Introduction: Trump's new tariffs kick in at 10%
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
President Donald Trump’s new tariffs have come into effect today at a rate of 10%, following the US Supreme Court’s decision last Friday to block many of his previous import taxes.
The president signed an executive order last Friday authorising the 10% tariffs just hours after the Supreme Court ruling. He subsequently threatened to increase the rate to 15%, but had not officially done so by Tuesday at 12:01 am Washington time, when the 10% levy became effective.
However, Bloomberg reports that White House officials are preparing a formal order to raise the tariff rate to 15%.
This development follows President Trump’s declaration earlier this week that he can use tariffs in a .
The new tariffs, imposed under Section 122 of the 1974 Trade Act, have generated uncertainty among several US trading partners, including the UK—which negotiated a 10% rate with the US last year—and the EU.
On Monday, the EU paused the ratification process of last July for the second time within a month, after freezing and unfreezing the deal in response to Trump’s Greenland threats. The agreement involved 15% blanket tariffs on EU imports, inclusive of previous levies.
Meanwhile, in the UK, a spokesperson for Keir Starmer, when asked whether retaliatory tariffs were an option, said:
"No one wants to see a trade war. No one wants to see a situation that’s escalated. But as I say, nothing is off the table at this stage."
The agenda
11am GMT: CBI Distributive trades for February
2pm GMT: Case-Shiller US home price index
2.15pm GMT: Bank of England governor to discuss MPC decision to hold interest rates at 3.75% with the Treasury Committee
'Fresh uncertainty' for UK businesses exporting goods to the US
William Bain, head of trade policy at the British Chambers of Commerce, warns that although the 10% tariff is less severe than the threatened 15% rate, the shifting policies complicate business planning.
"It is far from clear what will happen next, and whether a higher tariff rate is still on the way. Despite the immediate reprieve, there is fresh uncertainty for UK firms exporting goods to the US.
This makes it very difficult for firms to understand the prices and margins they will be able to secure for their goods, currently under production, for export in several months’ time. Inevitably this will have an impact on their sales and hit the economy.
The BCC has provided government with a six-point plan to guard against the worst economic outcomes from the new tariffs and potential further hikes.
This includes continued negotiation with the US government, engagement with the US Congress, an uplift in UK Export Finance capacity and reviewing the UK’s Global Tariffs.
The risk of further tariff pain to come is still real and the government must do everything it can to prepare for the worst."
Not all parties welcomed the Supreme Court’s ruling that deemed Trump’s “reciprocal” tariffs illegal last week.
FedEx has filed a lawsuit against the US government, seeking reimbursement of their share of an in levies after the highest court found that Trump had exceeded his authority in imposing the tariffs.
The FedEx lawsuit names as defendants US Customs and Border Protection (CBP), which collects tariffs; the agency’s commissioner Rodney Scott; and the United States of America. The suit was filed in the US Court of International Trade. The company did not specify an amount in its complaint but stated it was seeking a “full refund” for duties paid to the US.
FedEx said in a statement:
"While the supreme court did not address the issue of refunds, FedEx has taken necessary action to protect the company’s rights as an importer of record to seek duty refunds from US Customs and Border Protection."
You can read the full story by my colleague Gabrielle Canon here:
New 10% tariff set to last at least 150 days
Trump’s new global 10% tariff is being applied under Section 122 of the 1974 Trade Act, which permits the president to impose the charge for 150 days without congressional approval.
The president adopted this approach after the Supreme Court ruled that he had violated an emergency-powers law in enacting his “reciprocal” tariffs on imported goods from countries worldwide.
The new tariffs include some exemptions, such as goods covered under the North American trade pact between the US, Canada, and Mexico. The order also exempts certain agricultural products.
The full impact remains uncertain. The UK has not ruled out retaliation, with a spokesperson for Keir Starmer stating yesterday that “nothing is off the table,” while Bernd Lange, chair of the EU Parliament’s trade committee, commented:
"We want to have clarity from the US that they are respecting the deal because that’s a crucial element."
President Trump warned that any country attempting to “play games” with the Supreme Court decision would face “a much higher Tariff, and worse, than that which they just recently agreed to.” However, Jim Reid of Deutsche Bank notes it is unclear how the president might respond to developments in the UK and EU.
"At the moment the rate is 10% with White House officials stating that they are working on a formal order to raise to 15%. Perhaps the stacking concern is delaying things for now. Late yesterday, we also saw the WSJ and Bloomberg report that the administration was preparing new Section 232 national security investigations into several industries including batteries, telecom equipment and industrial chemicals.
Remember that Trump’s delivering the State of the Union address tonight, so it’s possible we might get a better sense of the next steps on tariffs…net-net we still think the effective tariff rate will fall this year and that the world post-SCOTUS will see lower tariffs than the pre-SCOTUS world."
