Businesses continue to face uncertainty after latest US tariff blitz, ICC says

Mint

4 days ago

Businesses around the world are still seeking clarity on the barriers they will face as exporters to the U.S., with many pausing big decisions on investment and hiring, according to the deputy head of the International Chamber of Commerce.
President Trump raised tariffs on scores of countries late Thursday, but delayed their implementation until Aug. 7. That came after his trade-deal deadline for many countries to clinch agreements or face tariff hikes expired.
However, the tariff announcements lacked detail, adding to uncertainties that include decisions that have yet to be taken on key sectors, as well as continuing talks with China and others, and the legal status of the new duties.
'Last night's announcement provides confirmation that the administration is set on applying generally higher tariff rates," said Andrew Wilson, deputy secretary-general of the ICC. 'But at a more practical level, we still see companies struggling to understand how the country specific rates will apply in practice."
Wilson said a particular issue is whether the new tariffs outlined in Trump's executive order will be added to existing duties—stack in trade jargon—or replace them.
'The Executive Order only states the headline tariff rate, with no specifics as regards their implementation aside from the E.U. deal," he said.
Uncertainty about the tariff framework dates back to Trump's victory in the November election, although it ratcheted up when he announced a series of huge increases on April 2 and then suspended those rises pending negotiations. The deadline for those talks was then extended, but, despite Thursday's announcements, questions remain.
Still, figures released earlier this week showed the eurozone's economy avoided a forecast contraction during the second quarter, while the U.S. returned to expansion after a first-quarter contraction. Data published last month pointed to continued strong growth in China during the second quarter.
'We've certainly avoided the biggest risk that we saw several months ago, which was widespread tit-for-tat retaliation and a global rise in protectionism," Wilson said in an interview with The Wall Street Journal.
But Wilson said it is likely too early to draw any firm conclusions about the impact of tariff rises on the global economy.
'There are still so many uncertainties, so many delays in decision making that it may be too early to tell," he said.
The uncertainty relates not just to the level at which tariffs will settle, but also whether they are legal. Federal appeals judges on Thursday pushed back against the president's claims that a 1977 law addressing economic emergencies gives him the ability to rewrite the tariff schedule.
'What we have heard major executives say is that, if you don't know what the tariff rate is going to be next week, let alone next month, let alone in three years' time, how on earth can you make an investment that will take eight to ten years, possibly even more, to pay off," Wilson said.
For the ICC, which represents 45 million businesses in 170 countries, it is at least clear that the Trump administration is determined to push tariffs sharply higher, and that the TACO jibe—which asserts that Trump Always Chickens Out—has little truth.
'The conclusion we've come to is that essentially this administration is looking at how far it can push the effective rate, in the first instance without freaking out the financial markets," Wilson said.
Equity markets fell back Friday in response to the new announcement of higher tariffs, but to a much smaller degree than after the April 2 surprise.