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The Trump administration has implemented a new global tariff, starting at 10%, following a recent Supreme Court ruling that deemed many of its previous tariffs illegal. This move, which has sparked concerns and uncertainty among UK businesses, comes after the president had threatened to impose a higher rate of 15%. The tariffs will remain in effect for 150 days unless exemptions are granted, raising questions about the long-term implications for international trade and economic stability.
New Tariff Structure and Immediate Reactions
The newly established 10% tariff is set to apply to imports from all countries, adding to the existing most-favoured-nation duties. The announcement follows a significant legal defeat for Trump, who had previously relied on a controversial interpretation of a 1977 law aimed at addressing national emergencies to justify his tariff policies. The Supreme Court’s ruling, issued last week, struck down many of these tariffs, leading to an immediate backlash from the administration.
In a reaction to the court’s decision, Trump announced the implementation of the 10% tariff through a post on his social media platform, further indicating a willingness to escalate tensions with trading partners. While this initial rate has been perceived as a temporary relief for British businesses, the uncertainty surrounding the potential rise to 15% looms large.
William Bain, head of trade policy at the British Chambers of Commerce, commented on the impact of this unpredictability, stating, “While a new 10% tariff rate, instead of the threatened 15%, will provide some relief, it shows how difficult it is for businesses to plan ahead.” The lack of clarity about future tariff rates complicates pricing strategies for UK exporters, who may find themselves at a disadvantage in an already volatile market.
Legal Challenges and Economic Implications
In a separate but related development, FedEx has taken legal action against the US government, seeking a refund for tariffs imposed under the previous regime. This lawsuit marks a significant move within the corporate sector, as it is the first major attempt to reclaim portions of the estimated $175 billion in levies. The FedEx complaint names various government entities, including the US Customs and Border Protection, and underscores the growing frustration among businesses regarding the administration’s tariff policies.
Experts suggest that the new tariffs under section 122 of the Trade Act of 1974 could face further legal challenges. Atakan Bakiskan, an economist at Berenberg Bank, noted that the current trade deficit may not meet the necessary criteria for imposing such tariffs, which raises questions about their long-term legality and sustainability.
As the 150-day period progresses, it is anticipated that the Trump administration will explore additional avenues to fortify its protectionist agenda. This could lead to a series of new tariffs or adjustments to existing ones, further complicating the landscape for international trade.
European Response and Trade Agreements
The announcement of the new tariffs prompted the European Parliament to halt its ratification process of the US-EU trade agreement established last year. In response, European Trade Commissioner Maroš Šefčovič assured that the Trump administration has reiterated its commitment to honour the existing deal with the EU. He highlighted ongoing communications with US trade representatives, emphasizing a desire to maintain stable trading relations despite the recent turmoil.
This development suggests a complex balancing act for the Trump administration, as it navigates the dual objectives of domestic protectionism and international trade commitments.
Why it Matters
The introduction of the new global tariffs by the Trump administration not only highlights the ongoing volatility in international trade relations but also underscores the potential economic repercussions for businesses on both sides of the Atlantic. As firms grapple with uncertainty and fluctuating tariff rates, the broader implications for the global economy could be profound. The unfolding legal battles and potential for further regulatory changes may reshape the landscape of international trade, affecting supply chains, pricing strategies, and economic stability for years to come.