The White House and the Republic of Indonesia on Tuesday said in a joint statement that they have a framework for negotiating a reciprocal trade agreement.
The statement confirms what U.S. President Donald Trump said on July 15 on his Truth Social platform that an agreement was in place providing for a 19 percent tariff on imports to the U.S., with America having full access to Indonesia and that exports to the Southeast Asian nation would not be taxed.
The White House statement also noted that the two countries “are committed to strengthening economic and national security cooperation to enhance supply chain resilience,” as well as complementary actions to address unfair trade practices of other countries and combat duty evasion.
While there are likely a number of still unanswered questions, for now shoe manufacturers at least can breathe a bit better. The original threatened reciprocal tariff levy for Indonesia was 32 percent.
Other trade deals disclosed this week were with Philippines at 19 percent, down from a proposed 20 percent, and Japan at 15 percent, down from a proposed 25 percent.
On the footwear front, one country still said to be in talks with the U.S. is India. Trump said earlier this month that the countries are “close to a deal,” but so far no announcement has been made. The shoe-producing country so far also hasn’t received a tariff letter. India is facing a 26 percent reciprocal tariff rate.
The trade deals announced so far all follow a similar pattern. They are based on a framework for continued talks to finalize deal terms. They also lower the tariff duties for the countries importing to the U.S., while agreeing for “open” access for American exports at a zero duty rate. With the exception of Vietnam, they also provide for a transshipping levy.
In the case of Vietnam, which has a 20 percent tariff rate, there is also an imposed 40 percent tariff on transshipped goods. This rate is specific to Vietnam, but also likely because Chinese manufacturers are known to have circumvented China tariffs by shipping first to Vietnam before heading to its final U.S. destination. Vietnam, which accounts for 25 percent of footwear production globally, has become the go-to place for athletic performance shoes. The initial reciprocal rate proposed by Trump was 46 percent.
Trump disclosed his global reciprocal tariffs on April 2. Since then, there’s been pauses on the tariff hikes to allow for negotiations for new trade deals between the U.S. and other countries. With the Aug. 1 deadline fast approaching, and Trump noting that no more extensions would apply, one can expect a possibly flurry of forthcoming “trade deal” disclosures featuring the same “framework” trend as those already announced. Trump said Tuesday that “Europe” is expected shortly, along with others “coming in.”
There’s been rumblings that there could be a deal with the European Union (EU) at a 15 percent tariff rate, although the EU also is said to be preparing for reciprocal 30 percent duties should a framework agreement not be reached by the Aug. 1 deadline. Spain, Italy, Portugal and Germany are among the EU countries that manufacture shoes. In addition to manufacturing, premium leathers and textiles used for footwear are also sourced from EU countries.
China, which is the largest global suppler of footwear, remains the other question mark for shoe producers. The reciprocal rate started at 34 percent but then escalated to as high as 145 percent for certain goods. That was followed by a 90-day pause through Aug. 12 that included a temporary 30 percent rate.
The two countries agreed to a rare earth minerals trade deal in June, and that was supposed to set the stage for a deescalation of U.S.-China tensions as well as pave the way for further talks on a trade deal. But hard feelings may have resurfaced when Trump imposed the 40 percent transshipment levy on Vietnam, which targets trade between China and Vietnam. China is both Vietnam’s largest trading partner and its largest supplier of production inputs.
Trump earlier this month issued a tariff letter to Cambodia, a growing shoe manufacturing destination, that threatened a 36 percent duty rate — down from the previous 49 percent threat — if the parameters for a trade deal aren’t negotiated by Aug. 1. The two countries have had at least three rounds of talks, but so far there’s been nothing more definitive regarding any agreed upon framework for a trade deal.