Although US trade policy may be unpredictable at times, tariffs are here to stay, at least until 2025. Despite various legal challenges to the International Emergency Economic Powers Act (IEEPA) tariffs, the Biden administration has indicated that it will not alter its current stance. This announcement comes as the international market continues to face increased volatility, most notably in the Middle East.
Effective US MFN tariff rates are set to remain high, too. This decision further highlights their uncompromising stance on global trade relations. After recent trade deals, analysts have declared these agreements even more so “largely symbolic.” They think these agreements have had a limited impact on the structural and systemic dynamics of U.S. trade policies. These developments signal that U.S. tariffs are not likely to be lifted in the near future, maintaining the current economic landscape for businesses engaged in international trade.
Global markets are responding to these fast-moving developments, forcing the EUR/USD currency cross lower. It is currently trading holding firm around 1.1550 as a risk-off mode sets in. Investors are understandably on edge, particularly as Israeli-Palestinian tensions grow in the Middle East. The Strait of Hormuz is the world’s most important oil chokepoint. This cramped chokepoint carries upwards of 20% of the world’s seaborne oil trade, creating a vital hot-spot of tension.
The continued conflict in the area has even sparked fears of attacks on this crucial shipping lane. Iran has vowed revenge against those it views as threats. This heightens fears for continued instability in the region and its impact on the global oil supply. The global impacts of these tensions would be severe on international markets and trade flows.