On Tuesday, the United States imposed a new 10% tariff on global imports. This comes just days after President Donald Trump’s “liberation-day” tariffs were struck down by the Supreme Court.
US Customs and Border Protection sent out a notice that said an extra 10% of ad value duty will be applied to all imports for 150 days starting Tuesday, except in specific cases.
Rates are lower than expected by the markets
Trump announced on Saturday an increase in tariffs to 15%. However, no official directive to this effect has been released.
The higher tax could be introduced at any moment, according to officials.
Use of Section 122 to bypass Congress
The new tariffs are being applied by the administration under Section 122 of Trade Act of 1975, which gives the President the power to impose temporary restrictions on imports without the approval of Congress in response to pressures on the balance of payments.
This 10% tax is added to the existing tariffs for most-favoured nation.
Legal experts point out that Section 122 restricts such measures to only 150 days unless Congress votes them to be extended, which raises questions as to what happens after the time limit expires.
Trump’s tone was defiant after the Supreme Court decision, warning countries that were trying to take advantage of the ruling would be treated harsher.
He said in a post on social media that any country who “plays” games would face higher tariffs.
The economic experts warn about the rising level of uncertainty
Analysts warned that the sudden changes in tariff policies could plunge businesses and their trading partners into uncertainty.
Carsten Brzeski is an economist with ING. He said that the recent pace of change and its unpredictable nature adds chaos to the situation.
He told the BBC that the current level of uncertainty is similar to that last year. There’s a greater risk of retaliation from US trading partners.
He added that “the risk of an actual fully-fledged trade war escalate is higher this year than it was last.”
Early signs of market unease were seen on the financial markets.
Investors weighed up the possible impact of renewed uncertainty surrounding US tariff policies on global trade as they weakened the Japanese yen.
However, stock futures in US were almost flat.
US Trading Partners Push for Clarity
US trading partners sought clarity quickly.
Ryosei Akazawa, Japan’s Trade Minister, has urged Washington not to impose any tougher terms than the ones agreed in last year’s bilateral agreement.
Akazawa, according to Bloomberg, stressed during an interview with US Commerce Sec. Howard Lutnick that the new measures should not worsen Japan’s situation.
In the agreement of last year, Japan agreed to establish a $550 Billion investment vehicle as a trade-off for US tariff reductions. This included a drop in US duties from 27,5% to 15% on Japanese automobile imports.
Bloomberg reported that officials from both sides agreed to continue to work closely together to ensure the smooth execution of projects related to this mechanism.
Taiwan’s Government also stated that it sought assurances from the United States government regarding its commitment to maintaining favorable terms previously agreed.
Europe freezes the ratification of trade agreements
In Europe the reaction was cautious.
The European Union announced that it has frozen its ratification of the trade agreement it signed with the Trump Administration while seeking clarity about the US tariff policy.
Bernd Lange is a German senior EU legislator who wrote “Pure Tariff Chaos from the US Administration”.
No one has any answers to the questions that remain. Only open-ended uncertainty and unanswered questions.
This uncertainty is a result of the fact that European exporters began this year with a slight advantage.
According to a survey conducted by the German Ifo Economic Institute, export expectations rose in February among electronic and optical manufacturers.
Timo Wollmershaeuser is the Institute’s Chief Economist. He said, “Exports are starting off the year in a positive way.”
He warned that planning was undermined by the constant shifting of US tariff policies.
He said that if customs regulations change constantly, planning becomes difficult.
Legal questions linger over new tariffs
Some economists have warned that Section 122 tariffs themselves could be subject to court review.
Atakan Bakiskan is a US economist with Berenberg. He said that the US current trade deficit may not reach the threshold for a “large” and “serious” imbalance of payments problem, which would be required by law to justify these measures.
Bakiskan, however, said that it would not be surprising to see the government abandon its anti-protectionist agenda after the 150 day period has expired.
The official said that they would likely explore other legal avenues to replace or reimpose the tariffs.
He pointed out that there were several other options, including trade laws.
The national security option is back on the table
These options are beginning to take shape.
According to reports, the administration is currently preparing several national security investigations in accordance with Section 232 of Trade Expansion Act of 1964. This could lead to new tariffs that are justified by security.
Bloomberg reported that the probes will examine the importation of cast iron, iron fittings, electrical equipment for grids, telecommunications gear and plastics.
Trump used his emergency powers to implement tariffs against metals and cars during his second tenure.
Officials have stated that while Section 232 Tariffs are time limited, Trump may use this period of investigation to create additional import taxes which, taken together, could restore a large part of the tariff system that was struck down in the courts.
The information in this post, New 10% US Tariffs Come into Effect: All You Need to Know may change as new developments unfold.
