It’s a busier edition than normal for the ‘Day in Trade’. Firstly, a tanker is reportedly on fire in the Northern Gulf after Iran said the US will “bitterly regret” its actions.
Secondly, a senior White House official has said that a global tariff rate of 15% will “likely” come into effect this week.
Thirdly, Brussels has released its ‘Made in Europe’ plan, fundamentally reshaping the EU’s economic approach.
Middle East war
The war in the Middle East has widened, after Iran’s government said the US will “bitterly regret” sinking one of its naval vessels. Yesterday, a US submarine sank the Iranian warship Iris Dean off the southern coast of Sri Lanka, resulting in the deaths of at least 87 sailors.
“Mark my words: The US will come to bitterly regret precedent it has set.”
Both sides continue to trade blows, with third-party allies like Kuwait, Saudia Arabia and the UAE caught in the crossfire. Iran’s Revolutionary Guards have claimed to have hit a US tanker in the Gulf, while also announcing it has hit Kurdish militia targets in Iraq.
The UK Maritime Trade Observatory reported a number of incidents yesterday, including several attacks on tankers around the UAE, Oman and Kuwait. No casualties or fires aboard the ships have yet been reported, but these came before this morning’s report of a further attack.
China has instructed its top refiners to halt diesel and gas exports, following disruption to the country’s supply of energy through the Strait of Hormuz. The FT reports that the Gulf’s oil producers are racing to resume exports before their storage tankers fill up, with Saudia Arabia only having two weeks before it would run out of space.
An attempt to rein in the war by US legislators has failed, as the Senate voted 53-47 against a measure that would have required congress to approve any further action.
Higher US tariffs ‘likely’ this week
US treasury secretary Scott Bessent said that the world should expect 15% tariffs “likely sometime this week”.
There had been confusion over whether a 10% or 15% rate would apply, following the US Supreme Court ruling that the previous ‘reciprocal’ tariff regime was illegal. Speaking to CNBC, Bessent confirmed that these would last for 150 days under section 121 of the US Trade Act 1974.
“It’s my strong belief that the tariff rates will be back to their old rate within five months”, he said, referring to investigations launched by his department which are another route to imposing the previous system of tariffs.
Legal analysts previously told Global Trade Today that Trump was likely to attempt to re-impose the tariffs via other means, with a new legal challenge facing different barriers to success.
Bloomberg reports that the Brussels has received assurances that a 10% rate will apply to EU exports to the US rather than the higher 15% rate.
Industrial Accelerator Act
The legislation for the EU’s ‘made in Europe’ plan has been released, marking a change in how the EU approaches its economic policy.
The European Commission (EC) has published its proposal, officially named the Industrial Accelerator Act (IAA). The IAA will, according to a press statement, “increase demand for low-carbon, European-made technologies and products.”
“Today marks a major step in the renewal of the European economic doctrine so the Union is fit for the 21st century, as recommended by the Draghi report,” said Stéphane Séjourné, executive vice-president for prosperity and industrial strategy at the EC.
“Facing unprecedented global uncertainty and unfair competition, European industry can count on the provisions of this Act to boost demand and guarantee resilient supply chains in strategic sectors.”
The IAA includes simplified permission for industrial projects, more government support and conditions for investment in EU supply chains. The proposal will now go to the European Parliament and Council before it becomes adopted.
The EU has insisted that “valued allies” will be able to participate in some aspects of the EU’s supply chains. The Guardian reports that Brussels could allow countries like the UK and Japan to participate in the European markets if there is reciprocal access.
Other news
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The Singapore-European Free Trade Association (EFTA) free trade agreement entered into force for Singapore and Norway yesterday (4 March)
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The partner of a Labour MP was one of three men arrested on suspicion of spying for China. East Kilbride and Strathaven MP, Joani Reid, has denied knowledge of any wrongdoing of her husband, David Taylor
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Charles Parton, an expert on China at the Council on Geostrategy, has released analysis on the proposed Five Year Plan set to be approved at the end of the National People’s Congress in Beijing
Yesterday in trade
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UK chancellor Rachel Reeves’ fiscal headroom is being eroded by the conflict in the Middle East, according to credit ratings agency Moody’s
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Her Spring Statement on Tuesday (3 March) won plaudits for including a focus on EU cooperation
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However, the Labour government’s approach to rebuilding the UK-EU relationship was criticised by MPs from the Foreign Affairs committee
Read yesterday’s Day in Trade.
