The U.S. Supreme Court struck down the Trump administration's use of the International Emergency Economic Powers Act to impose tariffs, including country-specific duties and fentanyl-related tariffs on China, Mexico, and Canada.
In response, the White House reinstated tariffs under Section 122 of the Trade Act of 1974. A 10% global tariff took effect on Tuesday and remains valid until late July. The president stated he intends to raise the rate to 15%, and the administration is reportedly working on an amended order.
The ruling leaves de minimis suspended and keeps Section 232 sectoral tariffs and Section 301 tariffs in place, including those applied to China in 2018. The administration indicated it may use Section 232 and 301 mechanisms again before Section 122 expires, though these require federal investigations and take time.
The administration has several Section 232 probes underway and is reviewing China's compliance with prior trade terms. Additional Section 301 investigations focused on China may also be under consideration.
Trade agreements negotiated over the past year were largely based on IEEPA tariffs, creating uncertainty regarding their status. The administration stated the U.S. intends to honor these agreements. However, some partners, including the European Union, view a potential 15% blanket tariff as inconsistent with agreed levels and have paused implementation pending clarification.
Yale's Budget Lab estimates the shift reduces the overall effective U.S. tariff rate by two percentage points. China and Vietnam see a five percentage point reduction, the EU baseline remains unchanged, the UK faces a five-point increase, and Brazil records the largest decrease, from 40%. Overall, effective tariffs on China remain around 40% due to Section 301 duties.
For U.S. shippers, the focus turns to possible frontloading ahead of the July deadline. The lower rate for Brazil and the reduction for China and Vietnam may prompt some volume acceleration when manufacturing resumes after the Lunar New Year. However, modest reductions for most countries, domestic political considerations, and potential tariff adjustments later this year may limit broad frontloading.
Container rates have not yet reflected any surge. Transpacific and Asia-Europe rates were stable last week and below pre-Lunar New Year levels. Carriers have increased blank sailings to manage capacity, but may restore them if demand rises.
Weather disruptions in Northern Europe and a major blizzard in the northeastern U.S. caused temporary congestion without materially shifting rates.
In air cargo, de minimis remains suspended. Ex-Asia freight is in its Lunar New Year lull. China-U.S. air rates fell 15% last week, and China-Europe rates declined nearly 10%.
Source: Container News
