Trump’s new tariff comes into effect at lower than expected rate

Peter Hoskinsand

Mitchell Labiak,Business reporters

US President Donald Trump’s new global tariffs have come into effect at 10% despite a pledge to introduce them at a higher rate.

However, according to official documents, the tariffs have been set at the lower rate from Tuesday with no directive to increase the rate issued. The BBC has contacted the White House for comment.

“I think it simply adds to the chaos and mess,” said Carsten Brzeski, an analyst with investment bank ING, referring to the fast-changing tariffs and their effects on businesses.

“In terms of uncertainty we’re back to where we were last year,” he told the BBC’s Today programme, adding there was now a higher risk that the US’s trading partners would retaliate.

“The risk of a real fully-fledged tariff war – trade war – escalation is clearly higher than last year,” he said.

An executive order signed by Trump on Friday said the temporary 10% import duty was intended to “address fundamental international payments problems and continue the Administration’s work to rebalance our trade relationships to benefit American workers, farmers, and manufacturers”.

The administration is applying the levy under Section 122 of the 1974 Trade Act, which allows the president to impose the charge for 150 days without congressional approval.

The president has argued that tariffs are necessary to reduce America’s trade deficit – the amount by which imports exceed exports. But the deficit reached a fresh high last week, widening by 2.1% compared to 2024 and hitting roughly $1.2 trillion (£890bn).

The US has already collected at least $130bn in tariffs using the 1977 International Emergency Economic Powers Act (IEEPA), according to the most recent official data.

On Friday, the Supreme Court said the president had overstepped his authority by introducing sweeping tariffs using IEEPA last year, a decision that raised the possibility that businesses could get billions of dollars in tariff refunds,

However, experts have raised doubts about the likelihood of the US handing money back, with Trump saying on Friday the issue would be fought in the courts “for the next five years”.

Supreme Court justice Brett Kavanaugh said in the ruling the refund process was likely to be a “mess”.

‘Good news, but will it stay that way?’

Fraser Smeaton, chief executive of fancy dress firm Morph Costumes, is a UK-based business that makes costumes in China and exports them to the US.

The business pays the Chinese tariff rate and he says he has not been able to invest as productively as he would want to because he’s had to keep money aside in case of changes in tariff policy.

“The fact that we’re at 10% rather than 20% is better than it was, but will it stay that way?” he asks.

Like many others, he says his business is pursuing a refund for the unlawful IEEPA tariffs, having kept track of “what we’ve paid and when we’ve paid it”.

Daniel Graham, managing director of UK-based tea business Birchall, says the unexpected lower tariff rate is welcome but the lack of clarity is not.

“Good news that it’s come in lower; bad news that it keeps changing,” he says.

The tea business founded by his great, great-grandfather in 1872 imports tea from Africa, packages it in the UK, and then exports it to countries including the US.

He says the firm has been able to deal with tariffs so far because tea is a lower-cost product than cars or other high-end goods, meaning the tariffs do not affect them as much.

However, if Trump’s tariffs were to go too high, he says the business would consider “different territories”.

‘We need to react’

His warning came as countries around the world said they were evaluating what tariffs and trade deals would stand following the decision.

The UK said no reciprocal action was “off the table” if the US did not honour its tariff deal with the UK, but added that “no one wants a trade war”.

The European Union said it would suspend its ratification of a deal struck over the summer.

“If we get worse conditions then we need to react,” said the chair of the European Parliament’s delegations for relations with the US, Brando Benifei, adding that the EU had asked the US for clarity over the tariffs.

“I think you should demand respect,” he told the Today programme. “My plea is that all the countries in the world that do not like that we are being treated this way… try to work a bit together.”

India also said it would defer previously scheduled talks to finalise a recent agreement.

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