New Trade Tariffs: What You Need to Know
July 31, Trump signed an executive order, clarifying key points of the new trade tariffs:
1. When do they take effect?
The new trade tariffs will take effect on August 7th. Any goods in transit or cleared through customs before noon on October 5th (Beijing time) will still be subject to the old 1-day tariffs.
2. What are the tariff rates?
The administration has published extra tariffs for 69 economies, ranging from 10% to 41%. The remaining economies will still be subject to a 10% basic tariff.
3. What changes should we pay attention to?
1. The EU's 15% is not an additional tariff rate, but the lowest tariff level. For goods with a first-tier tariff rate (US most-favored nation rate) less than 15%, the tariff rate will be increased by 15% minus the first-tier rate to 15%. For goods with a first-tier rate above 15%, no additional tariff will be applied.
2. It is clear that goods in transit will be subject to a 40% tariff.
3. The original tariffs for the 232 industries and other goods should still apply, not independently combined with new tariffs. The new trade tariffs are based on Executive Order No. 14257 issued on April 2nd and do not mention independent tariffs as previously stated in the tariff notification.
4. Who is not included in this adjustment?Mexico, Canada, China
Mexico will still be subject to a 25% tariff for the next 90 days, and Canada's tariff rate will increase from 25% to 35%, exempting certain goods as agreed upon by the USMCA. Mexico was originally not included in the April 2nd tariffs list, with its tariffs being made up of fentanyl and non-immigrant tariffs. On July 31st, Trump announced that Mexico's current tariff rate would be extended for an additional 90 days to give both sides more time for negotiations.
China's tariff rate will remain at 30% (20% fentanyl tariff + 10% basic tariff) until August 12th. After August 12th, if the tariffs are not extended, they will return to 54% (20% fentanyl tariff + 34% tariff), and if extended, they will continue at 30%.
5. What impact will this have on US overall tariff rates? Estimated to be around 2.7%
Compared with the previous three months' 10% basic tariff, it is estimated that the new tariffs will increase US overall tariff rates by approximately 2%. Canada's increased tariff rate will also raise US overall tariff rates by about 0.7%, for a total of 2.7%. As of June, US overall tariff rates were around 10.6%, with rates increasing to 13.3%.
Note: The calculation assumes the EU's additional tariff rate is 15%, without considering the impact of trade agreements between the US and Japan, the EU, and South Korea on key industries such as automobiles, which may result in underestimated estimates.
Risk warning: Calculated error, tariff exemption details still pending clarification.
Data source: White House, US Census Bureau, Zhongtong Securities calculation.
This article is reprinted from WeChat public account "One's Yu" (author: Zhang Yu, Xia Xue); edited by Yan Wencai of Zhongtong Securities.