Trump Reconstructs His Tariffs
As expected, President Trump’s sweeping new tariffs arrived last week to replace his struck-down IEEPA ones.
On Thursday, the Trump Administration announced the U.S. would impose tariffs ranging from 10 to 12.5% on over 60 trading partners, effective Friday, July 24th.
New tariffs were expected to be implemented Friday, as once the clock struck midnight, the 10% Section 122 tariffs President Trump put in place immediately after the Supreme Court ruled against his IEEPA-authorized ones would expire like Cinderella’s pumpkin carriage. Section 301 investigations had new glass slipper tariffs ready to slide back on imports’ feet.
Terrible fairy tale analogies aside, All-Ways shared a good summary of the new tariffs in a newsflash email:
Under the new action, a 10% tariff now applies to most imports from Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, the United Kingdom and Trinidad & Tobago. Goods already loaded before July 24 remain exempt, provided they arrive in the United States before July 28.
Imports from the European Union and Taiwan will continue to pay their existing Most Favored Nation (MFN) tariff rate, with an additional Section 301 tariff applied only if needed to bring the total duty to 10%.
The same methodology applies to Japan, South Korea and Switzerland, with additional Section 301 duties applied only as needed to bring the total effective tariff rate to 12.5%.
All other countries included in the investigation are subject to a flat 12.5% tariff,including Algeria, Angola, Australia, The Bahamas, Bahrain, Brazil, Chile, China, Colombia, Costa Rica, the Dominican Republic, Egypt, Hong Kong (China), Iraq, Israel, Kazakhstan, Kuwait, Libya, Morocco, New Zealand, Nicaragua, Nigeria, Norway, Oman, Peru, the Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Thailand, Türkiye, the United Arab Emirates, Uruguay and Venezuela.
The administration also preserved several important exemptions. USMCA-compliant goods from Canada and Mexico remain duty-free, while oil, natural gas, fertilizer and a broad list of product-specific exclusions continue to be exempt.
Additional country-specific carveouts were also granted for Argentina, Bangladesh, Cambodia, Ecuador, El Salvador, the European Union, Guatemala, Indonesia, Jordan, Malaysia, Switzerland, Taiwan and the United Kingdom.
Let the Legal Battles Begin
Section 301 tariffs, which include investigations to back them, have proven more legally durable than President Trump’s IEEPA tariffs turned out to be. That doesn’t mean they won’t face legal challengers.
It took only hours for the new tariffs to see the first lawsuit filed against them.
Aldgra Fredly reported in the Epoch Times:
Two small businesses have filed a lawsuit to block new tariffs imposed by the Trump administration on dozens of trading partners.
…
The Liberty Justice Center, which previously secured a Supreme Court ruling against the president’s tariffs imposed under the International Emergency Economic Powers Act (IEEPA), filed the lawsuit on behalf of Burlap and Barrel, a New York-based spice retailer, and Collective Horology, a California-based watch retailer.
The lawsuit alleges that the U.S. Trade Representative (USTR) “acted arbitrarily and capriciously” by imposing nearly identical tariffs on 60 trading partners without offering a documented, well-reasoned explanation for its decisions.
The plaintiffs also argued that the tariffs exceeded authority granted by Congress under Section 301 because the USTR “did not validly determine that, with respect to each economy, a specific foreign act, policy, or practice is unreasonable or discriminatory and burdens or restricts U.S. commerce.”
Clearly, legal challenges were being prepped in anticipation of the new tariff announcement. At Universal Cargo, we’ll, of course, be watching to see if these tariffs withstand these and other legal challenges likely to come.
Just because Section 301 tariffs have previously withstood legal challenges doesn’t necessarily mean these ones will. I didn’t expect the Supreme Court to rule against the Trump Administration’s IEEPA tariffs as it did, and the argument that these tariffs are not really about forced labor may ultimately hold up in court.
Early End to Peak Season?
Many shippers frontloaded goods to get ahead of these tariffs, creating an early peak season. Now that the new tariffs are here, some think international shipping demand will diminish and the peak season will putter out early.
Traditionally, we’re going into what would be the strongest period for U.S. businesses importing goods. This week and last week, freight rates are starting to decrease, indicating that demand indeed is slipping.
If demand drops hard, freight rates should fall significantly, though ocean freight carriers would utilize blank (cancelled) sailings to limit capacity and try to keep freight rates up. Particularly since the pandemic, that’s been an effective Viagra for freight rates. However, there’s a great deal of capacity entering the ocean freight market right now, so it will be difficult to keep freight rates up with falling demand.
That could mean a good opportunity for small and medium importers is on the way ahead of the holiday shopping season when freight rates are normally at their height.
