President Trump’s July 31 announcement on modifying reciprocal tariff rates represents a slight course correction from previous retaliatory threats. The U.S. government’s trade policy is still treating friends and foes alike on paper, but allies such as the European Union (EU), Japan, and the United Kingdom have been given a clear priority and relevance. Most importantly, some of the announced framework agreements have incorporated language attempting to address how allies are abusing U.S. companies operating abroad through non-tariff attacks.

More broadly, America’s trade relationships have indeed been far out of balance, with a proliferation of foreign mercantilist policies being adopted, even by close partners such as the EU. These policies can harm U.S. companies and undermine American technological leadership. While there are early signs of progress in addressing this problem, the administration still has more work ahead.

Here are three takeaways on where things now stand.

1. Some Trade Partners Appear to Be Walking Back Discriminatory Practices Against U.S. Firms

The U.S. government has given U.S. companies (and thus U.S. workers and citizens alike) some “wins” by addressing non-tariff barriers in trade negotiations. The framework agreement with the UK directly commits to “reduce or eliminate numerous non-tariff barriers (NTBs) that unfairly discriminate against American products, hurt the United States’ manufacturing base, and threaten the national security of the United States.” Likewise, the framework agreement with the EU, in addition to addressing NTBs, states that both parties “intend to address unjustified digital trade barriers. In that respect, the EU confirms that it will not adopt or maintain network usage fees.” In addition, Canada reversed its digital service tax, a discriminatory policy against American tech companies that contravened fair tax practices.

Yet, discriminatory non-market practices against U.S. companies and technological leadership persist. ITIF has compiled a growing knowledge base of over 100 policies worldwide that target and threaten American technological leadership. U.S. policymakers should use this catalogue of challenges as a reference for ongoing trade negotiations with strategic allies and partners.

2. Strengthening American Manufacturing Is Still a Stated Goal, But in Practice It Has Been Sidelined in Favor of Other Policy Priorities

Despite several months of negotiations and tariff announcements, the U.S. government has not articulated a clear and coherent overall strategy. Instead, President Trump and some administration officials have provided a plethora of rationales to justify tariffs. Several of these justifications and actions are not directly related to trade, such as using tariffs as a revenue source to offset the budget deficit, sanctioning other countries’ court decisions (as was the case with Brazil), addressing the fentanyl epidemic, or opposing some countries’ stance on the Middle East conflict.

In seeking to rebalance America’s trade relationships, the administration’s strategic focus should be on preserving American technological leadership and promoting investments in advanced manufacturing in high-tech industries. Thus, the administration should not be so eager to impose tariffs on imports of minerals, raw materials, equipment, and intermediate goods that are essential for keeping American manufacturing globally competitive. For example, tariffs on U.S. semiconductor imports militate against the goal of boosting American manufacturing, as they will make U.S. semiconductor manufacturing economically uncompetitive, increase prices for every downstream product that relies on them, and cause overall economic losses for the U.S. economy and households.

3. America Is Engaged in a Techno-Economic Competition for Global Market Share With China; Its Trade Policy Should Reflect That

A framework of an agreement with China, the world’s top trade offender, is still pending. While at some point the tariffs on Chinese products of more than 100 percent would have created an effective trade embargo and led to a tit-for-tat retaliation scenario, tariffs are now at around 50 percent (considering a 10 percent general tariff, fentanyl tariffs, and Section 301 “trade practice” duties), depending on the product. Regardless of the specific tariff rate, trade relations with China won’t be as extensive as before.

The Trump administration appears to appreciate that the techno-economic competition won’t be won by the first to decouple from the other. The U.S. government, fortunately, is making a course-correction decision to strategically keep American technological leadership, for example, by reauthorizing the exports of H20 chips, which are a second-tier technology specifically designed to enter the Chinese market. Simultaneously, the U.S. government has continued to invest in critical minerals to reduce America’s dependence on Chinese imports.

The Path Forward

The U.S.-China techno-economic competition is not simply a tug-of-war; it’s a contest to decide which countries products, technologies, and broader economic frameworks win in global marketplaces. America’s interests are better served when America enjoys stronger alliances and trade partnerships. The Trump administration is right to negotiate fiercely to prevail upon foreign nations to remove non-tariff barriers and desist on non-tariff attacks that harm U.S. companies in digital industries and other sectors. But permanently instantiating tariffs at 15 percent (or other levels) is not going to do favors for the U.S., allied, or global economies going forward.

Ultimately, America’s goal should be achieving significant non-tariff barrier reductions while moving to zero-for-zero tariff frameworks with truly allied nations. The United States may be the world’s largest economy, but it still needs allies if it’s going to accomplish its long-term geostrategic objectives, especially vis-à-vis the ever-intensifying competition with China. Room remains for the Trump administration to better balance the interests of restoring American manufacturing, removing other nations’ unfair trade practices, and orientating like-mined nations to the long-term China threat in the execution of the Trump administration’s trade and tariff policies.