President Trump rolls out new tariffs ahead of Supreme Court review

While the United States Supreme Court is set to hear arguments regarding the legality of tariffs implemented by the White House under the International Emergency Economic Powers Act (IEEPA), in the form of an expedited review set to begin in November, President Trump last night, in various social media posts, announced new tariffs on various items, including heavy trucks, kitchen cabinets, and pharmaceuticals, which will go into effect on October 1.

The new tariffs announced by President Trump include:

• 25% tariffs on imports of heavy trucks, citing the need for truckers to be financially healthy and strong and for national security purposes;
• 50% tariffs on all kitchen cabinets, bathroom vanities, and associated products and a 30% tariff on upholstered furniture, citing the flooding of these products into the U.S. by outside countries, as well as the need to protect, for national security and other reasons, the U.S. manufacturing process; and
• a 100% tariff on any branded or patented pharmaceutical product unless a company is building (breaking ground and/or under construction) its pharmaceutical manufacturing plant in America, with no tariffs placed on those pharmaceutical products if construction has started

A Politico report noted that these three product sectors were the focus of an investigation under Section 232 of the Trade Expansion Act of 1962 by the Commerce Department this year, with these respective social media posts by President Trump potentially serving as, “a signal that the administration is moving to conclude those reviews.”

Earlier this year, the White House leveraged Section 232, in issuing tariffs on steel, aluminum, automobiles, and copper, with new investigations announced earlier this week, for imports of robotics, industrial machinery, and medical devices, which could result in tariffs, noted a New York Times report.

Chris Rogers, Head of Supply Chain Research for S&P Global Market Intelligence, said that in general terms industry stakeholders need to be careful not to prejudge the impact of these new tariffs until the official filings are issued, which may not be until September 30.

“For ocean freight sector the pharma tariffs aren’t particularly relevant from a scale (i.e. number of containers) perspective as only the high-end branded/on-patent pharmaceuticals are covered,” he said. “Older, generic drugs which do travel by sea do not appear to be covered. Additionally, the exclusion of generic drugs is good for India unless ‘non-covered’ drugs revert back to being covered by the regular ‘IEEPA’ country duties.

The furniture tariffs are a bigger deal, given the size of the products and the fact they are mostly moved by sea, though we’ll need to see the details before taking a view—remember this was part of a review of the forestry sector. The truck tariffs are not surprising—at 25% they’re in line with the automotive sector duties. The bigger issue for the truck makers is whether they can get a tariff break on their components—that’s an incentive to source USMCA-compliant parts.”

Addressing the tariffs on heavy trucks, Keith Prather, Managing Director, Armada Corporate Intelligence, estimated that roughly 8% of the total U.S. Class 8 trucks sector would be subject to the new tariffs, in turn, pushing the average cost of a tractor from around $175,000 to around $250,000, not including discounting, which he said could drive that number down and soften the blow.

“About 42% of the Class 8 market is imported from Canada and Mexico—only 25% of the Mexican imports are exposed to the tariff and about 5% of the Canadian trucks are exposed and would not be covered by the USMCA agreement (that's how we get to about 8% of the U.S. market carrying the full tariff),” stated Prather. “Most of the major brands have little exposure from what I see, I think this was aimed at keeping Chinese BEV (battery electric vehicles) out of the U.S. I believe that the Section 232 tariffs stack…but many firms already knew that and were creating work-arounds to avoid those.” 

Paul Bingham, Director, Transportation Consulting, at S&P Global Market Intelligence, said that while these commodity categories had been previously announced as under investigation under Section 232, none of the commodities assessed these new tariffs come as a surprise, with the tariff levels and conditions having been unknown prior to yesterday.

“Whether Mexico-produced heavy trucks can be sheltered with U.S. content under existing USMCA category exemptions isn’t clear yet, and Mexico is a significant current source for the US heavy truck imports,” he said. “The U.S. import tariffs on steel and aluminum earlier this year had raised cost of inputs for U.S. truck manufacturers, making them less competitive with foreign built trucks where the metals are already incorporated into the finished vehicles. This new finished truck tariff helps shield the US truck manufacturing plants from the higher costs they already face.  And they might be considered an echo of the expanded set of steel and aluminum derivative products covered by U.S. import tariffs added last month.”

As for the pharmaceutical tariffs, Bingham said that at 100%, the new pharmaceutical product import tariff is high and characterized as promoting foreign pharmaceutical product manufacturers to set up factories in the U.S, adding that the exemption for foreign pharma companies that have new U.S. factories already under construction or are breaking ground for U.S. factories is evidence of that objective for this commodity category.

“However, while there are significant new pharmaceutical plants under construction in the U.S., they won’t be online or able to replace the large majority of the imported pharmaceutical products covered by these new tariffs,” he said. “Where foreign pharmaceutical manufacturers are not yet already underway with plans for new U.S. pharmaceutical factories, they will likely face a period of years before they could have new U.S. factories located, designed, permitted and financed to be ready to break ground and get under construction to qualify for exemption from these new tariffs.”

As for the new import tariff rates applied starting next week to select categories of furniture imports tariffs, Bingham said that they seem more targeted to protect U.S. manufacturers from import price competition, although the objective stated is to promote onshoring of manufacturing of those furniture categories. 

“It will be expected that some importers will adjust and pay the new tariffs, negotiating with foreign suppliers on the prices plus considering how much to also either lower margins on their U.S. import sales or pass the costs on to the U.S. customers with higher prices,” he said. “For these products and at these tariff rates, the U.S. government tariff revenues are likely to increase instead of pricing out U.S. imports of these commodities to be replaced by U.S.-made products.”