COMMENTARY: Trump’s tariffs have created the deal zone

Investors feel the whiplash as markets react to on-again, off-again tariffs proposed by the Trump administration. The recent 90-day pause led to sighs of relief in some quarters and consternation in others — but Trump’s effort to remake the global economy is just starting.

Some countries have gotten the message loud and clear, though not as President Donald Trump might have hoped. Politico reported over the weekend that China is accelerating not only its tariff war with the United States but also non-tariff economic barriers such as a ban on GMO imports, restrictions on mineral exports to the United States and refusal to renew export licenses for hundreds of U.S. meatpacking plants.

That’s because those barriers have far more of an effect than tariffs, something to which many Trump critics are blind.

It appears that leaders in Japan, South Korea and India are recognizing how reducing those barriers set out in the National Trade Estimate (the book Trump waved from the podium) can help them enter “The Deal Zone,” which Treasury Secretary Scott Bessent has said includes a bespoke arrangement for each country that comes to the negotiating table.

Take Japan. Trump has been favorable to the nation in the past, with a strong relationship with then-Prime Minister Shinzo Abe in Trump’s first term. When the country responded promptly to Trump’s new actions, Bessent, leading Trump’s trade conversations, said, “I would expect that Japan is going to get priority” among trading partners.

Bessent can find a lot in Japan’s trade policy to discuss. It looks as if Japan is ready to address some: relatively high agricultural tariffs, overregulation of the beef industry, an insurance monopoly and a range of import and distribution distortions that decrease the competitiveness of U.S. exporters. U.S. farmers will especially benefit from eliminating some of these barriers, as China’s retaliatory tariffs have blocked them from accessing that nation.

Japanese companies will benefit from reduced barriers because Trump wants to make deals. Negotiations by Japan could include expansion of industries in U.S. markets to the apparent benefit of the Japanese. For example, then-President Joe Biden blocked Nippon Steel’s purchase of U.S. Steel in January. Since then, Nippon Steel has expanded the financial value of its investment in the American steel industry to $21 billion, with a promise that it will keep thousands of jobs.

Despite the protectionist accusations, Trump is more open to the proposal, perhaps because he recognizes that America needs allies to increase pressure on China.

Another player who “gets it” is South Korea — a country with an export-dependent economy. Its leaders were also among the first to call Trump for what the president lauded as a “big deal” that could result in “one-stop shopping” and “a beautiful and efficient process!!!”

What could that deal include? South Korea’s acting president, Han Duck-Soo, and Trump have revealed few details. Still, they agree that mutually beneficial shipbuilding and energy agreements could be on the agenda. Trump could also insist on changes to several anti-competitive regulations in areas such as chemicals and agricultural biotechnology, and regulations that translate into bans on many U.S. products. And South Korea, like Japan, has many barriers in services, especially regarding rules requiring data to be held locally and applying local content rules to keep out U.S. media content.

Finally, we have India, which often appears on the international economic community’s bad list. Its average tariff of 17 percent is the highest of any major economy. Its rate of agriculture imports is an astonishing 113 percent. And its tariffs on U.S. spirits can increase the costs of products by three times or more.

However, again, while the details are scant, it is clear that India could enter the Deal Zone. Han has highlighted India and Japan as close allies in the desire to seek agreements. The country is making news for being among the first nations to present a multi-industry deal framework to Trump.

We could do this exercise for every country. We could refer to the 45 pages of China barriers or the 33 pages of European Union barriers. The point is that many countries have long-established patterns of distortion of trade. These barriers aren’t “tariffs,” so they’re not getting headlines, yet they create greater trade distortions than even the worst tariff — three times as much.

For 30 years, nothing has been done until now.

The smart leaders know things are changing — and not just for tariffs. China is choosing the path of most aggression and least results, while its neighbors are taking steps to reduce barriers so deals can be made.

It won’t be just governments that benefit — large companies such as Nippon Steel to small mom-and-pop farms will find U.S. markets more open than before.

Tariffs are not necessarily the endgame. They could presage Trump’s effort to remake the world’s economic order, reducing barriers assumed to be set in stone. And now, less than 100 days into his second term, he’s on the verge of making it happen.

Shanker Singham is the CEO of Competere. He wrote this for InsideSources.com