A report suggests that upcoming US trade deals with countries such as India, Japan, South Korea, and Australia may involve maintaining tariffs at or around 10%, similar to the UK’s tariffs. This approach marks a continuation of strategies employed in deals with other international partners.

These tariffs do not seem to encourage concessions from other countries eager to export to the US, raising concerns about possible retaliatory measures. The stalled progress in trade discussions with Japan exemplifies the difficulties involved in these negotiations, as the US seeks to set its terms.

Strategic Tariff Measures

In Congress, there are uncertainties about the long-term acceptance of such tariff measures. Some speculate that these initial high tariffs might serve as a negotiating tactic to eventually settle at the 10% level. The outcome and effectiveness of this strategy remain to be seen.

What’s essentially being described here is a calculated push by Washington to keep tariff rates steady at around 10%, aligning them roughly with British levels, when dealing with various Indo-Pacific partners. The guiding idea underpinning this is to hold firm on these tariffs as a bargaining chip, potentially using them to shape negotiation outcomes more favourably. The US doesn’t appear to be flexing toward major tariff reductions anytime soon, and that’s already creating visible friction—particularly in the case of Japan, where discussions have slowed to little more than a pause. Tokyo isn’t rushing to meet conditions it views as inflexible, and it’s telling that no reciprocal trade measures have yet come forward.

Meanwhile, we’re seeing scepticism on Capitol Hill. Lawmakers aren’t united behind this long-game approach. Some believe what looks like domestic protectionism could simply be leverage—frontloaded tariffs that soften as talks progress. Others, however, worry that the countries involved may simply choose different trading partners, leaving Washington without much to show. That argument holds weight when we look at how hesitant several nations have been to make opening offers. In effect, these high openers might work in a strong-man negotiation tactic—or they might push counterparties further away.

Implications for Pricing Models

Viewed from our lens, the implications for pricing models in the derivatives space are direct. If we forecast these tariffs remaining in place through the next quarter, then hedging strategies tied to commodities, freight, and manufacturing should adjust upward to price in extra cost layers. That hinges on whether the rest of the supply chain absorbs tariff impact or passes the surcharge through. Because these talks are decidedly not wrapping up next week—or even next month—that leaves sharp room for rotation in how risk is spread over shorter contracts.

In this kind of stand-off, price volatility isn’t triggered by immediate spikes but rather by long, slow drags in policy. Derivatives that pick up on forward-looking market mood will need longer tail assumptions, especially for exposure tied to Asia-Pacific trade routes. We’d recommend a deliberate check of any instruments with more than medium exposure to East Asian manufactures—especially those that ride on narrow margins like consumer electronics and pharmaceuticals.

There’s also the question of retaliation. Should these nations decide to mirror US terms, pricing models on both the import and export side get re-indexed, especially for multi-jurisdiction trades. Time spreads and relative value pairs with exposure to US/Asia could move out of alignment if any reprisal action unfolds without clear signalling beforehand. And it’s fair to say that policymakers in Seoul and Canberra are paying attention to what’s happening in Tokyo—not necessarily to play along, but perhaps to gauge how assertive to be in their own responses.

From our desk, there’s no room now to assume lower levies in the short term. Forward guidance on costings and spreads should treat the 10% tariff rate as sticky, not provisional. Any downward reversion scenario would need to be grounded in actual treaty shifts rather than assumption. Because as it stands, the default bias lies not in easing but in maintaining pressure.

Create your live VT Markets account and start trading now.