U.S. reciprocal tariffs: July 9th implementation and what happens next

The U.S. government’s 90-day pause on global reciprocal tariffs (excluding China) is set to expire on July 9th, with the pause for China ending on August 12th. This means a return to higher rates, significantly impacting import expenses for retailers.

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The situation so far has been highly dynamic, with last-minute court decisions, repeals and international policies intuited from social media posts. While negotiations on the tariff landscape are ongoing, U.S. trading partners are not necessarily rushing to meet the deadline. European negotiations are reportedly resigned to a 10% tariff, while Japan has decided to not focus on the July deadline. 

With discussions all over the world ongoing, legal challenges to existing tariffs, and the already-felt impact of increased steel and aluminum duties, we sat down with David M. Murphy, Partner, GDLSK on a recent webinar to understand how shippers can plan ahead.

What’s changing on July 9th?

Reciprocal tariffs have been temporarily reduced to 10% across the board. However, these are scheduled to “snap back” to their previous rates on July 9th for most countries, excluding China. China’s reciprocal tariff pause extends until August 12th.

Adding another layer of complexity, tariffs on steel and aluminum imports jumped to 50% on June 4th. This increase also expanded the list of affected reciprocal products and changed the calculation of duties to apply only to the steel and aluminum content, with the balance of mixed products now subject to reciprocal tariffs.

While federal courts have deemed the reciprocal tariffs unlawful under the International Emergency Economic Powers Act (IEEPA), these decisions are currently stayed pending appeal. This means tariffs remain in force, and importers must continue to pay them.

How has the market reacted to the idea of tariffs?

The initial 90-day tariff reprieve, particularly for China, triggered a significant bullwhip effect in Transpacific shipping. 

• Retailers rushed to get their back-to-school and holiday orders in before tariffs potentially spiked, leading to increased demand and capacity issues on this route. 
• This surge, in turn, led carriers to pull capacity from other major trade lanes, such as Asia-Europe, tightening space and impacting those routes as well.

Despite the peaks in Trans-Pacific demand, the market is already seeing a “retread,” indicating a full bullwhip effect with subsequent troughs. 

Data from the market shows impact in the U.S. logistics market, including:

• Truckload freight volumes down 13.37% 
• Intermodal freight volume down 7.42%.
• Transatlantic cargo up 15% increase due to frontloading

For importers, the stakes are high:

• Cost Increases: Steel and aluminum tariff hikes are already impacting procurement costs, and the end of the reciprocal tariff pause will further raise import expenses.
• Customs and compliance pressure: Shifting U.S. tariffs and increased scrutiny on country of origin are creating a compliance headache for businesses, with customs enforcement on the rise. 
• Supply chain disruptions: The ongoing tariff changes and associated market reactions can disrupt supply chains, necessitating agile and adaptable strategies.

The future of U.S. tariffs

The U.S. is actively engaged in trade negotiations with various partners. 

• While the President claims an agreement has been reached in principle between the U.S. and China, addressing Chinese rare earth export restrictions and U.S. tech export limits, details remain scarce, and the total tariff rate for China post-August 12th is unclear. 
• India and the U.S. are also said to be finalising trade negotiations, with India hopeful of reaching an agreement before July 9th to avoid a potential jump to a 26% duty rate. 
• Canada and Mexico, major suppliers of steel and aluminum to the U.S., have been hit with the 50% tariff.

The U.S. Treasury has indicated ongoing discussions with 18 key trading partners, who may receive extensions beyond July 9th if negotiating in “good faith”. However, the administration has demonstrated a willingness for “overnight implementation” of tariff changes, suggesting that delays are unlikely for countries not actively negotiating. 

That said, some observers believe that the administration will delay implementation.

Dates to bear in mind for tariff calculations

• Retailers importing from countries outside these key partners should model their costs based on the rates that were in effect on April 4th, as these are the most likely to “snap back”.
• The “consumption date” for tariffs refers to the date goods are fully cleared by customs, not the pre-filing or entry date. 
• Shippers must coordinate with partners to ensure goods are entered for consumption before the tariff deadlines.

How to plan your supply chain for a new world of tariffs

Managing your supply chain in the new tariff regime will require precise coordination and attention to detail across products and procurement networks. 

1. Judge your exposure: The first step for every retailer will be a thorough data audit to understand potential tariff impacts across SKUs, countries of origin, classifications, and valuation methods.
2. Close compliance gaps: Ensure all documentation accurately supports origin and valuation declarations. Be wary of any supplier offering to help avoid country of origin or valuation – customs is aware of these practices.
3. Update pricing: While commercially challenging, shippers will need to consider adjusting prices according to updated tariffs and work to isolate non-dutiable costs from customs values to avoid overpaying.
4. Consider Facilities for Duty Delay: While Foreign Trade Zones (FTZs) have limitations under the current orders due to “privilege foreign” rules, bonded warehouses can offer a way to delay duty payments until goods are withdrawn for consumption. This can be beneficial for cash flow, especially with high duty rates.

Planning and executing an agile logistics strategy starts with reliable data, clear communication and measurable goals. Zencargo is working with our customers to help them build flexible, cost-effective strategies to manage the uncertainty ahead.

• Aligned communication: Zencargo’s platform brings every step of your supply chain together to help teams help each other, working in one direction. Connect internal buyers, logistics teams and finance to manage orders, lead times and budgets as well as manufacturers and transport partners.
• Customs expertise: Our dedicated team can help you manage tariff changes, origin scrutiny, and valuation challenges with targeted support, keeping you compliant.
• Targeted solutions: Our experienced professionals can help you understand your trade data, scenario plan for regulatory uncertainty and align your pricing strategies with tariff exposure.

To find out how Zencargo can help you manage your supply chain through whatever comes next, get in touch with our team.