As the global game of chicken over incoming US tariffs continues, countries are waiting to see if they should retaliate, or make concessions to President Trump to safeguard their economies. Last week, the US President announced his administration would start a comprehensive review of America’s trade relationships after which specific tariffs would be developed for each nation, based on their current trade balance with the US and other factors. He said these tariffs would be enforced on March 12 “without exceptions or exemptions.”
Howard Lutnick, who was recently confirmed as Commerce Secretary, will lead the effort. Lutnick had been in the running for Treasury Secretary, a coveted position with major sway over tariffs which ultimately went to Scott Bessent. Lutnick had been perceived as the more controversial contender, given his pro-tariff stance. Investors expected Bessent to use tariffs as more of a negotiating tactic.
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Up until now, only a 10% tariff on all Chinese imports has actually gone into effect. It’s a figure that is a far cry from the 60% Trump promised on the campaign trail, and one analysts considered to be relatively light. The promised 25% tariffs on Canada and Mexico were delayed for a month after both countries’ leaders made minor (some argue negligible) concessions.
He also announced a 25% tariff on all steel and aluminium imports, which will go into effect on March 4, and threatened a 25% tariff on all imported cars. However, many countries are already making arguments about why they should be exempt.
Hoping for exceptions
“I relayed my thoughts to Rubio that Japan should not be one of the countries subject to reciprocal tariffs,” Japan’s Foreign Minister Takeshi Iwaya said after meeting with US Secretary of State Marco Rubio. He also reportedly discussed the auto tariffs and argued for an exemption regarding the steel and aluminium ones.
Japan’s exports have been growing for four consecutive months, led by an increase in auto exports to the US. The bulk of the country’s exported goods and services ($138b) go to the US, with nearly a third of that value coming from the auto sector. Therefore Trump’s announcement that he would impose auto tariffs “in the neighbourhood of 25%” could strongly curb Japan’s growth.
Japanese leaders may be betting on the countries’ traditional alliance and the island nation’s strategic importance in the region to negotiate with Trump. While the US President recently pressed Japanese Prime Minister Shigeru Ishiba at their first meeting in the White House on the country’s $68.5b annual trade surplus, the meeting was largely uneventful and considered a success by the Japanese delegation. There were reports that Ishiba “studied” ahead of the meeting, consulting with former Japanese leaders on the best way to handle the American President.
“We have been raising the issue with the US government, given the importance of Japan’s automobile industry,” Japan’s chief cabinet secretary Yoshimasa Hayashi said to reporters.
“Japan will first carefully examine the specific details of the measures that will come out and their impact on Japan, and then respond appropriately,” he added.
The UK, on the other hand, is in the midst of a balancing act. As the government tries to revive the country’s hard-struck economy, its leaders are trying to rekindle some of its ties to Europe while staying out of Trump’s firing line. The relationship between Trump and UK Prime Minister Keir Starmer has so far been more positive than with some other US allies. Business Secretary Jonathan Reynolds recently told the BBC that the US and the UK had a “mutual interest” in negotiating an exemption for the upcoming steel and aluminium tax.
Reynolds said that if the countries did not manage to work out a deal before the deadline, the UK would revive import tariffs on some US-made products like whiskey, jeans and motorbikes. Whether the goodwill between Starmer and Trump could survive that, remains to be seen.
Reynolds insisted this was a measure of last resort and that “there’s a basis for constructive engagement.” He explained that UK steel imports into the US have ‘specialised’ uses, such as making submarine casings for the US Navy. The UK government has said they would not immediately retaliate and Starmer is set to visit the White House to discuss the issues personally with Trump later this month.
Thailand is also looking to leverage their past economic and political relationship with the US to evade upcoming tariffs. The country’s Minister of Commerce, Pichai Naripthaphan, told reporters his government has plans to negotiate with the US and is flexible to US requests to reach an amicable solution. On the subject of Trump’s reciprocal tariffs, Pichai said, “if we do anything wrong, we can fix it.”
The minister noted that American investors had particularly wide access to the Thai market, as they are the only foreigners that can have a 100% stake in some of the country’s businesses.
“We have had this agreement for a long time but people don’t know about it […] Everyone wants it, but America is the only one to have it,” he added.
Like in Japan’s case, Thailand’s biggest export market is the US, with who they had a trade surplus of $35bn in 2024. The US took in 18.3% of all Thai exports, valued at $54.96bn. To further narrow the trade surplus, the country has offered to increase their imports of ethane to 1m tonnes in the second quarter of this year.
The only country Trump has suggested could get an exemption from the steel and aluminium tariffs is Australia, following a phone call with Australian Prime Minister Anthony Albanese.
“We have a [trade] surplus with Australia. One of the few. And the reason is they buy a lot of airplanes. They’re rather far away and they need lots of airplanes,” Trump said following the call.
Australia was exempt from similar tariffs during Trump’s first term, and the country only accounts for 1% of steel imports and 2% of aluminium imports, according to Albanese.
The EU retaliates
The EU, on the other hand, has vowed to retaliate against the steel and aluminium tariffs. Last week, EU Commissioner Ursula von der Leyen said, “unjustified tariffs on the EU will not go unanswered– they will trigger firm and proportionate countermeasures.” The bloc has made multiple lists of goods it would target in the US, depending on what the American tariffs look like.
German Chancellor Olaf Scholz said if the US “leaves us no other choice, then the European Union will react to this as one. As the largest market in the world with 450m citizens, we have the strength to do so.”
The tariffs would be a continuation of the dispute that started during Trump’s first term, when the President applied duties on $7b of EU steel and aluminium exports, citing national security concerns. Countries have increasingly used security concerns to justify protectionist measures in the past few years.
Despite a more resolute attitude towards retaliation, the EU naturally also wants to calm tensions and avoid a trade war that would be hurtful to the bloc. EU trade chief Maroš Šefčovič flew to Washington DC earlier this week to present a “package of cooperation” which could include increasing LNG imports (which von der Leyen suggested in November), decreasing duties on American vehicles, focusing on common interests regarding China such as the safeguarding of key-technology and buying more American weapons.
However, as the US flips their position regarding the Russia and Ukraine war, the bloc’s attention has shifted to a more fundamental transformation in the geopolitical order of their region. In the face of simultaneous economic and security threats, the EU seems ready to face the storm as a unified bloc.
