Washington | Reuters — The United States began collecting a temporary new 10 per cent global import tariff on Tuesday but the Trump administration was working to increase it to 15 per cent, a White House official said, sowing confusion over President Donald Trump’s tariff policies in the wake of last week’s Supreme Court defeat.
Trump initially signed an order on Friday for a 10 per cent tariff to last 150 days to replace broad duties under an emergency law that were struck down by the Supreme Court, but on Saturday, he said he would increase the rate to 15 per cent.
WHY IT MATTERS: Canadian agricultural goods are largely exempt from new, 10 per cent tariffs under the CUSMA trade agreement. However, the tariffs and uncertainty in the marketplace may have other knock-on effects for the sector.
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But on Monday night before the midnight start of collections, the U.S. Customs and Border Protection agency notified shippers that the rate would be 10 per cent..
The White House official told Reuters that Trump has had “no change of heart” in his desire for a 15 per cent tariff under Section 122 of the Trade Act of 1974, but offered no details on the timing for that increase.
As of Monday, Trump had not signed a formal presidential order for the increase to 15 per cent and CBP can only act on published presidential executive orders and proclamations.
CBP’s notice referred to his Friday order, saying that aside from products covered by exemptions, imports would “be subject to an additional ad valorem rate of 10 per cent.”
Unclear why lower rate is imposed
The move added to confusion surrounding U.S. trade policy, with no explanation offered in the notice for why the lower rate had been used.
“Remember that Trump is delivering the State of the Union address tonight, so it’s possible we might get a better sense of the next steps on tariffs,” Deutsche Bank said in a note.
“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,” its analysts said, using the acronym for the Supreme Court of the United States.
The new tariffs took effect at midnight, while collection of the tariffs annulled by the Supreme Court was halted. They had ranged from 10 per cent to as much as 50 per cent.
It remains unclear whether and how companies will be refunded for tariff payments made under the regime annulled by the Supreme Court.
The Section 122 law allows the president to impose the new duties for up to 150 days to address “large and serious” balance-of-payments deficits and “fundamental international payments problems.”
Trump’s tariff order argued that a serious balance-of-payments deficit existed in the form of a $1.2 trillion annual U.S. goods trade deficit, a current account deficit of four per cent of GDP and a reversal of the U.S. primary income surplus. But some economists and trade lawyers argue that the U.S. is not on the cusp of a balance-of-payments crisis, making the new duties vulnerable to a legal challenge.
Trump warns against reneging on trade deals
On Monday Trump warned countries against backing away from any previously negotiated trade deals with the U.S., warning he would hit them with much higher duties under different laws.
Japan said it had asked the United States to ensure its treatment under a new tariff regime would be as favourable as in an existing agreement. The European Union, Britain and Taiwan all indicated a preference to stick to their deals too.
Carsten Brzeski, global head of macro at ING, noted that even with the 150-day limit of the current set of measures, the trade uncertainty was unlikely to go away soon.
“Because the next thing that he (Trump) could do is always, with the interruption of one day, theoretically endlessly extend by 150 days,” he said.
China meanwhile urged Washington to abandon its “unilateral tariffs”, indicating it was willing to hold another round of trade talks with the world’s largest economy, the country’s commerce ministry said in a statement on Tuesday.
— Additional reporting by Mark John and Francesco Canepa in Frankfurt
