HONG KONG – Global trade has been suspended again after the Supreme Court struck down President Donald Trump’s “retaliatory” tariffs, with US trading partners and businesses around the world scrambling to understand the plan to replace them.
A new global tariff of 10% on US imports went into effect on Tuesday, down from the 15% that Trump has said he would impose in the past few days. Under Section 122 of the Trade Act of 1974, the 10% tariff can last up to 150 days without congressional approval.
China is the “big winner” in the Supreme Court decision, and the effective US tax rate is now much closer to that of other countries, said Alicia García-Herrero, chief Asia-Pacific economist at French investment bank Natixis.
Among other benefits, China’s low price level reduces the incentive for companies to shift production to other Asian countries, at least temporarily.
But the whiplash has created great uncertainty for key US allies and Washington’s other major trading partners, many of whom have already announced or are nearing trade deals with the US, while others have offered major concessions in an effort to secure favorable tariffs under Trump’s defunct tariff regime.
In Asia, Trump administration officials rushed to conclude agreements in the weeks before the court’s decision, with Indonesia agreeing to a 19% tariff a day earlier.
The tariff decision comes just weeks before Trump’s upcoming trip to China, where he hopes to preserve a trade deal with the world’s second-largest economy.
The biggest losers include Japan and Taiwan, both of which have previously pledged hundreds of billions in US investment in exchange for a 15% tariff. Singapore and Australia will also lose out as they already have a favorable tariff rate of 10%.
“If you’re from Taiwan, you’re like, why on earth am I committing to $250 billion if I’m getting the same amount?” said García-Herrero, who is based in Hong Kong.
The Trump administration says it will stand by existing agreements and expects America’s trading partners to do the same.
“The good news is that almost every country and company wants to keep the deal we’ve already made,” Trump said Tuesday in his State of the Union address, “knowing that the legal power that I have as president to make a new deal would be very bad for them.”
A day earlier, Trump said on social media that any countries that tried to “play games” with trade deals after the court’s decision would be hit with much higher tariffs.
Major trading partners in Asia, which are heavily dependent on US exports, generally stick to the terms of their existing deals or take a wait-and-see approach.
India, which had planned to sign the deal in March, delayed a trade delegation’s visit to Washington last week, saying talks would resume once there was more clarity. Its commerce minister had an impromptu lunch meeting in New Delhi on Thursday with Commerce Secretary Howard Lutnick.
While Trump officials have said they expect the deals to be preserved, “one element of all deals is a flat rate of tariffs,” said Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore.
The main question for many governments, he said, is whether their assets are now below their previous rates or the new 10% rate, which the White House did not specify.
“That raises some concerns about the actual price, and then what happens to the rest of the deal,” Elms said.
The US Trade Representative, Jamieson Greer, said last week that in some countries, he could name, tariffs would rise by 15% or more while remaining in line with existing agreements.
He says there are no plans to raise tariffs on Chinese goods before Trump’s trip to China, which the White House says will begin on March 31, and he doesn’t expect the Supreme Court’s decision to affect Trump’s meeting with Chinese President Xi Jinping.
China, which responded to Trump’s first tariffs last year with rising tariffs, said after the decision that it would “fully evaluate” any future US tariff changes and adjust its countermeasures accordingly.
“The current situation has put China in a relaxed position,” China’s international affairs analyst Qiu Zhenhai said in a social media post.
“This is because the high tariffs proposed by Trump – whether they are aimed at the whole world or specifically at China – are currently being blocked by the highest legal authorities at home, and, frankly, have caused a huge backlash in the United States.”
But China still has plenty to worry about, such as Trump’s ability to impose export controls on key products like semiconductor chips.
According to Greer, one of the main ways the Trump administration plans to end the refundable tariffs is the investigation, authorized under Section 301 of the Trade Act of 1974, of countries suspected of treating the US or its companies unfairly.
Elms said that investigation, along with a national security investigation focused on strategic industries under the same law, could give the White House a strong basis for imposing new tariffs, and other punitive measures that could end up being worse in some countries than the tariffs that have already been reduced.
Although Greer has expressed a desire to speed up the Section 301 investigation, it would be difficult to remove China from any list of countries facing investigation, which would risk antagonizing Beijing ahead of Trump’s trip, Elms said.
Greer said his office is continuing an existing Section 301 investigation into China that stems from Trump’s first trade deal with Beijing and could be used to justify new tariffs.
China said last week it had “fulfilled its obligations” under the deal.
The Supreme Court decision also did not affect US sector-specific tariffs on cars and metals, which are key industries in China, as well as South Korea and Japan.
On Tuesday, the president of Hyundai Motor, one of South Korea’s largest automakers, urged lawmakers to quickly approve the promised US investment of R350 billion, citing the risk of high tariffs on the sector.
Elms said many of America’s trading partners “will have their own domestic politics” to consider.
He added: “It’s getting very difficult to manage the government-to-government relationship with the US and we’re going to see some resentment, I think, spill over as prices keep changing and these deals seem more desirable.”
