Even the most fleshed-out trade pacts are light on details, and in some cases there are different interpretations of what was agreed upon. By Reshma Kapadia

Following a messy few months of tariff threats and delays, President Donald Trump arrived at his self-imposed Aug. 1 deadline brandishing several framework agreements with major trading partners, higher baseline tariffs on most countries than the market initially had expected, and another extension for implementation.

The White House left baseline tariffs of 10% on many countries with which the U.S. has a trade surplus; 15% on those with which the U.S. has a small deficit; and bespoke rates ranging up to 41% on countries with which the U.S. has a large trade deficit.

But this may not be the finish line that many companies had hoped for, and the fog of uncertainty persists. Even the most fleshed-out pacts are light on details, and in some cases there are different interpretations of what was agreed upon.

A spate of sector-oriented tariffs, including ones on pharmaceuticals and semiconductors, still loom, creating a potential spoiler to these agreements. Another issue: legal challenges to Trump's unprecedented use of the International Emergency Economic Powers Act for some of the tariffs. The Federal Circuit Court began hearing the case on Thursday.

Trump's unorthodox approach has brought major trading partners to the table and increased tariffs on U.S. imports by six times -- from an average effective tariff rate of about 2.5% at the start of the year to 18.3% so far -- the highest since 1935. The U.S. has collected an additional $55 billion in tariff revenue, much of it paid by U.S. companies.

Through this confusion, the stock market has forged new highs, taking comfort that the worst-case scenario -- a trade war with China or the European Union -- has faded.

Trade experts caution that for businesses vulnerable to the tariffs, a lot is unknown. Already, companies including Stellantis, Procter & Gamble, and Hershey have warned that they face higher costs as a result of the tariffs. Some companies have used tariff delays to build inventory, largely holding off on big moves or price hikes until they see where tariffs ultimately settle -- including for China.

On this front, companies may need to wait a bit. China this week said the two sides agreed to extend the Aug. 12 deadline by 90 days for an additional 34% tariffs on Chinese goods to go into effect. But U.S. officials said they were waiting on Trump to sign off on that plan.

These delays and preparation for tariffs have prevented the inflation spike that some economists warned about. But Claudio Irigoyen, Bank of America's head of global economics, says that could be the reason inflation may become persistent.

What has emerged is a general template. For major trading partners that have reached a framework agreement, there appears to be a 15% tariff rate in return for vows to buy U.S. goods or invest in America -- as Japan, the European Union, and South Korea have done.

There are still potential hurdles: "They will need to iron out disagreements between the U.S. and negotiating partners, flesh out the specific terms of frameworks, and put together text that can be signed and certified by all parties," says Dan McCarthy, a former senior staff member at the U.S. Trade Representative's office and principal of McCarthy Consulting.

Indeed, some of the announced deals are just letters to trading partners, setting terms. Even in instances where both sides announced the pacts together, some of the vague terms are in dispute.

Take Trump's announcement that Japan, already one of the largest investors in the U.S., would invest $550 billion at his discretion with the U.S. reaping 90% of the profit. Japanese officials have said that only a fraction of the amount will be a direct investment, with the majority coming in the form of loans.

There are other questions about the logistics, from the mechanism used for enforcement of promises to buy U.S. goods or invest to how countries may compel private-sector companies to commit to such spending.

The nature of the negotiations have added their own level of confusion. Historically, trade deals took years to hash out, with technical negotiations at various levels eventually blessed by leadership. Trump's team has stressed that he wants to put the final touches on a deal -- unfamiliar territory for many trade negotiators.

That was on display in the administration's first trade deal, with Trump announcing a 20% tariff on Vietnam and 40% on any goods deemed as "transshipping" or rerouted to evade tariffs. Yet, neither side released documentation, with reports that Vietnam believed that it had agreed to a much lower rate.

Adding another level of volatility is Trump's use of tariffs as an "international fix-all," says Owen Tedford, senior analyst at Beacon Policy Advisors. The U.S. raised tariffs on Brazil from 10% to 50%, citing the country's legal proceedings against Trump ally and former President Jair Bolsonaro, and policies targeting U.S. technology companies.

On Thursday, Trump said that Canada's recognition of Palestine as a state would make it hard for the U.S. to reach a deal with its northern neighbor. Hours later, the U.S. imposed 35% tariffs on Canadian goods, on the high end of the levies imposed and effective on Aug. 1.

In a note to clients, Arthur Kroeber, head of research at Gavekal, describes the main achievement as political -- more a demonstration of "America's raw power" than an economic win.

"Although the deals do provide a measure of certainty, this certainty is provisional," Kroeber writes. "More tariff threats will surely follow as soon as Trump feels he isn't sufficiently respected or has something he wants to get."

Write to Reshma Kapadia at reshma.kapadia@barrons.com

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August 01, 2025 21:31 ET (01:31 GMT)

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