Fab 5: Countries Escaping Trump’s Reciprocal Tariffs

Unraveling the Mystery of Their Absence

President Donald Trump’s reciprocal tariffs have hit numerous countries, with rates varying from 10% to 50%. Yet, five nations were notably absent: Russia, Canada, Mexico, North Korea, and Cuba. Let’s delve into the reasons for their exemption.

Russia, North Korea, Cuba, and Belarus

• US Treasury Secretary Scott Bessent revealed that Russia was left out due to existing sanctions that had already reduced trade between the two nations.
• North Korea, Cuba, and Belarus were also likely spared from this latest round because of prior sanctions and minimal trade.

Canada and Mexico

• Although not mentioned in Trump’s April 2nd tariff announcement, Canada and Mexico have faced earlier trade penalties, including a 25% tariff on imports and a 10% rate on Canadian energy and potash.
• Goods covered by the US-Mexico-Canada Agreement (USMCA) remain exempt from new duties.
• New tariffs on auto parts and other products are scheduled to start on Thursday.
• Canadian Prime Minister Mark Carney and Mexican President Claudia Sheinbaum are preparing countermeasures to safeguard their workers.

Russia’s Exclusion: Possible Factors

• Ongoing negotiations between Trump and Russian President Vladimir Putin may have played a role in Russia’s exemption, as US-Russia trade has already significantly decreased due to existing sanctions.
• It remains uncertain whether Trump intends to revise his approach towards countries still buying Russian oil and gas.

Trump’s Tariff Approach

• The new tariff strategy seems to focus on countries with substantial trade surpluses with the US, such as China’s projected $295 billion surplus in 2024.
• Countries in Asia and the EU typically have higher trade deficits with the US, which might explain their presence at the top of the tariff list.
• Non-tariff barriers, like domestic VAT systems and currency manipulation, have also influenced tariff levels.

Surprising Tariffs on Japan and Vietnam

• Hefty tariffs on Japan (24%) and Vietnam (46%) stand out as notable developments.

Retaliation and Diplomatic Ties

• As global trade adapts to these new measures, several countries are preparing retaliatory actions.
• Canada and Mexico are considering their next moves, while Asian and European nations anticipate broader consequences.
• Russia and North Korea remain unaffected by Trump’s tariffs, but this could change depending on diplomatic relations in the coming months.