White House moves forward with reciprocal tariff implementation in Executive Order

While some previous implementation dates for the White House’s reciprocal tariffs placed on goods imported into the United States had seen those dates pushed back, or paused, that was not the case this time around.

The reason for that was explained in an Executive Order issued by the White House yesterday which modifies reciprocal tariff rates for certain countries, “to further address our exploding annual U.S. goods trade deficits,” and also, “reflects the President’s continued efforts to protect the United States against foreign threats to the national security and economy of the United States by securing fair, balanced, and reciprocal trade relationships to benefit American workers, farmers, and manufacturers and to strengthen the United States’ defense industrial base.”

The U.S. rolled out its reciprocal tariffs on April 2, which President Trump labeled as “Liberation Day,” in which he rolled out new, or increased, tariffs on nearly 60 U.S. trading partners, ranging from 10%-50%. President Trump described this measure as a “Declaration of Economic Independence,” noting that for years Americans were forced to sit on the sidelines as other nations got rich and powerful, at the expense of the U.S., and stated that it is now the U.S.’s turn to prosper and use trillions of dollars to reduce taxes and pay down the country’s national debt.

In an April 9 social media message, the original date in which the tariffs were scheduled to take effect, President Trump said that the U.S. has changed course, in terms of the scope and timing of its tariff implementations, in which he stated that “more than 75 countries have called Representatives of the United States, including the Departments of Commerce, Treasury and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately.”

In early July, with the 90-day pause set to expire on July 9, the White House extended the pause to August 1.

President Trump said in the Executive Order issued yesterday that going back to early April, there have been varying degrees of feedback and receptiveness to the reciprocal tariffs rollout, with: several countries having agreed to, or appear to be soon agreeing to meaningful trade deals and security arrangements with the U.S.; some countries have offered terms in negotiations that the White House felt do not sufficiently address the national economic emergency the president declared in April; and some countries have not engaged in any negotiations with the U.S.

Tariff levels for countries that have not reached new trade deals with the U.S. vary, ranging from 10%-to-41%, and are scheduled to go into effect on August 7.

This does not apply to the countries that have already reached trade deals with the U.S., cited in a White House fact sheet including:

• a recently-announced deal with the European Union, in which the EU has agreed to purchase $750 billion in U.S. energy and make new investments of $600 billion in the United States, all by 2028, while accepting a 15% tariff rate;
• an agreement with Japan to invest $550 billion in the United States to rebuild and expand core American industries, as well as to further open its own market to U.S. exports, all while paying a baseline 15% tariff rate;
• the United States-United Kingdom trade deal, which includes billions of dollars of increased market access for American exports; and
• additional trade deals with Indonesia, the Philippines, South Korea, Vietnam, and others, which it said will protect U.S. industries, open foreign markets, and encourage foreign investment in American industries

What’s more, in regards to trade deals and developments with the U.S. three largest trading partners, Mexico, Canada, and China, there are ongoing developments, to varying degrees.

The U.S. and Mexico came to terms on a 90-day tariff pause yesterday, in advance of a 30% tariff on goods imported from Mexico into the U.S. that was scheduled to take effect today, and, in the interim, a 25% tariff on Mexico remains intact, for goods in included in the United States Mexico Canada Agreement (USMCA), as well as a 50% tariff on steel, aluminum, and copper. As for Canada, the U.S. said this week it has implemented a 35% tariff on Canadian goods imported into the U.S. not under the USMCA, which takes effect today, and also includes a 40% transshipment tariff on imports that are re-routed through Canada to avoid tariffs. And tariffs on imports from China will remain at 30% and tariffs on American goods imported into China will remain at 10% through August 12, as per the terms of a May agreement reached between the countries.

Keith Prather, Managing Director, Armada Corporate Intelligence, told LM that this is a developing situation and that he thinks there will be some additional trade deals announced in the coming days, adding that purchasing managers are going to have to remain flexible, as it is an evolving situation. 

“The world is basically on a blanket 10-15% tariff,” he said. “That will have some mild impacts, but most supply chains can absorb the majority of it. I did an analysis yesterday looking at the products that are most impacted by tariffs and thus far, even with the 10% tariff in place over the last few months, it was mostly those items that had some steel and aluminum components in it that were more subject to impacts from tariff increases (products from China mostly with those Section 232 tariffs in which the tariff “stacks”). But it was less than 5% of the total Personal Consumption Expenditures categories that had any potential tariff impact, and only a fraction of those had any material movement in price through June. So, we still aren't really seeing the full impact of tariffs yet…but I think that it is still coming. In the August 1 tariff moves, the ones that stick out to me are non-USMCA products moving cross-border with Canada that have 35% applied, Mexico looks like it might have a temporary postponement, Brazil obviously at 50%, and India moving up to 25% (mostly electronics and pharma).”

Another important factor cited by Prather is that “exemptions” for specific products will start to be applied, which he said will make it even more confusing and challenging for supply chain managers.

As an example, he observed that the copper tariff is much higher (which is probably one of the primary concerns for the supply chain and freight activity), but there are now even exceptions to that.

“Mostly raw copper moves tariff free—but finished copper products would be subject to the copper tariff,” he said. “And that's still evolving—there could be adjustments to it in the coming days and weeks as they monitor the impacts. Remember, this is a swipe on, swipe off affair. The Trump Administration will continuously get inputs from industry and reserve the right to make adjustments on the fly if they start to see some pressure in the market. 

The blended tariff average looks like it might be around 18%, this would technically be a modern all-time high and we really aren't sure how it ultimately impacts the supply chain because its new territory. And if we have a million importers, we could be seeing a million different approaches in how they work with and around these pressures. It's going to be tough to nail down a ‘best practice’ for how folks strategize and work through these conditions.” 

What the White House released yesterday was generally anticipated in terms of relative country reciprocal tariff levels, with few surprises, stated Paul Bingham, Director, Transportation Consulting, for S&P Global Market Intelligence.

Bingham noted that, for example the tariffs on the U.K. remain at 10% while New Zealand went up to the apparent default 15% level, and Switzerland, not being part of the European Union deal last weekend, is now facing a 39% tariff. The 40% tariff on transshipped imports needs further definition to understand the potential impacts that may have on trade, especially for countries in Southeast Asia such as Vietnam, he said, adding, that timing is subject to change, as are these tariff rate levels, depending on further country negotiations.

“The U.S. import tariff situation remains quite uncertain, with this latest set of rates to be used in planning only until they are modified or invalidated,” he said. “Assessments of tariff impact requires supply-chain specific analysis for supply chain managers on an ongoing basis for now. We advise using scenario planning, with adoption of baseline assumptions for effective U.S. import tariff rates to remain at least at a 10% level, for at least the next few years. Also, a consideration affecting assessments of impacts of all the reciprocal tariffs is the still-pending ruling on the validity of the tariffs imposed under the IEEPA, where the appeals court hearing was also just held.” 

Feedback from industry associations, regarding the White House’s tariff plans, made the case for the potential negative impact of these tariffs.

National Retail Federation (NRF) President David French said that his organization encourages the administration to negotiate binding trade agreements that truly open markets by lowering tariffs, not raising them, adding that tariffs are taxes paid by U.S. importers and are eventually passed along to U.S. consumers.

“These higher tariffs will hurt Americans, including consumers, retailers and their employees, and manufacturers, because the direct result of tariffs will be higher prices, decreased hiring, fewer capital expenditures and slower innovation,” said French. “Retailers have been able to hold the line on pricing so far, but the new tariffs will impact merchandise in the coming weeks. We have heard directly from small retailers who are concerned about their ability to stay in business in the face of these unsustainable tariff rates.”

And National Foreign Trade Council President Jake Colvin said that this week’s trade deals and new tariff rates mark a significant inflection point for the Trump Administration’s trade policy.

“While it has been encouraging to see key U.S. trading partners to commit to remove some foreign trade barriers, a great deal of work remains to be done to make sure they deliver on those promises and to accelerate efforts to remove discriminatory measures that were not part of those initial understandings,” said Colvin. “Whatever progress that’s ultimately achieved as part of these new trade deals will come at the steep price of significant U.S. tariff increases and the erosion of trust with America’s key partners. Institutionalizing the highest U.S. duties since the Great Depression, coupled with ongoing uncertainty, will ultimately make American businesses less competitive globally and consumers worse off while harming relationships with close geopolitical allies and trading partners. 

We hope the Administration will continue working with our major trading partners to translate the initial deals they reached into durable results while looking for opportunities to reduce U.S. tariffs, eliminate key foreign trade barriers and restore predictability to trade.”