Tariffs return to the fore as US president Donald Trump threatens a fresh semiconductor levy.
Also today in trade, Indian prime minister Narendra Modi is standing firm in face of an additional 25% rate, imposed due to its purchasing of Russian oil, and the Bank of England (BoE) has confirmed that it is cutting the interest rate to 4%.
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Trump chip threat
With the dust settling on a frenetic period of tariff announcements and bilateral trade deal negotiations, Trump is turning his attention back to product-specific levies.
Bloomberg reports that the president threatened a 100% duty on semiconductor chips, with exemptions for firms like Apple which reshore production to the US. The tech-manufacturer pledged a US$100bn investment in the US over the next four years, earning praise from Trump earlier this week.
He told reporters yesterday:
“We’re going to be putting a very large tariff on chips and semiconductors, but the good news for companies like Apple is, if you’re building in the US, or have committed to build, without question, committed to build in the US, there will be no charge.”
Modi doubles down
Following Trump’s additional 25% levy on India – a punitive measure in response to increased Indian purchases of Russian oil – prime minister Narendra Modi told reporters he would “never compromise on the interests of farmers, livestock owners and fishermen”.
His remarks only addressed the initial 25% reciprocal tariff Trump levied on the nation after it failed to reach a deal before the delayed August deadline, with the need to protect Indian farmers cited as a key blocker.
The FT reports that financial markets haven’t been spooked by Trump’s latest announcements, attributing this to tariff fatigue following a number of threats throughout the summer. Barclays bank also suggested India’s large domestic market could “limit the pain” of tariffs.
Chartered Institute perspective
Chartered Institute of Export & International Trade director general Marco Forgione discussed the impact of tariffs on CTGN Europe.
In light of the tumultuous shift in the global trade order, he outlined the implications for exporters and international trade more widely.
Legal basis?
Amid the ongoing tariff rollout, our senior content editor, Phil Adnett, has explored the legal justifications for the measures in a member-exclusive feature.
Speaking on the cases being bought against the Trump administration, Kathleen Claussen, a professor of law at Georgetown University, said:
“Although they have a lot of support, it really is an uphill battle for them with this Supreme Court, which is where ultimately this case will go”.
Russia-US meeting
Back to Russia, Trump told reporters yesterday that there is a “a very good chance” he’ll soon meet with Russian president Putin and Ukrainian leader Volodymyr Zelenskyy to broker peace between the warring nations.
Following a Moscow visit and meeting with Putin by the US’ envoy to Russia, Steve Witkoff, Trump said that there was a “good prospect” of a meeting taking place “very soon”.
Russian ambassador to the US, Yuri Ushakov, echoed Trump’s comments on Russian state media. He said that an agreement to meet had been “essentially reached”, and that together with US counterparts, he was “now beginning concrete preparations”.
A previous attempt by Trump to broker a ceasefire failed with Russian non-compliance in March, when Putin instead advanced Russia’s campaign into Ukraine with air strikes and a ground campaign.
UK rate decision
After much speculation, the Bank of England has confirmed that it cut the UK interest rate to 4%.
Stronger than anticipated growth in Q1 slowed in Q2, with uncertainty around tariffs one of the factors.
Chancellor Rachel Reeves’ 2024 Autumn Budget has also impacted business confidence, with a national insurance contribution hike limiting spending by firms.
On confirming the cut today, BoE governor Andrew Bailey expressed caution over the pace of rate cuts, with inflation currently at 3.6% and expected to peak at 4% in September.
“Our job is to ensure that inflation falls back to the 2% target once these temporary factors [rising energy and food prices] have passed, as we expect to see.
So, it remains important that we do not cut Bank rate too quickly or by too much.”
What else is in the news
· Canadian leader Mark Carney suggests he might relent on US retaliatory measures as the country’s economy feels the heat.
· Brazilian leader Lula da Silva has turned to the beleaguered WTO in a bid to find ways of challenging the 50% US tariff rate applied for partly political reasons.
Yesterday in trade
· The EU suspended its retaliation on US tariffs. Despite preparing a comprehensive package of measures targeting €93bn in US goods, a spokesperson for the bloc said those plans “back in the freezer for now”.
· South Africa criticised the US’ new 30% tariff rate. President Cyril Ramaphosa says the country will now look at “diversification of our export markets”, while a government statement hit out at the “calculation of US-South Africa ‘trade deficit’” and the “complementary nature of the bilateral trade and investment relations”.
You can read more from yesterday’s round-up here.
