Impact of US Supreme Court Ruling on Global Tariffs: A New Chapter for UK and EU Trade Relations

The US Supreme Court's recent ruling against Donald Trump's global tariffs has sent ripples through international trade, prompting both Britain and the European Union to assess the situation's implications. A spokesperson for Downing Street confirmed that the UK government is collaborating with the US to understand how the Supreme Court's decision will affect the UK's trading position, and they anticipate that their privileged trading relationship with the US will persist. The UK was the first nation to establish a tariff agreement with the US, which currently stands at 10% on all imports from Britain, in contrast to the EU's blanket rate of 15%. Meanwhile, the EU has expressed intentions to analyze the ruling and is committed to reducing the tariffs imposed by the US on European exports. Last July, the EU agreed to the 15% tariff rate during discussions at Trump’s Scottish golf course, yet 50% tariffs remain on steel imports. The EU stated, "We remain in close contact with the US administration as we seek clarity on the steps they intend to take considering this ruling. Businesses on both sides of the Atlantic depend on stability and predictability in the trading relationship. Thus, we continue to advocate for low tariffs and work towards their reduction." While companies affected by the tariffs may be able to seek refunds, the process remains unclear. It seems that tariffs on products such as steel will likely remain unchanged, although experts have warned that the White House may consider broader product-based tariffs on commodities like computer chips and agricultural products, potentially leading to even higher tariffs. John Denton, Secretary-General of the International Chambers of Commerce, stated that there is new uncertainty for companies looking to trade with the US. He noted, "Many businesses will welcome the prospect of refunds following today's ruling, especially given the significant strain that the International Emergency Economic Powers Act (IEEPA) tariffs have placed on corporate balance sheets in recent months. However, companies should not expect a simple process, as the structure of US import procedures indicates that claims will likely be administratively complex." William Bain, head of trade policy at the British Chambers of Commerce, commented that while the Supreme Court clarified the executive powers used to raise tariffs, it still leaves businesses in uncertain waters. He warned that Trump could exert power through the 1974 Trade Act to impose even higher tariffs than the additional 10% levies already affecting the UK and Australia in several goods sectors. Despite these challenges, Bain noted that the recent agreement on pharmaceuticals offers hope for using the economic prosperity deal to ensure that the UK receives the preferential treatment detailed within it. An insider from the aerospace industry expressed relief over the declaration but also concern regarding ongoing geopolitical tensions, stating, "I don't think it's that helpful for geopolitical tensions. We still face quite an unpredictable US administration, and public reprimands could complicate some trade relationships." On the financial markets, the UK's FTSE 100 index reached a new intraday high following the Supreme Court's ruling announcement, closing up 0.56%. Exporters were among those to see gains; for instance, drinks giant Diageo, whose Scottish whisky and Mexican tequila brands have faced Trump's tariffs, saw its stock rise by 3.9%, while luxury fashion brand Burberry saw a 3.3% increase. Additionally, some European car manufacturers benefitted, with Stellantis, which includes brands like Citroën, Fiat, and Vauxhall, experienced a 2% rise in shares. In the US, government bond prices fell, increasing borrowing costs as investors grappled with the potential loss of income from tariffs and the possibility that US companies could be eligible for refunds on import costs, resulting in a slight weakening of the dollar. Related Sources: • Source 1 • Source 2 • Source 3