Geopolitical Report (Special)
U.S. energy exports and investment commitments are showing momentum under President Donald Trump's trade agreements, though the agreements lack fine details. Trump this week added three new framework trade agreements with Japan, Indonesia and the Philippines, adding to previously announced agreements with Vietnam and the United Kingdom, as the Aug. 1 deadline he set for dozens of countries to reach a trade deal or face significant increases in tariffs approaches.
The White House hailed a "significant expansion of U.S. energy exports to Japan," along with a $550 billion Japanese commitment to provide capital, credit guarantees and financing for major projects within the United States. This could include a $44 billion liquefied natural gas project in Alaska, which the administration is seeking to attract Asian trading partners to invest in.
Trump told U.S. lawmakers on Tuesday: "They're forming a joint venture with us in Alaska, you know, for LNG. "They're ready to close the deal now. But, as with much of Trump's trade agenda, no formal PPAs have been signed, and few details have emerged other than the key U.S. tariff rate, which in Japan's case dropped from 25 percent to 15 percent, still historically high, and will include Japanese automobiles. A researcher at the Center for a New American Security explained that "it's easier to pledge interest than to implement" when it comes to energy procurement and investment.
She added in a note: "Some may be optimistic about the costly Alaska project, but that may be premature." She added: "The U.S. will need to deliver tangible results to attract investment. Recent customs letters suggest fast, routine and reliable approvals, and the Treasury Department appears to be experimenting with a new mechanism for investors, but the details have not yet been revealed."
The framework agreement with Indonesia removed 99% of tariff barriers on US exports to the world's fourth most populous country, according to the White House, while US tariffs on Indonesian goods were set at 19%. Indonesia has also agreed to buy US energy products, including liquefied natural gas, crude oil and gasoline, worth an estimated $15 billion.
Agreements on paper
One conclusion from the agreements announced so far is that the basic tariffs are likely to remain above the 10% previously announced by Trump, while some countries may be able to negotiate lower sectoral tariffs or quotas, such as those on steel and aluminum, and possibly future tariffs on copper.
Although Trump calls them "trade agreements," they are actually framework agreements that lack the nuanced character of traditional trade agreements. For example, the White House briefing paper on the framework agreement with Indonesia explains that "in the coming weeks," the U.S. and Indonesia will negotiate and finalize the agreement before it is signed and subject to "domestic formalities before coming into force."
As the first set of framework agreements are announced, other countries are rushing to conclude their own agreements. South Korea, which has sought to leverage its expertise in shipbuilding and buying U.S. power in trade negotiations, is now looking to Japan as a potential model. The European Union, which has also talked about buying more U.S. power and investing, is also pushing for any deal to be finalized before August 1.
The vice president of the Asia Policy Institute said during a seminar hosted by the International Trade Association in Washington on Friday: "The agreement with Japan is a turning point. "It will put pressure on other countries, especially the European Union and South Korea, this week to reach a deal." Trump said on Friday, before leaving for Scotland to discuss trade with European Commission President Ursula von der Leyen, that there was a "50-50 chance" of a deal.
Negotiations with China escalate
US and Chinese negotiators are set to hold a new round of trade talks in Stockholm early next week, as the two sides seek to extend the tariff truce beyond the August 12 deadline.
Energy issues have slipped to second place in talks that are more focused on rebalancing the trade relationship between the world's two largest economies.
China's imports of U.S. liquefied natural gas and crude oil have fallen since Trump took office, as China continues to impose tariffs of 10 percent to 15 percent on U.S. energy products. U.S. Treasury Secretary Scott Besant, who is leading the negotiations with China, has talked about getting China to buy more U.S. goods, but not so much about energy. He did mention energy this week in the context of China's purchases of Russian and Iranian oil, saying he plans to raise the issue in the context of trade talks.
Besant told Fox Business on Thursday: "We're going to talk about the fact that they're buying sanctioned Iranian and Russian oil. "You know, if they stopped those purchases for 3 or 6 months, I think the Russian war machine would stop, and negotiations with Iran would be much easier. We have a whole range of issues to address."
Conclusions
- Trump's business vision intersects a lot with the political vision, as his vision does not often coincide with the dynamics of international relations and the foundations formed by the unipolar system after the collapse of the Soviet Union, and that the structure of this system relies heavily on the institutions that the United States contributed to forming after World War II, and this relates to the foreign policy priorities of the United States.
The agreement with Asian countries is different from the agreement with China, especially with the overlapping financial and economic interests of the two countries, and it is difficult for anyone to expect a real collapse of relations, but what is happening is a tactic for the purpose of understanding a new economic stage that does not stop at imposing new tariffs, but rather defining new patterns for global trade and its implications for the two countries.
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