Tariffs and investigations
After the Supreme Court ruled the US administration’s basis for tariffs was not legal, the US administration introduced a baseline 10% tariff under Section 122 as an interim measure, whilst preparing to transition to Section 301 investigations as a more durable legal basis once the current tariffs expire on 24 July. Unlike Section 122, which caps tariffs at 15%, Section 301 would give the President scope to impose duties without an upper limit.
In the past week, the US Trade Representative has launched two new Section 301 investigations covering manufacturing overcapacity and forced labour. These multi-country investigations will run until mid-May, after which the President will determine the US’ response. The UK is not included in the overcapacity investigation, though the EU is, with a particular focus on Germany and Ireland. However, the UK is in scope of the forced labour investigation, with the US arguing that the UK’s Modern Slavery Act does not match the requirements of US law.
Further Section 301 investigations are expected in due course, including on Digital Services Tax where the UK is also likely to be included. For now, UK tariffs remain at 10% under last May’s Economic Prosperity Deal, with expectations this will continue; however, ultimately the final decision rests with the President.
US mid-term elections
With less than eight months to go until the midterms, campaigning is already well underway. Current expectations and polls suggest the Democrats may regain control of the House and the Republicans retain the Senate, although ongoing redistricting is adding uncertainty to these projections.
A divided Congress would likely result in a ‘lame duck’ presidency, with increased congressional oversight and limited legislative progress. Whilst Republican lawmakers have not yet distanced themselves from President Trump, this may shift as the election approaches and the President’s approval rating wanes.
Affordability is very much the defining issue of the campaign, driven by rising food prices, housing costs, and healthcare. Any escalation in energy prices linked to the Middle East conflict could further intensify these pressures.
The fiscal backdrop adds another layer of risk: the federal budget expires on 30 September – just weeks ahead of the election – and a government shutdown is widely anticipated.
What this means for CBI members
Growing uncertainty over the coming weeks and months is creating more instability for firms trading with the US. From an exporting perspective, the shift to Section 301 tariffs could bring more targeted duties or tighter compliance requirements. When taken in conjunction with US election dynamics, there could be a more volatile and politicised trade environment which increases cost and pressures on businesses.
Get in touch to share your views on tariff impacts and non-tariff barriers and to join our International Working Group to help shape the CBI’s international policy priorities.