In Trade War Déjà Vu, Retailers Rush Imports to Avoid New Trump Tariffs

New tariffs, same old story.

US retailers have spent the summer importing as many goods as possible to capitalize on a small window of time before a new batch of tariffs that are expected next month, driving shipments toward a record in July. It’s the same playbook the industry ran last year to beat wide-ranging levies imposed by the White House that were later overruled by the Supreme Court. 

Tariff Timeline

When SCOTUS determined in February that the president lacks the authority to levy unilateral import taxes under the International Emergency Economic Powers Act, the White House responded by imposing a new batch of tariffs under a different law, Section 122 of the Trade Act of 1974. The Trump administration said the temporary 10% blanket tariff was needed to address “large and serious balance-of-payments deficits.” America’s old importing habits die hard, though, and the US trade deficit surged to $77 billion in May, the highest in 14 months, according to the Commerce Department.

With the Section 122 tariffs due to expire this week, the White House has already lined up its next tariff stopgap. Last month, the US Trade Representative said a different clause in the Trade Act of 1974, Section 301, allows it to impose tariffs of up to 12.5% on 60 different countries it says have failed to curb trade in goods made with forced labor. (Some countries have disputed the charge.)

To protect their profit margins, retailers are racing to obtain inventory needed later in the year:

• Imports in June are expected to have reached 2.33 million TEUs (that’s 20-foot equivalent shipping container units), according to a Global Port Tracker report from the National Retail Federation and Hackett Associates. That would be more than an 18% year-over-year increase.
• It follows 2.24 million TEUs in May, a roughly 15% surge. July is expected to draw 2.47 million TEUs, according to the tracker, beating a monthly record previously set in May 2022.

RefundMe: In the meantime, retailers are losing some of their potential tariff savings to heightened shipping costs. Spot shipping rates from Shanghai to New York City climbed 74% year over year last week and surged more than 120% from Shanghai to Los Angeles, according to maritime consultancy Drewry’s World Container Index. Retailers have a bit of a buffer, however: the refunds from overturned Liberation Day tariffs rejected by the Supreme Court. Customs officials have already certified $71 billion in refunds, which includes interest, according to a court filing recently spotted by Axios, and are processing more than $100 billion in refunds altogether.