The United States is anxious, gold rose by 1%! Becente

Source: Wall Street News

There are signs that the trade war initiated by the United States is heating up again, and gold, as a safe-haven asset, has risen in response.  

According to media reports, U.S. Treasury Secretary Bessent issued a stern warning on Sunday, stating that if countries do not "negotiate in good faith," the U.S. will restore the highest tariff levels announced by Trump on April 2. This signals that the U.S. is adopting a more aggressive stance in trade negotiations.  

On Monday, spot gold rose by more than 1% in early Asian trading, breaking above $3,230 per ounce.  

### The U.S. Suddenly Hardens Its Stance in Trade Negotiations  

"Some countries have a tax rate of 10%, while others are significantly higher," Bessent told the media. If "you don’t want to negotiate, then tariffs will rebound to the levels of April 2." It is reported that countries will receive a letter from Bessent specifying the maximum tariff rates they will face if they do not negotiate seriously.  

This tough stance contrasts sharply with Trump’s recent claim that countries are "vying" to negotiate with Washington. However, on May 16 local time, Trump also said that within the next two to three weeks, the U.S. might unilaterally set new tariff rates for many trading partners. Trump claimed that the U.S. lacks the ability to negotiate agreements with all trading partners.  

Trump said, "Although 150 countries want to reach agreements, it’s impossible to meet with all of them. I think we will set fair tax rates; it’s impossible to meet and negotiate with so many countries."  

On April 2, Trump announced a 10% base tariff on nearly all imported goods, while imposing "reciprocal tariffs" on dozens of trading partners, once triggering剧烈动荡 (violent volatility) in global financial markets.此后 (Since then), Trump announced a 90-day暂缓执行 (suspension) of the high "reciprocal tariffs," but the 10% base tariff remained in effect.  

Currently, apart from quickly reaching an agreement with the UK and pausing tariffs with China, negotiations with major allies such as the EU, Japan, and South Korea have reached a standstill, particularly on auto tariffs.  

Brad Setser, a senior fellow at CFR, stated on his social media account: "There are increasing signs that trade negotiations with U.S. allies are not progressing smoothly. This is not surprising—Trump’s 'proposals' are not particularly attractive."  

He explained that Trump’s proposal requires other countries to make concessions to rebalance trade. In exchange, the U.S. will not raise the "benchmark tariff" (10%) to "reciprocal tariffs" (20% for Europe, 24% for Japan) and will maintain tariffs under Section 232 (potentially 25%).  

Setser criticized this proposal as essentially requiring allies to make further concessions without retaliating against existing tariffs, merely to avoid higher future tariffs. This "unequal exchange" is not seen as a good deal by allies. Historical experience shows that major trade concessions usually require the U.S. to make corresponding concessions, not after the U.S. unilaterally raises tariffs first.  

Setser said he understands the so-called "TACO" trade (i.e., expectations of partial compromise + continued negotiations) that the market is betting on, but he personally believes that due to deep-seated disagreements and complex political factors among the parties, there may be more "dramatic events" rather than the smooth progress expected by the market before early July.  

### Slow Progress in Japan-South Korea Negotiations, Hardline EU Attitude  

For Japan, South Korea, and the EU—the largest trading partners—auto tariffs are the main obstacle. The U.S. has been reluctant to abandon the 25% high tariff on imported cars, which has hit these allies particularly hard. Although the UK obtained lower auto tariffs in its quickly reached agreement, this only applies to the first 100,000 vehicles imported annually, far below the annual export volumes of these automotive manufacturing powers to the U.S.  

For Japan, the 25% auto tariff is particularly devastating. Japan’s Minister of State for Economic Regeneration, Ryosei Akasawa, publicly stated that a Japanese automaker "loses $1 million per hour due to tariffs." Toyota, Honda, and Nissan have all lowered their profit forecasts in their latest earnings reports and explicitly listed tariffs as a major negative factor.  

South Korea has also been hit hard. South Korea’s Minister of Trade, Industry and Energy, Andeok Kwon, recently met with U.S. Trade Representative Greer on Jeju Island to seek tariff exemptions. The South Korean side noted that the auto parts industry creates approximately 330,000 jobs and urgently needs U.S. concessions.  

As one of the U.S.’s largest trading partners, the EU currently bears 25% tariffs on cars, steel, and aluminum, plus a 10% base tariff. If "reciprocal tariffs" are restored, it will rise to 20%.  

According to Global Information Broadcasting, European Commission Executive Vice President and Trade Commissioner Valdis Dombrovskis重申 (reiterated) that the EU will continue to seek negotiated solutions to trade disputes while preparing for possible countermeasures.  

The EU has prepared two countermeasures lists: the first targets U.S. steel and aluminum tariffs, covering €210 billion in goods; the second covers U.S. products from aircraft and cars to spirits and nuts, totaling €950 billion. Meanwhile, the EU plans to file a lawsuit with the WTO.  

EU officials have bluntly stated that if negotiations fail, they do not rule out imposing penalties or restrictions on large U.S. tech companies and are accelerating free trade negotiations with Asian countries to diversify risks. "In today’s geopolitical context, we need to ensure we don’t put all our eggs in one basket," said EU Trade Commissioner Šefčovič.  

Setser pointed out that the "room for negotiation" between the U.S. and Europe is limited, which could trigger greater friction:  

Although the EU is willing to make partial concessions, this is conditional on the U.S. making substantive concessions (such as "zero-for-zero" industrial tariffs), which is inconsistent with Trump’s usual stance. Europeans also note that the current 10% U.S. tariff, plus the threat of 25% under multiple Section 232 programs, effectively approaches 20%. This leaves very little "room" for negotiation.  

The Global Times cited a report from the *Nikkei Asian Review* that after two consecutive rounds of failed negotiations, Japan has adjusted its strategy from hoping the U.S. would completely eliminate tariffs to accepting tariff reductions. Japan and the U.S. plan to hold a third round of negotiations after the G7 finance ministers’ meeting.  

Japan is preparing negotiation bottom lines, including increasing imports of U.S. agricultural products, special measures to expand imports of U.S. cars, and cooperation in shipbuilding. However, a practical challenge is that Japan’s main exports to the U.S. are cars and parts. Increasing U.S. agricultural imports would anger domestic agricultural lobbying groups, and the July Senate election makes it difficult for the Ishiba Shigeru government to compromise.  

Setser believes that due to significant differences on substantive issues among the negotiating parties, coupled with Japan’s domestic political factors, the possibility of a U.S.-Japan agreement by early July is minimal.  

Meanwhile, the U.S. and South Korea held three days of consultations in Jeju Island, South Korea, from May 14 to 16. According to Huanqiu.com, South Korea is striving for a U.S. exemption from the announced 25% "reciprocal tariffs" and seeking preferential tariff treatment in auto and semiconductor sectors. South Korea will hold a general election on June 3, and the government has stated it will not force an agreement before the election.  

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