DAVOS, Switzerland: Imagine a world where the relationships and roles that have defined the global order for the past three quarters of a century have been turned on their head. Communist China is the world’s champion of free trade and globalization. The US has turned its back on liberal values and is cozying up to Russia. And Europe, spurned by Washington and London, is turning to Beijing to fill the void.
Welcome to the World Economic Forum (WEF) in Davos circa 2017. This is not a dream. It is, or may be, the new reality in a world shaken by economic and geopolitical tremors not seen since the fall of the Berlin Wall, or possibly World War II.
“Cautiously pessimistic” is how Robin Niblett, director of the London-based think tank Chatham House described the mood.
Federica Mogherini, EU foreign policy chief, spoke of a new paradigm in foreign policy. “We have been used to friendships, natural partnerships based mainly on values and history and probably we are entering into a phase where we will be maybe more pragmatic, transactional, some say emotionless,” she told Reuters.
Chinese President Xi Jinping stole the show in Davos with a speech that made it clear Beijing is eager to fill any vacuum in global leadership arising from the arrival of Donald Trump in the White House. His address to a vast, packed hall, in which he defended globalization, free trade and multilateralism, was both diplomatic and opportunistic. Xi took indirect digs at Trump, only days before his inauguration. And he sent an unmistakable message to a rudderless Europe: China is here for you.
Europe and China
“The Chinese have seized the opportunity,” said a senior European Commission official. “They have developed such deep knowledge about us in the last 10 years that they know exactly how to tweak a message to a Western audience that is at a loss because of Brexit and Trump.”
“Whichever way you look at it, the EU and China will have to lead on climate change,” the official said. “If we want to try to maintain a world economic model based on openness and free trade, it could be led by the EU and China if we do it smart.”
This is a new world, Niblett said, in which the Europeans see Russia as a threat and China as an opportunity, while Trump sees China as a threat and Russia as an opportunity.
But are we really there yet? Perhaps not. Much depends on Trump, who stayed away from Davos on the week of his inauguration but dominated discussions.
Dollar dilemma
On economic policy, something will also have to give. During his presidential campaign, Trump accused the Federal Reserve of keeping interest rates too low for too long.
Last month it began raising them on expectations of a pick-up in growth and inflation, spurred on by Trump’s plan to spend on infrastructure and slash taxes.
Now that is fueling expectations of a rise in the dollar, and Trump is calling dollar strength a problem, a message echoed in Davos by Anthony Scaramucci, the one member of his team who made the trek to Switzerland. Oddly, for a meeting that takes place in Europe and has traditionally lured leaders from across the EU, it was the Europeans that made the least noise, reduced to bystanders as Xi spelled out his vision and speculation swirled about Trump.
Germany’s Angela Merkel had signaled she would come but then decided against it. To make matters worse, British Prime Minister Theresa May turned up and explained to everyone why leaving Europe would make Britain stronger.
Davos offers unsettling glimpse of new world order
Davos offers unsettling glimpse of new world order
Trump pivots to new 10 percent global tariff, new probes after Supreme Court setback
WASHINGTON: US President Donald Trump moved swiftly on Friday to replace tariffs struck down by the Supreme Court with a temporary 10 percent global import duty for 150 days while opening investigations under other laws that could allow him to re-impose the tariffs.
Trump told a briefing he was ordering new tariffs under Section 122 of the Trade Act of 1974, duties that would go on top of surviving tariffs. These would partly replace tariffs of 10 percent to 50 percent under the 1977 International Emergency Economic Powers Act that the top court declared illegal.
Trump said later on Truth Social that he had signed an order for the tariffs on all countries “which will be effective almost immediately.”
A spokesperson for the US Customs and Border Protection agency declined comment when asked when collections of the illegal IEEPA tariffs would halt at ports of entry.
Trump’s Treasury Secretary, Scott Bessent, said the new 10 percent duties and potentially enhanced tariffs under the Section 301 unfair practices statute and the Section 232 national security statute would result in virtually unchanged tariff revenue in 2026.
“We will get back to the same tariff level for the countries. It will just be in a less direct and slightly more convoluted manner,” Bessent told Fox News, adding that the Supreme Court decision had reduced Trump’s negotiating leverage with trading partners.
The never-used Section 122 authority allows the president to impose duties of up to 15 percent for up to 150 days on any and all countries to address “large and serious” balance of payments issues. It does not require investigations or impose other procedural limits. After 150 days, Congress would need to approve their extension.
“We have alternatives, great alternatives,” Trump said. “Could be more money. We’ll take in more money and we’ll be a lot stronger for it,” Trump said of the alternative tools.
While the administration will likely face legal challenges, the Section 122 tariffs would lapse before any final ruling could be made, said Josh Lipsky, international economics chair at the Atlantic Council, a think tank in Washington.
Trump said his administration also was initiating several new country-specific investigations under Section 301 of the Trade Act of 1974 “to protect our country from unfair trading practices of other countries and companies.”
Trump’s shift to other statutes, including Section 122, while initiating new investigations under Section 301 had been widely anticipated, but these have often taken a year to complete.
The 10 percent tariffs only last five months, but Trump said that would allow his administration to complete investigations to enhance tariffs.
Asked if rates would ultimately end up being higher after more probes, Trump said: “Potentially higher. It depends. Whatever we want them to be.”
He said some countries “that have treated us really badly for years” could see higher tariffs, whereas for others, “it’s going to be very reasonable for them.”
The fate of dozens of trade deals to cut IEEPA-based duties and negotiations with major US trading partners remained unclear in the wake of the ruling, though Trump said he expected many of them to continue. He said deals that are abandoned “will be replaced with the other tariffs.”
“This is unlikely to affect reciprocal trade negotiations with our trading partners,” said Tim Brightbill, trade partner with the law firm Wiley Rein in Washington. “Most countries would prefer the certainty of a trade deal to the chaos of last year.”
US Trade Representative Jamieson Greer said details on new Section 301 investigations would be revealed in coming days, adding these are “incredibly legally durable.” Trump relied on Section 301 to impose broad tariffs on Chinese imports during his first term.
The Supreme Court’s ruling puts about $175 billion in tariff revenue collected over the past year subject to potential refunds, according to estimates provided to Reuters by Penn-Wharton Budget Model economists.
Asked if he would refund the IEEPA duties, Trump said, “I guess it has to get litigated for the next two years,” a response indicating that a quick, automatic refund process was unlikely.
Speaking in Dallas, Bessent told business leaders that since the Supreme Court did not provide any instructions on refunds, those were “in dispute,” adding: “My sense is that could be dragged out for weeks, months, years.”
Part of the reason why Trump opted for IEEPA to impose tariffs last year was because the 1977 sanctions statute allowed fast and broad action with almost no constraints. Until Friday, he had also used it as a cudgel to swiftly punish countries over non-trade disputes, such as Brazil’s prosecution of former president and Trump ally Jair Bolsonaro.
While Trump’s new investigations will prolong tariff uncertainty, they could inject more order into his tariff policy by forcing him to rely on trade laws that have well-understood procedures, research and public comment requirements, and longer timelines, said Janet Whittaker, senior counsel with Clifford Chance in Washington.
“The administration will need to follow these set processes, conduct the investigations, and so for businesses, that means more visibility into the process,” Whittaker said.
Robert Lighthizer, Trump’s trade chief during his first term, said on Fox News that he hoped Congress would revise decades-old trade laws to give Trump new tariff tools.
“I think there’s consensus in this Congress that we have to change the old system, and I hope that they will take this as an opportunity to do that,” Lighthizer said.
