Governments around the world are unlikely to renege on trade pacts signed with Donald Trump over the past year despite a Supreme Court ruling that many of the tariffs imposed by the US were illegal, according to international analysts and legal experts.
Sectors such as autos and steel were not affected by the Supreme Court ruling. Countries are expected to be deterred from seeking to backtrack on their deals due to fear of retaliation in those areas by Trump’s capricious White House, along with US leverage in other areas such as defence and security.
Andrew Wilson, deputy secretary-general of the International Chamber of Commerce, said that, while the court ruling raised significant questions about the ultimate durability of Trump’s deals, it did not mean they were in imminent danger of collapse.
“From our recent conversations with governments, we aren’t expecting to see any jurisdictions immediately walk away from the agreements that have been inked in recent months,” he said.
Since returning to the White House, Trump has signed a raft of so-called “reciprocal tariff” deals, imposing blanket levies of between 15 and 20 per cent on most countries that export more goods to the US than they import.
On Friday the US Supreme Court ruled that tariffs imposed using the International Emergency Economic Powers Act (IEEPA) were illegal, but other tariffs on autos and steel that used a different legal basis remain intact.
After the ruling Trump quickly hit back, using another piece of legislation — Section 122 of the Trade Act of 1974 — to impose 10 per cent tariffs across the board, although these are only valid for 150 days without further approval from the US Congress.
On Saturday he said he would increase the levy to 15 per cent.
Despite the fresh legal uncertainty and the fact that many countries will now be paying a lower tariff, analysts said existing deals were unlikely to collapse, although some might be delayed until the legal picture became clearer.
Simon Evenett, professor of geopolitics and strategy at IMD Business School in Lausanne, Switzerland, said the ruling did not diminish the leverage available to the US administration but simply replaced one set of threats with another.
“For countries currently in negotiations with the United States, or with interim deals in place — such as Switzerland — the threat of high tariffs after the 150-day period maintains, and arguably intensifies, the pressure to make concessions. Overall, expect little change,” he wrote in a blog post.
The unconventional nature of Trump’s trade deals, sometimes referred to as “napkin deals” — where heads of terms are hastily agreed and then fleshed out in subsequent negotiations — is expected to add to the uncertainty.
Analysts said that the completion of recently agreed deals, such as the US-India deal announced this month, in which Trump lowered tariffs on Indian goods from 50 to 18 per cent, could now move more slowly as governments try to exploit Trump’s legal difficulties.
India’s trade ministry issued a non-committal statement following the ruling, saying that it was “studying all these developments”, while Trump on Friday appeared to send a warning to New Delhi when asked about the deal with India. “Nothing changes,” he said.
Pratik Dattani, founder of the Bridge India think-tank, said the ruling could provide space for India to soft-pedal talks, perhaps awaiting a legal challenge to the new tariffs, or a shift in the balance of power in the US Congress after November’s midterm elections.
“This improves the bargaining position of trade partners like India and feeds into the ‘TACO’ [Trump always chickens out] narrative,” he added.
During a visit to New Delhi on Sunday, Brazilian President Luiz Inácio Lula da Silva told reporters he was “relieved that I didn’t rush into doing things hastily” when it came to signing a trade deal with the US, adding that he would like to talk to Trump “personally”.
Trump’s latest tariff salvo “provided relief for many countries who were previously charged 50 or 40 per cent”, Lula said, adding that their rates would “now be 15 per cent”.
Trump initially slapped a 40 per cent tariff on Brazil, which has a trade deficit with the US, though this was later lifted on some Brazilian agricultural products, including coffee, beef and fruits. The initial duty, combined with a 10 per cent reciprocal tariff, brought the headline rate to 50 per cent, which sparked the worst diplomatic crisis in memory between the two largest nations in the Americas.
Analysts expect that fear of retaliation is likely to limit repercussions over concluded deals, such as those with the EU, Japan and South Korea.
Trump’s tariffs on steel, autos, semiconductors and medical goods were imposed using Sections 232 and 301 of US trade legislation — legal instruments that still remain available to the administration to punish partners that try to wriggle out of concessions they have already made.
The European parliament will meet on Monday to discuss postponing the ratification of the so-called Turnberry agreement — a deal between Brussels and Washington last year that applied a 15 per cent tariff to most European goods being imported to the US.
Despite some opposition to the pact, Nicolas Köhler-Suzuki, adviser for trade and economic security at the Jacques Delors Institute, said he expected the EU-US deal to survive because of the threat of “substitute deterrence”.
“The stick is alternative statutory threats, specifically . . . automotive tariffs. The European parliament will be emboldened by the ruling, but the economic risk of reinstated auto tariffs remains and neutralises the incentive for [an] outright challenge,” he said.
As the US continues to try and broker a peace deal between Moscow and Kyiv, Europe must also weigh the risk of Trump withdrawing security support for Ukraine — a key factor in Brussels’ original decision to sign the Turnberry deal despite political opposition, Evenett added.
The muted reaction across Asia reflected similar realities facing countries such as Korea and Japan, whose auto sectors are heavily exposed to retaliation risk.
Even so, former UK trade department official Allie Renison, now at consultancy SEC Newgate, warned that while the US retained leverage in ongoing trade talks, Washington would now need to tread more carefully.
“The White House will hope President Trump’s unpredictable approach to foreign relations should keep renegotiation attempts at bay — but that will also depend on Washington reviving its diplomacy skills,” she added.
With additional reporting from Andres Schipani in New Delhi
Source link
#Trumps #latest #tariff #threat #previous #trade #pacts
