Trade Agreements and Tariffs

Trade agreements are treaties that set the rules for how countries trade goods and services, invest, and increasingly move data. They usually aim to lower or remove tariffs, simplify customs procedures, and reduce “behind the border” obstacles such as duplicative regulations.

The United States has comprehensive free trade agreements in force with 20 countries, including partners like Canada, Mexico, Australia, and South Korea. These larger agreements often cover intellectual property, state‑owned enterprises, government purchasing, and dispute settlement, creating more predictable conditions for businesses.

A tariff is a tax a government charges on imported goods; it is usually paid by importers and often passed on to consumers through higher prices. When tariffs rise sharply—especially between large economies—they can disrupt supply chains and push inflation higher by making trade more expensive.

Recent history shows how powerful tariffs can be. In one major U.S.–China deal, Washington cut average tariffs on Chinese goods from 145% to 30%, and China cut its tariffs on U.S. goods from 125% to 10%—levels still high enough to strain trade and raise consumer anxiety about inflation. UNCTAD warns that such steep and volatile tariff shifts can dampen investment and global growth.

Current U.S. trade policy has moved toward narrower, “reciprocal” agreements that keep significant U.S. tariffs while pressing partners to open their markets. Recent frameworks with El Salvador, Argentina, Ecuador, and Guatemala aim to expand access for U.S. farm products, machinery, and medical goods, while addressing issues like labor rights and environmental protection.

In Asia, new frameworks with Vietnam, Malaysia, Cambodia, and Thailand ask these countries to remove or sharply cut tariffs on most U.S. goods, while the U.S. maintains baseline reciprocal tariff rates—often around 19–20%—with selective exemptions for listed products. These deals also seek commitments on export controls, supply‑chain security, and major commercial purchases such as aircraft and agricultural commodities.

Modern agreements reach far beyond classic tariff cuts. Latin American partners like Guatemala and Ecuador have pledged to combat forced labor, protect labor rights, fight illegal logging, and implement World Trade Organization rules on harmful fisheries subsidies. Such provisions tie market access to social and environmental standards.

Digital trade is another frontier. Countries such as Guatemala and Cambodia have agreed to avoid discriminatory digital services taxes, allow cross‑border data flows, and support a moratorium on customs duties on electronic transmissions. These rules matter for streaming, cloud services, and e‑commerce platforms that rely on frictionless data movement.

When tariffs fall under a trade agreement, imported food, clothing, electronics, or cars can become cheaper or more varied, and firms gain more stable access to foreign inputs. When tariffs rise or trade tensions escalate, the opposite often happens: fewer choices, higher prices, and more uncertainty for workers in trade‑exposed sectors.

UNCTAD’s latest Trade and Development Report stresses that trade rules now sit at the intersection of finance, supply‑chain resilience, and development, meaning their impact goes well beyond headline “trade wars.” For mobile‑first consumers and workers, understanding trade agreements and tariffs is increasingly key to decoding changes in prices, product availability, and job prospects in a turbulent global economy.