deadline, the EU's Ursula von der Leyen flew to meet President Trump in Scotland yesterday (Sunday), with both putting the odds of any deal at 50/50.

Even 50/50 felt high when you recall the EU’s quickest deal (with Korea) took 2.5 years. But the two emerged overnight with a high-level (detail-free) update that enables a) a Trump win via future EU investments and purchases, b) a von der Leyen win by avoiding a full trade war and instead halving the threatened US tariffs to 15%, then they both c) delay the much harder talks. Though these 15% US tariffs on the EU are still seven or eight times higher than the status quo ante, so an inflationary hit ahead feels inevitable.

The EU also seems to have learned from history here: you’ll recall under Trump 1.0, it skirted US tariffs by pledging to buy more US soy and gas, though the market winds were already blowing that way. The bloc is now likewise pledging to buy stuff it already wants: US energy and arms. That’s a little like boldly pledging to watch more Netflix.

The EU has presumably also learned from...

3. 🇯🇵 Japan

President Trump’s big Japan deal last week featured more market access for US cars and rice in return for a capped 15% tariff on Japan plus a yuuuge $550B investment pledge (the EU then likewise got 15% and pledged $600B in unspecified investments).

But surprisingly, Tokyo's cabinet office then piped up on Friday, saying there's actually no written deal, won't be one, and that according to what Tokyo did agree:

• Japan's rice purchases will still just be as needed (ie, potentially zero)

• US cars still have to meet Japanese safety standards (ie, no major change), and

• Any investments will be "up to" $550B (ie, theoretically 'zero' fits that definition).

We say 'surprisingly' because you might think Japan should've just let the president fire off that tweet then take his lower tariffs. So why didn't it? Trump’s tweet suggested Japan’s investment would be 90% in America's favour, which presumably didn't go down too well among the voters who just dunked on Japan's ruling party a week ago.

Still, the lesson for other capitals might’ve been to a) offer big, long-term pledges in hopes of getting immediate tariff relief, then b) just let the president sell it how he wants. And that’s what the EU has now done (it’s staying notably silent on his claims that EU members are now “agreeing to open up their countries to trade at zero tariff”).

But maybe there’s another lesson on display…?

4. 🌏 Stability

The president's recent deals with Vietnam^* , Indonesia, and the Philippines all landed relatively high at 19% or 20%. And sure, that likely reflects their own limited leverage plus a calculation that ~20% is probably manageable for their lower-cost export bases.

But it also reflects an assessment that whatever extra percentage point or two these leaders might’ve shaved off, it still wouldn’t be worth the risk of higher US tariffs from Friday, nor the bigger risk: more uncertainty. Hanoi, Jakarta, and Manila (plus Brussels too) all know that the firms they’re trying to lure need stability before they’ll invest.