The Early Dealer Got Burned
The Early Dealer Got Burned
The Early Dealer Got Burned
At 12:01 a.m. on Tuesday morning, a flat 10 percent tariff hit every country that ships goods into the United States, and the White House was already working on a formal order to raise it to 15 percent. The rate applies to everyone. Britain, Brazil, China, Japan, the EU — the same number, the same wall, no exceptions worth the name. And that one fact has turned the whole trade map on its head, because the countries that moved first to cut deals with the Trump administration are now worse off than the countries that held out.
Start with Britain. Last year, British officials took a conciliatory line and locked in a 10 percent rate on their exports to the United States, and the Trump administration held the deal up as proof that cooperation worked. Britain had what looked like a good seat at the table. But the Supreme Court struck down the tariffs that deal was built on, and the new replacement levy — which must be applied at one flat rate to all countries under Section 122 of the 1974 Trade Act — is set at 15 percent. Britain bargained for 10 and now faces 15. The deal bought nothing.
The European Union ran into the same wall. EU officials negotiated a trade truce last summer that capped duties on European goods at 15 percent and lowered European barriers on American exports in return. The EU made real concessions. But the court ruling wiped the board, and under the new flat tariff the EU could face a rate at or above what it already agreed to — without getting anything back for the cuts it offered. On Monday the European Parliament froze ratification of the whole agreement and demanded clarity before going any further.
India stopped too. Officials in New Delhi called off talks on an interim deal that had been set for this week in Washington.
Now look at who gained. China never cut a deal. Brazil never cut a deal. Both had been hit with some of the heaviest tariffs under the old system — and the Supreme Court struck all of those down. Under the new flat rate, China and Brazil face the same 15 percent as everyone else, which for them is a sharp drop from what they had been paying. The countries that held out or never came to the table at all now sit at the same level as the countries that made concessions to get there.
This is worth a second look, because the shape of it matters. The administration is now reaching for three or four different legal tools to rebuild its tariff wall — Section 122 for the short term, Section 232 investigations into batteries and plastics and electrical equipment and industrial chemicals for the medium term, and Section 301 probes into what the US Trade Representative called discriminatory pricing and digital services taxes. Each tool is slower, narrower, and more likely to be challenged in court than the emergency powers the Supreme Court just took away. The 150-day clock on the current tariff runs out in late July, and Congress would have to vote to keep it going after that.
What a CEO should see here is not the noise but the shape of the ground beneath it. The old tariff system gave the White House the power to set different rates for different countries, and that power was the lever behind every deal it struck. That lever is gone. The replacement tools do not give the same power. Section 122 must be applied at one rate to all countries — there is no room to reward friends and punish holdouts. The deals that were built on the old system are now unmoored, and the countries that gave the most to get them have the least to show for it.
A 64 percent majority of Americans now say they disapprove of the administration's handling of tariffs. The average effective tariff rate sits around 10 percent and may climb to 12 or 13 under the higher levy. The EU, India, and Britain are all pulling back from the table. And the administration's own lawyers told the Supreme Court, in their briefs last year, that Section 122 was not the right tool for current conditions — which is the same argument that will now be used against them in the next round of court challenges.
The force at work here is old and simple. When the rules shift after the deal is struck, the early mover pays the price. The holdout keeps his options. And the table itself is no longer what it was.