The trade war initiated by the United States shows signs of escalating again, with gold rising as a safe-haven asset.
According to media reports, U.S. Treasury Secretary Bessent issued a stern warning on Sunday, indicating that if countries do not &#34;negotiate in good faith,&#34; the U.S. will restore the highest tariff levels announced by Trump on April 2. This marks a more aggressive stance by the U.S. in trade negotiations.
On Monday, spot gold rose over 1% in early Asian trading, breaking through $3,230 per ounce.
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<h2>U.S. Trade Negotiation Stance Suddenly Becomes Tough</h2>
&#34;Some countries have a tax rate of 10%, while others are significantly higher,&#34; Bessent told the media. If &#34;you do not want to negotiate, then tariffs will rebound to the levels of April 2.&#34; Reports indicate that countries will receive letters from Bessent clearly stating the highest tariff rates they will face if they do not negotiate seriously.
This tough stance sharply contrasts with Trump's recent claim that countries are &#34;eager&#34; to negotiate with Washington. However, on May 16, Trump also stated that the U.S. might unilaterally set new tariff rates for many trade partners in the next two to three weeks. Trump claimed that the U.S. lacks the ability to reach agreements with all trade partners through negotiation.
Trump stated, &#34;While '150 countries' want to reach an agreement, it is impossible to meet with all of them. I believe we will offer fair tax rates; it is not feasible to meet and negotiate with so many countries.&#34;
On April 2, Trump announced a 10% basic tariff on nearly all imported goods, while imposing &#34;reciprocal tariffs&#34; on dozens of trade partners, which once triggered severe turmoil in global financial markets. Subsequently, Trump announced a 90-day delay in implementing high &#34;reciprocal tariffs,&#34; but the 10% basic tariff remains in effect.
Currently, apart from quickly reaching an agreement with the UK and the tariff suspension with China, negotiations with major allies such as the EU, Japan, and South Korea are at a standstill, particularly on the issue of auto tariffs.
CFR senior researcher Brad Setser stated on his social media account, &#34;There are increasing signs that trade negotiations with U.S. allies are not progressing well. This is not surprising—Trump's 'proposals' are not particularly attractive.&#34;
He explained that Trump's proposals require other countries to make concessions to rebalance trade, in exchange for the U.S. not raising the &#34;baseline tariff&#34; (10%) to &#34;reciprocal tariffs&#34; (20% for Europe, 24% for Japan), while maintaining tariffs under Section 232 (potentially 25%).
Setser criticized this proposal as essentially asking allies to make further concessions without retaliating against existing tariffs, merely to avoid higher tariffs in the future. This &#34;unequal exchange&#34; is not seen as a good deal by allies. Historical experience shows that significant trade concessions are usually predicated on the U.S. also making corresponding concessions, rather than unilaterally raising tariffs first
Setser stated that he understands the so-called &#34;TACO&#34; trade that the market is betting on (i.e., partial compromise + expectations of continued negotiations), but he personally believes that the differences between the parties are deep and the political factors are complex, so it may not be as smooth as the market expects before early July, and instead, more &#34;dramatic events&#34; may erupt.
<h2>Slow Progress in Japan-Korea Negotiations, Europe Takes a Tough Stance</h2>
For major trading partners such as Japan, South Korea, and the European Union, auto tariffs are the main obstacle. The United States has been reluctant to give up the high 25% tariff on imported cars, which has hit these allied countries particularly hard. Although the UK secured lower auto tariffs in a quickly reached agreement, it is limited to the first 100,000 cars imported each year, far below the number exported to the U.S. by these automotive manufacturing powerhouses.
For Japan, the 25% auto tariff is especially deadly. Japan's Minister for Economic Revitalization, Akizawa Ryozo, publicly stated that a Japanese automaker &#34;loses $1 million per hour due to tariffs.&#34; Toyota, Honda, and Nissan have lowered their profit expectations in their latest financial reports, clearly listing tariffs as a major negative factor.
South Korea is similarly affected, with South Korea's Minister of Trade, Industry and Energy, Ahn Duk-geun, recently meeting with U.S. Trade Representative Katherine Tai in Jeju Island, seeking tariff exemptions. The South Korean side pointed out that the auto parts industry creates about 330,000 jobs and urgently needs concessions from the U.S.
As one of the largest trading partners of the U.S., the EU currently bears a 25% tariff on cars and steel/aluminum, and a 10% basic tariff, which would reach 20% if &#34;reciprocal tariffs&#34; are restored.
According to reports from Global Information Broadcasting, Valdis Dombrovskis, Executive Vice-President of the European Commission and Trade Commissioner, reiterated that the EU will continue to seek negotiations to resolve trade differences while also preparing to take possible countermeasures.
The EU has prepared two countermeasure lists: the first targets U.S. steel and aluminum tariffs, involving €21 billion worth of goods; the second covers U.S. goods ranging from aircraft and automobiles to spirits and nuts, totaling €95 billion. At the same time, the EU plans to file a lawsuit with the World Trade Organization.
EU officials have also 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. &#34;In today's geopolitical context, we must ensure that we do not put all our eggs in one basket,&#34; said Commissioner for Trade Valdis Dombrovskis.
Sester pointed out that the &#34;room for negotiation&#34; between the U.S. and Europe is limited, which may lead to greater friction:
<blockquote>
Although the EU is willing to make some concessions, the premise is that the U.S. should also make substantial concessions (such as &#34;zero for zero&#34; on industrial tariffs), which does not align with Trump's consistent position. Europeans also pointed out that the current 10% tariff in the U.S., combined with the threat of multiple 25% tariffs under Section 232, has an actual impact that is approaching 20%. This makes the &#34;space&#34; for negotiation very narrow.
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According to the Global Times, citing the Nikkei Asia Review, Japan has adjusted its strategy after two rounds of unsuccessful negotiations, shifting from hoping for a complete cancellation of tariffs by the U.S. to accepting a reduction in tariffs. The U.S. and Japan plan to hold a third round of negotiations after the G7 finance ministers' meeting.
</blockquote>
Japan is preparing its negotiation cards, including increasing imports of U.S. agricultural products, expanding special measures for importing U.S. cars, and cooperating in the shipbuilding sector. However, a practical challenge is that Japan mainly exports cars and parts to the U.S., and increasing imports of U.S. agricultural products would anger domestic agricultural lobbying groups, making it difficult for the Kishida government to compromise ahead of the Senate elections in July.
Setser believes that due to significant differences on substantive issues among the negotiating parties, along with the influence of domestic political factors in Japan, the likelihood of the U.S. and Japan reaching an agreement in early July is extremely low.
Meanwhile, South Korea and the U.S. held three days of consultations from May 14 to 16 on Jeju Island, South Korea. According to Global Network reports, the South Korean side is striving for the U.S. to exempt the 25% &#34;reciprocal tariff&#34; that has been announced against South Korea and is seeking preferential tariff treatment in sectors such as automobiles and semiconductors. South Korea will hold elections on June 3, and the government has stated that it will not push for an agreement before the elections

The United States' attitude towards trade negotiations has suddenly become tough. Bessent warned that "if you don't want to negotiate, then tariffs will rebound to the levels of April 2." Analysis indicates that there are currently deep divisions between the U.S. and major allies such as the European Union, Japan, and South Korea, with complex political factors at play. Therefore, it is unlikely to be as smooth as the market expects before early July, and instead, more "dramatic events" may erupt

- The U.S. trade war is intensifying, with gold prices rising as a safe-haven asset.  
- Treasury Secretary Bessent warned that if countries do not negotiate sincerely, the U.S. will reinstate high tariffs announced by Trump on April 2.  
- Negotiations with major allies like the EU, Japan, and South Korea are stalled, particularly over auto tariffs, leading to potential retaliatory measures from the EU and a challenging political landscape for Japan and South Korea.

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The U.S. is in a hurry, gold rises by 1%! Bessent "threatens": If "countries do not negotiate in good faith," the highest tariffs will be imposed