Portugal’s Cork Industry Celebrates Rare Tariff Exemption Under US Trade Policy

Economic

Summary:

Cork products, vital to winemaking and other industries, secured exemption from US tariffs on EU imports, safeguarding Portugal’s key export while reinforcing its global dominance in cork production....

Cork Carves Out a Tariff Exemption

Amid sweeping 15% US tariffs on European Union imports, cork emerged as one of the few natural products to win a reprieve. Classified as an “unavailable natural product” in the US-EU trade agreement effective September 1, cork joins a short list of exemptions that includes airplanes and generic pharmaceuticals. For Portugal, the world’s largest cork producer responsible for about half of global supply, the carve-out represents a major diplomatic and economic victory.

The exemption is the direct result of lobbying by Portuguese officials and industry advocates. Patrick Spencer, executive director of the US-based Natural Cork Council, worked alongside California vintners and the Wine Institute to persuade US trade officials of cork’s unique status. Their efforts highlight a causal relationship between organized industry advocacy and successful tariff negotiation outcomes.

Portugal’s Global Cork Leadership

Portugal exports cork to over 100 countries, with the US its second-largest market after France. In 2023, the US imported $241 million worth of cork from Portugal, more than 70% of which was wine stoppers and closures for spirits, olive oil, and honey. Beyond the wine industry, cork has specialized uses in aerospace, sports fields, and even airport runways due to its heat resistance and shock absorption.

The endurance of Portugal’s cork sector rests on centuries-old harvesting traditions. Companies like Corticeira Amorim, which manages 20 million cork trees across 700,000 hectares, still rely on highly skilled workers to manually strip bark from trees a process requiring precision to avoid fatal damage. Each tree takes 25 years to produce its first harvestable bark and regenerates every nine years thereafter. These biological and cultural factors explain why cork production remains concentrated in the Mediterranean and cannot easily be replicated in the US, despite a similar climate.

Sustainability and Consumer Trends

Cork’s exemption comes at a moment when the material is regaining favor among winemakers. Natural cork is renewable, biodegradable, and aligned with sustainability goals, giving it a competitive advantage over aluminum or plastic closures. In the US, cork closures in premium wines rose from 53% in 2010 to 64.5% in 2022.

Earlier concerns about “cork taint” caused by fungal contamination once drove wineries toward screw caps. Advances in processing have largely solved that issue, while innovations in screw cap technology allow controlled oxygen intake, mimicking cork’s properties. Yet, cork retains cultural weight in aging wines, with its presence in bottles seen as integral to tradition and authenticity. This blend of heritage and sustainability demonstrates a strong correlation between consumer sentiment and cork’s market resurgence.

Uncertain Future of US Tariffs

The permanence of cork’s tariff exemption is not guaranteed. A US appeals court recently ruled that President Trump lacked authority to impose his broad tariffs, though they remain in effect pending appeal to the Supreme Court. Commerce Secretary Howard Lutnick hinted that other natural products, such as mangoes or cocoa, could join cork in future carve-outs.

While cork is currently protected, the situation illustrates how deeply intertwined natural resource industries are with political negotiations. For Portugal, the exemption not only shields its cork exports but also sets a precedent for future trade diplomacy.

The cork exemption exemplifies how trade policy, diplomacy, and industry lobbying converge to shape global commerce. For Portugal, it safeguards a flagship export industry and demonstrates the strategic value of specialized, irreplaceable natural products. For US winemakers and consumers, it ensures continued access to a material central to wine culture and sustainability trends. Whether this exemption signals broader tariff flexibility or remains an isolated case will depend on future US trade negotiations and court rulings.

Source: AP

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Washington’s Strategic Leverage in Semiconductor Supply Chains

Despite being based in Taiwan and South Korea, global chip giants like TSMC, Samsung, and SK Hynix remain highly dependent on US technology. American firms dominate in chip design and essential equipment manufacturing Applied Materials, Lam Research, and KLA supply much of the machinery required for advanced production. The US Commerce Department’s decision to end Biden-era exemptions illustrates this power. Starting next year, the firms must apply for licenses to continue operating in China, though they will not be allowed to expand or upgrade facilities.

The causal relationship is direct: US restrictions on equipment access could cripple chip plants in China, as production requires continuous machinery upgrades and maintenance. Without timely approvals, disruptions could ripple through the memory chip market, raising global prices.

Korean Firms Most Vulnerable to Policy Shift

Samsung and SK Hynix are particularly exposed. Roughly 30% of Samsung’s NAND flash chips and 37% of SK Hynix’s NAND, along with 35% of its DRAM chips, are produced in China. Together, these facilities account for 15% of global NAND supply and 10% of DRAM, making them critical to worldwide electronics production.

Analysts warn that even with license approvals, the longer-term competitiveness of these Chinese fabs will erode. The likely outcome, as noted by CLSA’s Sanjeev Rana, is that the US wants these firms to redirect capacity to American soil, strengthening domestic supply chains at China’s expense.

Limited Impact on TSMC, but Strategic Uncertainty Remains

TSMC faces less risk since only about 3% of its production capacity comes from its Nanjing facility, focused on less advanced chips. While its global expansion into the US, Japan, and Germany continues, 80% of production will remain in Taiwan through 2030. Taiwan’s Ministry of Economic Affairs downplayed the impact, suggesting national competitiveness will remain intact.

Still, the correlation is noteworthy: while TSMC is less exposed to China directly, prolonged restrictions create uncertainty for cross-border operations and highlight Taiwan’s delicate position within the US-China technology rivalry.

China’s Domestic Chipmakers May Gain Breathing Space

Ironically, Washington’s move may strengthen Chinese firms such as ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies (YMTC). As foreign competitors struggle to upgrade their Chinese fabs, domestic players could seize market share in NAND and DRAM production. This outcome reflects a correlation: although restrictions aim to weaken China’s tech industry, they may accelerate the rise of local firms in specific segments where foreign competition stagnates.

The export control tightening also echoes recent precedent. Nvidia and AMD agreed to pay the US government 15% of their China revenues in exchange for export licenses, a deal analysts believe could foreshadow similar arrangements for Samsung and SK Hynix. Troy Stangarone of Carnegie Mellon Institute for Strategy and Technology suggested that Washington may be moving toward revenue-sharing conditions as a prerequisite for continued access to Chinese markets.

This signals a causal strategy: the US is not only restricting technology flows but also extracting direct economic rents from firms caught between its regulations and China’s vast market demand.

Beijing’s Response and the Geopolitical Outlook

China’s Ministry of Commerce condemned the decision, urging the US to “correct its wrongdoing” and pledging countermeasures to protect Chinese enterprises. While details remain vague, Beijing’s opposition underscores the geopolitical stakes: Washington’s policy is both a tool of economic statecraft and a catalyst for Beijing’s self-sufficiency drive.

The US export control shift exemplifies how Washington wields its dominance in chip design and equipment to pressure foreign companies operating in China. Korean firms face the greatest vulnerability due to their reliance on Chinese fabs, while TSMC appears insulated but not immune to broader uncertainty. Over time, this could accelerate the migration of high-tech manufacturing capacity out of China, while paradoxically providing opportunities for Chinese challengers to expand in a protected domestic space.

The semiconductor conflict has therefore become not only a contest between the US and China but also a restructuring of global supply chains, where foreign champions must constantly navigate Washington’s demands, Beijing’s push for independence, and the realities of market economics.

Source: CNN

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Energy Purchases Anchor Bilateral Agreement

Japan has reaffirmed its commitment to import $7 billion worth of US energy annually, a key element in the trade deal unveiled Friday. The joint statement highlights Tokyo’s interest in securing liquefied natural gas (LNG) from Alaska, signaling a diversification of its supply sources amid heightened global energy competition.

The causal link between geopolitical uncertainty and Japan’s energy policy is evident. By locking in US supplies, Japan seeks both energy security and political alignment, mitigating vulnerabilities from Middle Eastern disruptions and Russia’s curtailed energy flows. For Washington, the deal underscores its strategy of leveraging energy exports to reinforce trade and security partnerships.

Tariff Concessions Reinforce Economic Cooperation

In exchange, the US pledged to apply its lowest tariff rates to Japanese pharmaceuticals and semiconductors. These reductions are designed to ease Japanese access to critical US markets, particularly in sectors where Japan retains global competitiveness. The correlation between tariff relief and industrial cooperation is significant: while the energy deal secures Japan’s resource base, tariff concessions provide reciprocal benefits for its advanced manufacturing exports.

Japan’s exploration of Alaskan LNG supplies carries broader strategic implications. LNG exports from Alaska would not only diversify Japan’s energy sources but also strengthen the US-Japan alliance in the Indo-Pacific by embedding energy security into the partnership. This reflects a causal relationship between resource flows and strategic stability, reinforcing both nations’ shared interest in countering supply risks from rival powers.

The agreement highlights how energy trade and tariff policy are being deployed as dual pillars of the US-Japan alliance. For Japan, the deal ensures long-term energy diversification and favorable trade conditions for its industries. For the US, it strengthens political and economic ties with a critical Asian ally while expanding its energy export footprint. The move illustrates how economic agreements increasingly serve both commercial and geopolitical functions in an era of shifting global alliances.

Source: Reuters

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Warship Deal Marks a New Chapter in Security Cooperation

Australia’s decision to acquire 11 Japanese-built warships represents a turning point in bilateral defense ties. This is the first time Tokyo will export cutting-edge weapons systems while sharing classified defense technology, underscoring a level of trust previously reserved for treaty allies. The deal carries both military and economic implications, as Japanese firms plan to establish local operations to construct most of the vessels.

The causal link is clear: as US defense commitments become less predictable under President Donald Trump, Canberra and Tokyo are compelled to diversify their security guarantees. Strengthening bilateral arrangements helps both nations hedge against uncertainty while maintaining deterrence capabilities in the Indo-Pacific.

Policy Foundations for Deeper Military Integration

This growing alignment builds on the 2023 Reciprocal Access Agreement, which allows troop deployments to each other’s territories Japan’s first defense pact beyond its 1960 alliance with Washington. The agreement has since been mirrored with the UK and the Philippines, signaling Tokyo’s broader strategy of expanding defense partnerships.

More recently, Japan and Australia announced a new pact to evacuate each other’s citizens during third-country conflicts. Both sides also confirmed commitments to strengthen deterrence jointly and trilaterally with the US. These arrangements highlight a correlation: even as trust in Washington weakens, the US remains a core player in the triangular framework, albeit one now balanced by stronger intra-ally ties.

Shifting Balance of Power in the Indo-Pacific

China’s expanding naval and missile capabilities continue to drive regional anxiety. President Xi Jinping’s military parade showcased advanced hardware, while Chinese live-fire drills off Australia’s coast earlier this year rattled Canberra. The threat perceptions of Tokyo and Canberra converge around Beijing’s assertiveness, though analysts note their geographical circumstances differ.

Sam Roggeveen of the Lowy Institute points out that the threats China poses to Japan are more immediate than those to Australia, given proximity. This indicates a limitation: while strategic alignment is strong, the intensity of perceived threats varies, creating potential divergence in the depth of cooperation.

US Pressure Forces Allies to Shoulder More

President Trump has demanded higher defense contributions from Japan and South Korea, while raising doubts about the Aukus pact that underpins Australia’s nuclear submarine ambitions. Canberra, in response, plans to raise defense spending from 1.9% of GDP today to 2.4% by 2034, while Japan targets 2% by 2027 from the current 1.4%. These policy adjustments are causally linked to US pressure, as both governments prepare for a security environment where reliance on Washington comes at higher financial and political costs.

Still, the US remains central. A logistics pact signed in July between the three navies US, Japan, and Australia suggests that the traditional hub-and-spoke alliance model could evolve into a more balanced triangular structure.

Economic Dimension Reinforces Strategic Alignment

Beyond defense, Japan and Australia maintain deep economic interdependence. Japan remains one of the largest investors in Australia, with ¥2.5 trillion ($17 billion) in flows last year and nearly the same already in 2025. Bilateral trade dates back to a 1957 commercial treaty and has expanded through the 2015 free-trade deal and shared membership in regional pacts. Japan was instrumental in developing Australia’s LNG and iron ore industries and remains a critical customer for rare earths and energy.

These economic ties reinforce the strategic partnership. As Jan Adams of Australia’s Department of Foreign Affairs and Trade stated, the commitments in both trade and near-alliance defense arrangements are “ironclad.” The correlation here is important: economic trust underpins strategic trust, making both pillars mutually reinforcing.

Toward a Dual-Layered Alliance System

The tightening of Australia-Japan ties represents both a reaction to US unpredictability and an adaptation to China’s rise. While the US still provides unmatched nuclear and military power, Canberra and Tokyo are moving toward a dual-layered alliance system anchored in Washington but strengthened by direct bilateral commitments.

If US policy continues to demand greater self-reliance from allies, the Japan-Australia partnership could evolve into a more autonomous security framework. For now, however, the partnership reflects a pragmatic blend: reliance on American capabilities, combined with growing bilateral trust and economic integration, to manage a volatile Indo-Pacific landscape.

Source: Bloomberg

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Slowing Momentum After Temporary Boost

China’s export sector, long a cornerstone of its growth model, is showing signs of slowing momentum. According to a Reuters poll of 23 economists, outbound shipments in August are expected to expand by 5% year-on-year, compared with a stronger 7.2% growth in July. The weaker figure highlights how the temporary relief provided by the August 11 tariff truce with the US is already fading, underscoring the fragility of the arrangement.

The deceleration is partly tied to a high base effect, as China’s exports surged in August 2024, making this year’s comparison less favorable. This creates a statistical drag rather than a direct causal shock, but combined with structural headwinds, the result is a more modest expansion.

Impact of US Trade Policy and Tariff Pressures

The US remains China’s most important export market, once absorbing more than $400 billion annually in Chinese goods. However, President Donald Trump’s erratic trade policy featuring tit-for-tat tariff escalations continues to disrupt China’s export flows. Levies currently stand at 30% on Chinese imports into the US, while Beijing imposes 10% on US goods. Trump has also threatened tariffs as high as 40% on goods deemed transshipped through third countries to evade earlier restrictions.

This policy mix has caused a sharp drop in container traffic from China to the US. Ship departures fell 24.9% year-on-year in the first half of September, accelerating from a 12.4% decline just a week earlier, according to Citi data. The causal relationship here is clear: higher US tariffs and enforcement threats directly suppress China’s exports to its largest consumer base, forcing producers to scramble for alternative buyers.

Shifting Export Markets Provide Limited Relief

Chinese manufacturers are increasingly pivoting to Asia, Africa, and Latin America to offset US losses. However, these markets cannot replicate US consumption power. Analysts note that attempts to replace US demand have created intense competition among exporters, with one factory owner describing the process as a “mad rat race.”

The shift illustrates a correlation rather than a full substitute: while diversification cushions some losses, it cannot causally restore the scale of demand lost to the US. Consequently, the export slowdown persists despite geographic reorientation.

Domestic Economy Weighed Down by Structural Weakness

On the import side, growth is forecast to slow to 3% in August, down from 4.1% in July. The drag reflects deeper domestic structural issues: a prolonged property sector downturn, rising job insecurity, and diminishing returns from earlier consumer stimulus programs. Weak household demand limits the ability of imports to grow, and by extension, reduces the pressure on exporters to import intermediate goods.

China’s trade surplus is projected to rise modestly to $99.2 billion in August, up from $98.24 billion in July, but still well below June’s $114.7 billion. This signals that while exports remain strong in absolute terms, their contribution to the surplus is softening relative to earlier peaks.

Policy Options and Constraints

Analysts are watching closely to see if Beijing will introduce additional fiscal measures in the fourth quarter to stabilize growth. However, signs suggest policymakers are reluctant to deploy aggressive support. For instance, the flagship “cash-for-clunkers” program has run out of funds in several provinces, yet the central government has not rushed to replenish them. This restraint reflects a balancing act between short-term growth needs and longer-term concerns over fiscal discipline.

China’s export slowdown highlights both external and internal challenges. US tariffs exert a direct causal drag on shipments, while weak domestic demand and structural imbalances create a reinforcing effect. Diversification into emerging markets offers partial relief but cannot replace the consumption scale of the US. Unless trade tensions ease or domestic stimulus ramps up, China’s export-led growth model faces sustained pressure, leaving policymakers with limited room to maneuver as they attempt to stabilize the economy in the months ahead.

Source: Reuters

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Tariff Threats Target Semiconductor Imports

Speaking at a White House dinner with more than two dozen top tech leaders, President Donald Trump reaffirmed that semiconductor imports face “fairly substantial” tariffs unless manufacturers relocate production to the US. The remarks highlight a continuation of Trump’s protectionist stance, now focused squarely on a sector that is central to both economic security and the global technology race.

While Trump offered little clarity on the scale or timeline, his rhetoric follows a previous statement last month promising a 100% tariff on imported chips, with exemptions for firms willing to invest heavily in domestic operations. This creates a direct causal link between corporate investment choices and exposure to trade penalties. Companies that align with US industrial policy by building or expanding local facilities are rewarded, while those dependent on overseas production risk costly tariffs.

Apple Positioned to Benefit from Domestic Investment Pledge

Apple stands out as a beneficiary of Trump’s carve-outs. The company pledged an additional $100 billion toward domestic manufacturing earlier this year, on top of a $500 billion commitment announced in February. During Thursday’s dinner, Trump remarked that “Tim Cook would be in pretty good shape,” signaling that Apple’s proactive investment strategy has secured preferential treatment.

This dynamic illustrates a clear causal relationship: Apple’s capital commitments are directly influencing its insulation from tariffs. For other tech firms, the correlation is more uncertain. While major global semiconductor players such as TSMC and Samsung have already pledged billions to US-based fabrication plants, the extent of their exemptions will depend on how Trump defines “coming in” or “planning to come in.”

Tech Leaders Court Trump Amid AI Race

The dinner also underscored the political alignment between Trump and Silicon Valley leaders as artificial intelligence reshapes global competition. Executives including Meta’s Mark Zuckerberg, Oracle’s Safra Catz, Google co-founder Sergey Brin, and OpenAI’s Sam Altman praised Trump’s pro-business orientation and AI policies. This suggests a correlational trend: as the AI arms race intensifies, tech firms seek proximity to Washington power to secure favorable regulatory and industrial conditions.

Notably absent was Tesla’s Elon Musk, who had clashed publicly with Trump earlier in the year. Musk later clarified that he was invited but unable to attend, choosing instead to send a representative. His partial distance highlights the complex mix of rivalry and cooperation shaping relationships between leading tech entrepreneurs and the administration.

Onshoring Semiconductors as Strategic Priority

The administration’s tariff strategy is part of a longer-term effort to reconfigure the semiconductor supply chain. Since 2020, companies such as TSMC and Samsung Electronics have committed hundreds of billions of dollars to build fabrication plants in the US. These moves reflect both government incentives and geopolitical risks in relying on East Asian supply hubs, particularly Taiwan and South Korea.

Trump’s comments effectively reaffirm the causal logic that has been guiding policy since the early 2020s: strengthening US chip production reduces exposure to geopolitical disruption and secures national competitiveness in AI and advanced technologies. However, the lack of detailed tariff structures leaves uncertainty about how uniformly the policy will be applied and whether exemptions will tilt the competitive balance within the industry.

Policy Clarity Still Lacking but Pressure Rising

Trump’s remarks signal that semiconductor tariffs are imminent, with a design that punishes foreign-based production while rewarding domestic investment. Apple’s immunity demonstrates how capital commitments directly translate into political insulation, while global giants like TSMC and Samsung must navigate opaque exemption criteria.

The stakes are high: a poorly defined tariff regime could disrupt global supply chains and raise costs for US tech firms that remain partially dependent on imports. Conversely, a transparent policy could accelerate the buildout of US manufacturing capacity and reinforce America’s position in the AI-driven technology race. For now, investors and corporate leaders alike remain in a holding pattern, awaiting the specifics of how “fairly substantial” tariffs will be enforced.

Source: CNBC

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James Whitman

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Japan risks having to pay higher tariffs if it doesn’t fund US President Donald Trump’s investment recommendations, according to a document fleshing out a $550 billion funding initiative agreed by the two nations in July.

Trump will pick investment projects based on recommendations from an investment committee led by US Commerce Secretary Howard Lutnick, according to an Understanding of Memorandum of the investment mechanism signed by Lutnick and his Japanese counterpart Ryosei Akazawa in Washington on Thursday.

The investment committee will incorporate input from Japan via a separate panel, with investments to be made up to Jan. 19, 2029, the memorandum said, a time frame that coincides with Trump’s presidential term.

“The idea is to build supply chains within the United States,” Akazawa said in Washington on Thursday evening. “Therefore, it is only natural that the US side’s intentions, and more specifically, President Trump’s intentions, are strongly reflected.”

The memorandum provides more details of how Japan will be obligated to supply funds for Trump’s investment choices than has so far been indicated by Japanese officials. Akazawa said there was no change from July in the details agreed.

The investment fund forms part of a trade deal agreed with the US that limits universal duties on Japanese goods and sectoral tariffs on the auto sector to 15%. The Trump administration has included similar funding arrangements in other trade deals too, including the US agreement with South Korea.

While the US-Japan deal was struck on July 22, the auto tariffs had remained at 27.5% while existing duties were still being charged on top of the new tariffs imposed this year. Trump signed an executive order Thursday to lower the duties to 15% and stop the stacking up of tariffs, a move that delivers embattled Japanese Prime Minister Shigeru Ishiba a limited success as he tries to hold on to power in Tokyo amid calls for him to resign.

The memorandum states that the US does not intend to raise tariffs provided Japan faithfully implements it and doesn’t fail to provide funding. The US president would determine the tariff rate should that option be taken in the case of Japan choosing not to fund a project.

Japan will need to make funds denominated in dollars available within 45 days of an investment project being presented for review, the memorandum states. Separate Special Purpose Vehicles will be set up for each investment.

“Each Investment SPV will be managed and governed by the United States or its designees in the capacity of a general partner,” the memorandum stated.

Akazawa reiterated Thursday that Japan will contribute to the funding initiative partly using loan guarantees. A senior Japanese government official who briefed the press in Washington also said Akazawa’s previous explanation of how the investment fund would work remains the same.

“In short, we will provide investments, loans and loan guarantees for up to $550 billion. That remains the same,” he said.

Akazawa has largely played down the size of actual investments that Japan is likely to make via the new setup, which will involve the government-backed Japan Bank For International Cooperation and Nippon Export and Investment Insurance.

Of the total, investment will comprise 1% or 2% and the US and Japan will split the profits of that investment at a ratio of 90-10, he said in July following the deal’s announcement. The Japan side has cited JBIC and NEXI as the government-backed organizations that will be leading financing for the projects.