US Tariffs: End of 90-Day Pause – What You Need to Know

US Trade Policy on a Knife’s Edge: Tariffs, Deals, and the Looming July 9th Deadline

With just days remaining until a key deadline, the global trade landscape is bracing for potential upheaval as the US prepares to reinstate a range of reciprocal tariffs unless last-minute trade agreements are secured. The looming date of July 9th marks the end of a 90-day pause, and the possibility of tariffs ranging from 11% to 50% being reimposed is casting a shadow over international commerce.

The Current Tariff Landscape: A Complex Web

Currently, a tiered system of tariffs is in effect. A universal tariff of 10% under the International Emergency Economic Powers Act (IEEPA) applies globally as of April 5th. Section 232 tariffs impose a 25% levy on automobiles and auto parts, enacted on April 3rd and May 3rd respectively, alongside a 10% tariff quota for 100,000 vehicles from the UK. Steel and aluminum imports face a particularly steep 50% tariff (as of June 4th), with adjustments based on non-metallic content.

China currently faces the highest tariffs, with a base rate of 30% (since May 14th) that can climb to 55% when including legacy tariffs under Section 301 and a recently struck, but still unconfirmed, “framework deal.” The elimination of the de minimis rule for goods under $800, also enacted on May 14th, adds a 54% tariff or a $100 fee per postal item. Canada and Mexico face 25% tariffs on goods not compliant with the USMCA agreement, and 10% on non-compliant energy and potash.

Trade Talks Heat Up as Deadline Approaches

In recent weeks, negotiations have intensified with up to ten major trading partners, spurred by the urgency to avoid the impending tariff hikes. A key development has been a finalized deal with China, securing access to rare earth mineral exports in exchange for lifting certain countermeasures – though details remain undisclosed due to the sensitivity of the agreement. Despite this de-escalation, the effective tariff rate for goods from China remains at 55%, with additional anti-dumping measures in place.

The European Union is facing pressure from the US, with threats of tariffs increasing to 50% from July 9th if a deal isn’t reached. EU retaliation is slated to begin on July 14th. A major sticking point for the US involves non-tariff barriers like the EU’s Digital Markets Act (DMA) and Carbon Border Adjustment Mechanism. However, reports suggest the EU is considering exceptions for American companies regarding the DMA in exchange for sector-specific exemptions from US tariffs, particularly in automobiles, steel, aluminum, pharmaceuticals, and semiconductors, alongside acceptance of a 10% universal tariff.

Canada has resumed trade talks following a dispute over its proposed Digital Services Tax (DST). Prime Minister Mark Carney’s decision to repeal the DST has paved the way for a potential new trade deal by July 21st, securing Canada an extension.

US Prioritizes Protectionism and Revenue

Despite ongoing negotiations, the US stance on trade remains firmly rooted in protectionism. According to a senior official, tariff revenue is now viewed as a strategic goal to help finance the “Big Beautiful Bill Act.” Commerce Secretary Howard Lutnick has explicitly stated that “zero-for-zero” deals are off the table. Furthermore, analysis of Project 2025 suggests that mirroring foreign tariffs may be more effective in reducing the trade deficit than reciprocal reductions.

What to Expect: Extensions and Sector-Specific Increases

Analysts do not anticipate a full resolution of current negotiations by July 9th, suggesting extensions for ongoing talks are likely. Canada’s extension to July 21st sets a precedent. The official deadline for China remains August 12th, though the impact of the recent framework agreement is currently unclear.

The average current tariff rate of 13% is unlikely to change significantly by year-end. The 10% baseline tariff is expected to remain in place, with sector-specific tariffs potentially rising in the third and fourth quarters as Section 232 and 301 investigations conclude. Targeted sectors include copper, lumber, cranes, critical minerals, pharmaceuticals, semiconductors, shipbuilding, trucks, and aircraft, in addition to existing tariffs on cars, auto parts, aluminum, and steel. This could result in average tariff rates of 12-15% for the US overall, with the EU facing 10-15% and China around 50%.

Strategic Shifts and Geopolitical Tensions

The US tariff strategy is prompting a reshuffling of trade flows, with countries seeking to avoid the escalating costs. Canada’s introduction of a tariff quota on steel imports from non-FTA partners is making it more difficult to redirect goods. China has voiced strong opposition to other countries entering trade agreements with the US, viewing it as undermining its interests and labeling the US strategy as “unilateral bullying.”

As China is increasingly perceived as a geopolitical threat, US policies may focus on indirect trade impediments, including restrictions on investment, social media, and technology cooperation, pressuring companies to reduce their business with China. This creates a difficult position for both Asian/Chinese trade partners and US allies.

Legal Battles and Key Dates to Watch

The legal battle over IEEPA tariffs remains ongoing. While the US Court of International Trade (CIT) ruled that Trump overstepped his authority, the US Court of Appeals for the Federal Circuit (CAFC) has issued a stay, keeping the tariffs in effect for now. A final decision is expected in August. A Supreme Court challenge is likely if the CAFC upholds the CIT’s ruling.

Additionally, a Supreme Court ruling on June 27th, restricting nationwide injunctions, could impact the IEEPA litigation, potentially limiting relief to the original plaintiffs.

The global trade landscape remains highly volatile, with the July 9th deadline serving as a critical inflection point. While extensions and further negotiations are anticipated, the underlying trend points towards a continued emphasis on protectionism and a recalibration of trade relationships in a world increasingly divided between the US and China.

The Impact on Supply Chains: Navigating a Turbulent Sea

The current US trade policy, characterized by tariffs and the potential for further disruptions, has notable ramifications for global supply chains. The uncertainties surrounding the July 9th deadline and ongoing negotiations are already prompting businesses to reassess their sourcing strategies, manufacturing locations, and overall resilience. the goal is to mitigate risk and adapt to a rapidly evolving trade environment, considering factors like potential costs, delays, and geopolitical considerations. This is especially true for sectors like automobiles and auto parts, semiconductors, and pharmaceuticals, which have been increasingly targeted in trade disputes.

Increased tariffs, such as those potentially impacting the EU and China, directly translate into higher costs for businesses. These costs can be passed on to consumers, reducing demand or cutting into profit margins.Companies are thus forced to explore alternatives, which include reshoring production to the US, nearshoring to countries with more favorable trade agreements (like Mexico or Canada), or diversifying suppliers. Finding alternative suppliers can take a long time.

The move toward protectionism is reshaping established supply chains. According to a report published in November 2023, the US drive to reorder global supply chains is a significant challenge for the American economy [[1]]. the US is adapting trade policy for supply chain resilience through trade negotiations, enforcement actions, and other initiatives