HONG KONG – Global trade has been upended again after the Supreme Court struck down President Donald Trump’s “reciprocal” tariffs, and U.S. trading partners and companies around the world are scrambling to understand the system that replaces them.
A new flat 10% global tariff paid by U.S. importers took effect Tuesday, down from the 15% Trump said he would implement days earlier. Under Section 122 of the Trade Act of 1974, the 10% tariff can remain in effect for 150 days without congressional approval.
China is the “biggest winner” from the Supreme Court ruling, with the U.S. effective tariff rate 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 lower tariff rate reduces the incentive for companies to shift production to other countries in Asia, at least temporarily.
But the whiplash has created crippling uncertainty for key U.S. allies and some of Washington’s biggest trading partners, many of whom had already announced or were close to trade deals with the United States, some of which had offered major concessions aimed at securing favorable rates under Trump’s now-defunct tariff regime.
In Asia, Trump administration officials had rushed to close deals in the weeks before the court ruling, and Indonesia had agreed to a 19% tariff rate just a day earlier.
The tariff decision also comes just weeks before Trump’s next trip to China, where he hopes to maintain a delicate trade truce with the world’s second-largest economy.
Among those who will lose the most are Japan and Taiwan, which had previously promised hundreds of billions in US investment in exchange for a 15% tariff rate. Singapore and Australia are also at risk of losing, as they already had a relatively favorable tariff rate of 10%.
“If you’re Taiwan, you’re wondering: why the hell did I commit to paying $250 billion if I’m getting the same tariffs?” said García-Herrero, who resides in Hong Kong.
The Trump administration has said it will respect existing agreements and that it expects the United States’ trading partners to do so as well.
“The good news is that almost every country and corporation wants to keep the deal they already made,” Trump said Tuesday in his State of the Union address, “knowing that the legal power I have as president to make a new deal could be much worse for them.”
A day earlier, Trump said in a social media post that any country that tried to “game” trade deals after the court ruling would be hit with much higher tariffs.
Asia’s major trading partners, which rely heavily on U.S. exports, generally stick to the terms of their existing agreements or adopt a wait-and-see attitude.
India, which had planned to sign a deal in March, delayed a trade delegation’s scheduled visit to Washington last week, saying talks would resume once there was more clarity. His Commerce Minister then had a surprise lunch in New Delhi on Thursday with Commerce Secretary Howard Lutnick.
While Trump officials say they hope the deals will stick, “the one thing about every deal is the reciprocal tariff rate,” said Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore.
The main question for many governments, he said, is whether their products are now subject to their previous rates or the new 10% rate, which the White House has not clarified.
“That’s causing quite a bit of anxiety about what the actual rate is and then what happens to the rest of the deal,” Elms said.
U.S. Trade Representative Jamieson Greer said last week that for some countries, which he did not name, tariff rates would rise to 15% or even higher, while remaining consistent 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 March 31, and that he doesn’t expect the Supreme Court ruling to affect Trump’s meeting with Chinese President Xi Jinping.
China, which responded to Trump’s first reciprocal tariffs last year with its own rising tariffs, said after the ruling that it would “comprehensively evaluate” any future U.S. tariff changes and adjust its countermeasures accordingly.
“The current situation has put China in a relatively comfortable position,” Chinese international affairs commentator Qiu Zhenhai said in a social media post.
“This is because Trump’s proposed high tariffs, whether directed at the world or specifically at China, are currently being restrained internally by supreme legal authorities and, frankly, have triggered a significant backlash within the United States.”
But China still has much to worry about, such as Trump’s ability to impose export controls on strategically vital products such as semiconductor chips.
According to Greer, one of the main ways the Trump administration plans to replace reciprocal tariffs is through investigations, permitted under Section 301 of the Trade Act of 1974, of countries accused of treating the United States or its companies unfairly.
Elms said those investigations, along with national security investigations focused on strategic industries under the same law, could provide the White House with a stronger basis for imposing new tariffs, as well as other punitive measures that could end up being much worse for some countries than previously eliminated tariffs.
Although Greer has indicated a desire to move quickly on Section 301 investigations, it would be difficult to exclude China from any list of countries facing investigations, which would risk angering Beijing ahead of Trump’s trip, Elms said.
Greer said his office was also continuing an existing Section 301 investigation into China that stems from Trump’s first trade deal with Beijing and could be used to justify high new tariffs.
China said last week that it had “seriously fulfilled its obligations” under that agreement.
The Supreme Court ruling also did not affect sector-specific U.S. tariffs on autos and steel, which are crucial industries for China, as well as South Korea and Japan.
On Tuesday, the chairman of Hyundai Motor, one of South Korea’s largest automakers, urged lawmakers to quickly approve $350 billion in promised U.S. investments, citing the risk of higher sectoral tariffs.
Elms said many U.S. trading partners “will have their own domestic policies” to consider.
He added: “It is becoming very difficult to manage a government-to-government relationship with the United States and I think we will see some of that irritation spread as tariff rates continue to change and these agreements appear to be more or less desirable.”
