The Uncertainties Facing Businesses and Consumers After Trump’s Tariff Changes
US President Donald Trump’s recent tariff changes have created significant uncertainties for both businesses and consumers, according to industry experts and economists. These changes came in response to a Supreme Court ruling indicating that Trump could not utilize a 1977 law—the International Emergency Economic Powers Act—to impose taxes on imports from nearly all countries. Subsequently, Trump signed a proclamation on Saturday using Section 122 of the Trade Act of 1974, establishing a temporary 10% tariff on goods from all nations, which he later announced would increase to 15%.
These developments raise critical questions for countries, including the UK and Australia, that had previously negotiated 10% tariff arrangements with the US. Uncertainty looms not just over these agreements but also regarding potential new tariffs on previously exempted goods.
Clarity Needed on Existing Tariff Deals
– Following Trump’s initial “Liberation Day” tariffs last year, many countries negotiated lower export levies, including a 10% deal from the UK.
– However, officials indicated that those countries would now be subject to the new Section 122 global tariff instead of their negotiated rates.
– The White House asserts it will “continue to honour its legally binding agreements on reciprocal trade,” leaving it unclear how this would affect existing deals.
– Paul Ashworth, chief North America economist for Capital Economics, noted that Section 122 mandates tariffs be applied in a non-discriminatory manner, potentially negating previous agreements.
– This new tariff allows Trump to impose rates of up to 15% for 150 days, after which Congress must intervene.
Businesses Fear Higher Levies
– The British Chambers of Commerce (BCC) estimates that the rise to a 15% tariff may elevate tariff costs on UK goods exported to the US by £2-3 billion ($2.7-4 billion).
– Approximately 40,000 UK firms export to the US, and this increase in levies could deter trading activity.
– Industries particularly at risk include food and drink, textiles, and electrical goods, which now face sudden spikes in export costs.
– Tim Doggett, CEO of the Chemical Business Association, remarked that such added costs predominantly affect end consumers, pushing prices higher and contributing to inflation.
Tariff Refunds: A Big Question for Firms
– The Supreme Court’s ruling deemed Trump’s reciprocal tariffs unlawful, allowing companies to claim back around $130 billion (£96 billion) in levies paid since April last year.
– However, the decision did not directly address the issue of refunds, leading to potential lengthy legal battles for restitution.
– Hundreds of firms are reportedly pursuing lawsuits to secure refunds, navigating a complicated framework of contractual obligations.
Concerns Over Further Tariffs
– The White House indicated that certain essential goods would be exempt from new duties, including critical minerals and energy resources.
– However, businesses remain apprehensive that Trump may apply additional tariffs on other categories using various provisions of the Trade Act.
– Economist Bernard Yaros pointed out existing Section 232 investigations, which could lead to more industry-specific tariffs in sectors like pharmaceuticals and machinery.
Impact on Consumers
– Tariffs on imports often result in increased costs, shared by exporting businesses and US consumers.
– The Budget Lab at Yale estimates that US consumers may bear between 31% and 63% of these tariff costs, reflecting the direct impact of increased prices on imported goods.
– Recent findings from the New York Federal Reserve corroborate this, revealing that nearly 90% of additional tariffs are absorbed by US consumers and businesses alike.
– As uncertainties grow, exporters may increasingly redirect their products to other markets, reducing the diversity of options available to US consumers.
In conclusion, the uncertainties stemming from Trump’s recent tariff changes pose significant challenges for both businesses and consumers. The evolving landscape requires careful navigation to mitigate financial impacts and maintain trade relationships. The ramifications of these tariff alterations will likely continue to unfold, underscoring the necessity for clear policies and predictable economic environments. As companies assess their strategies amid these shifts, the implications for consumer choice and pricing remain substantial.