After U.S. President Donald Trump imposed a new 10% global baseline tariff using the Section 122 legal authority, the U.S. Court of International Trade once again overturned the tariff over complaints that the legal authority was misused. While the Trump administration has appealed the ruling to the U.S. Supreme Court, the 10% tariff was set to expire in July regardless, and that expiration date would likely come before any final Supreme Court ruling is issued.
Additionally, for the time being, the court has only overturned the policy in the state of Washington, and for two small businesses that initially sued, and did not ban the policy from taking effect in other states before the appeal is settled. At the time of writing, it is unknown if or when importers could expect any refunds to be paid from this tariff.
Despite the recent court setback, the Trump administration is moving forward with reconstructing its previous tariff regime after the reciprocal tariffs were overturned. On April 28, the U.S. began hearings seeking public comments on the Trump administration’s trade investigation into allegations of forced labor. Hearings about the investigation into alleged excess industrial capacity began the following week.
Over 60 trade partners could be impacted between the two investigations, which would expand the Trump administration’s power to unilaterally control tariffs on targeted countries if implemented. While the investigations are widely seen as an attempt to restore the previous reciprocal tariffs through the most convenient legal means available, the recent hearings did attract attention from human rights organizations and protectionist-leaning industry associations that hope relevant industry issues could be addressed by the investigations. The Trump administration plans to push for a conclusion to the investigations by mid-July.
U.S. launches refund system for tariffs paid on overturned legal authorities
On April 20, U.S. Customs and Border Protection launched an online system for importers to apply for refunds of tariffs paid under legal authorities that have since been overturned, including reciprocal tariffs and fentanyl-related tariffs on China, Canada, and Mexico.
The system will allow importers to combine all tariffs owed into a single refund claim instead of multiple smaller, purchase-specific claims. However, refunds will not be issued automatically, and importers must apply to participate in the program.
Refund eligibility will be limited to importers of record. After importers apply online, tariff refunds are expected to be issued within 60 – 90 days. The administration plans to release the first wave of refunds from May 12.
U.S. threatens to increase tariffs on E.U. while E.U. doubles steel tariffs
On May 4, the Trump administration threatened to raise tariffs on automobiles from the E.U. from 15% to 25%. If enacted, this measure would be a direct violation of the U.S.-E.U. trade agreement, which agreed to cap U.S. automobile tariffs for the E.U. at 15%.
Subsequently, on May 7, President Trump further threatened to raise tariffs on the E.U. to high levels if the E.U. did not finish ratifying the U.S. trade deal by July 4. The trade authority with which the Trump administration could raise these tariffs is unclear, as the previous 15% U.S. tariffs were part of the administration’s reciprocal tariff program.
European Commission President Ursula von der Leyen indicated that the deal is currently on track to be approved by this date. However, if the U.S. moves forward with these higher tariffs, pushback from E.U. members could lead to E.U. countermeasures and derail the approval process of the current trade deal.
Separately, E.U. lawmakers have approved a measure to double the tariff rate on steel products from 25% to 50% and reduce tariff-free steel quotas to 18.3 million tons per year, equivalent to the total level of imports in 2013. The 50% tariff rate will apply to steel imports above this quota level.
The measures will apply to all countries except European Economic Area members Norway, Iceland, and Liechtenstein. The proposal is intended to help protect domestic steelmakers whose profits are being hurt by a glut of recent cheap imports, particularly from China. The measure still requires final approval from the European Council and would come into effect as soon as July 1 if passed.
Deadlock in trade talks escalates between U.S. and Canada
On July 1, signatories of the United States-Mexico-Canada Agreement (U.S.M.C.A.) will face a deadline to indicate whether they plan to move forward with the current agreement as-is or renegotiate. The Trump administration appears increasingly likely to support renegotiations that could support further U.S. tariffs on Canada or Mexico, although the extent of any changes has not been specified.
Ahead of this deadline, Canadian and U.S. negotiators appear increasingly deadlocked. Recent tensions have been fueled by decisions from eight Canadian provinces to remove U.S. alcoholic beverages from state-owned liquor stores, which has drawn significant pushback from the Trump administration.
Since then, Canadian officials have further criticized U.S. tariffs on Canada and have stated that no progress on renegotiating the U.S.M.C.A. will occur until the U.S. addresses the existing tariffs. Currently, tariffs on Canadian industrial goods such as steel, aluminum, forest products, and automobiles range from 10 – 50%, while tariffs on other Canadian goods not covered by the U.S.M.C.A. agreement remain at 10%.
Although Canadian negotiators have expressed interest in preserving the existing terms of the U.S.M.C.A. as much as possible, this remains unlikely without an initial agreement on what parts of the U.S.M.C.A. could change in renegotiations. In contrast, U.S. discussions with Mexico appear to be progressing more smoothly. Formal bilateral talks between the U.S. and Mexico regarding the U.S.M.C.A. review are scheduled to begin on May 25.
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