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Despite the challenges posed by higher US tariff rates, the global economy will remain largely resilient against the uncertainty and the disruptions in global trade flows, according to QNB.At the beginning of the year, the global outlook pointed to steady economic growth, against a backdrop of cautious optimism. Tailwinds included the policy rate cutting cycles by major central banks, resilient growth of the US economy, cyclical recoveries in China and the Euro Area, and constructive overall investor sentiment, QNB noted in an economic commentary.Growth in both Advanced Economies (AE) and Developing Economies (DE) was initially expected to remain unchanged compared to last year, adding up to a world economic expansion rate of 3.3%.But the optimistic tone began to shift as the new US administration embarked on an aggressive agenda of policy change, with sweeping implications for the global macroeconomic landscape.On April 2, a day that came to be known as “Liberation Day,” President Trump announced sweeping tariffs, including a 10% baseline levy on all imports, and higher rates on selected countries.Financial markets reacted sharply to the announcements, with global stocks tumbling on fears of broader and deeper trade wars, as well as tainted policy credibility.The outlook narrative then debated the odds of a world recession. At its worst moment, growth expectations for the global economy dropped from the recent peak by 0.5 percentage point (p.p.) to 2.8%, a significant downgrade in a very short period of time.Since then, asset prices have recovered, with key indices reaching new highs, as the more negative trade-war scenarios were ruled out, AI-driven growth tailwinds regained the spotlight, and corporate profits remained robust.According to QNB, growth expectations have stabilised and even slightly recovered. The group of AE, which represents 40% of the world economy, is now expected to grow 1.5% this year, from a low of 1.4%.More significantly, after falling 0.5 p.p. to 3.7%, expectations for growth in the Developing Economies (DE) climbed to 4.1%, re-gaining most of the previous losses.Thus, recovering growth projections across the AE and DE groups are contributing to improving the outlook for global economic growth, which is expected to reach 3%.In QNB’s view, despite the challenges posed by higher US tariff rates, the global economy will remain largely resilient against the uncertainty and the disruptions in global trade flows.QNB has discussed two key factors that support its view of an improving global economic outlook.First, the US administration has concluded a first set of negotiations, which helped moderate uncertainty and discard the most extreme negative scenarios. The initially unyielding position of President Trump shifted towards pragmatism as deals were reached with the UK, Japan, Indonesia, Vietnam, the Philippines, and the EU, among others, narrowing the range of potential tariff rates for the rest of the world. Furthermore, even as the US has become more protectionist, the rest of the world is largely continuing to move in the opposite direction.From the European Union (EU) to Asia and Latin America, most major economies continue to view trade as essential to their growth models, and are actively pursuing deeper integration via new or deeper trade agreements. Even as the world adjusts to a more protectionist US, the outlook on global trade has improved, contributing to a less pessimistic growth scenario.Second, monetary policy easing cycles by major central banks will contribute to improve overall financial conditions and the stability of the global economy. Bringing inflation under control has allowed the US Federal Reserve and the European Central Bank (ECB), the two most important central banks in the AE, to start their interest rate cutting cycles.In the US, the Federal Reserve is set to cut its policy interest rate by 125 basis points over the next year, while the ECB could implement one more cut, bringing its benchmark rate to 1.75%. Stock markets have staged a notable recovery backed by resilient corporate earnings, while corporate credit spreads are narrowing, signalling improved market sentiment and easier credit for firms.The Financial Conditions Index (FCI) provides an informative summary of the overall state of markets, and is signalling that improving conditions are reducing borrowing costs for households and business, adding support to consumption and investment.“All in all, the global outlook initially deteriorated sharply after the US tariff announcements, but pessimism has gradually subsided on the back of improving prospects for international trade and better financial conditions supporting consumption and investment, leading to a broad based upgrade of performance expected across the AE and the DE,” QNB added.

In rolling out the most aggressive tariff regime in the US in nearly a century, President Donald Trump has leaned heavily on emergency powers that had never been used before to impose import taxes. Two federal courts ruled in May that he wrongfully invoked the International Emergency Economic Powers Act to justify sweeping “reciprocal” duties targeting America’s trading partners, as well as separate levies aimed at China, Canada and Mexico. The Trump administration appealed both decisions. Its appeal in the case brought by Democratic-led states and a group of small businesses went before the US Court of Appeals for the Federal Circuit, which upheld in August that Trump exceeded his authority by using IEEPA to impose tariffs. The duties remain in effect for now and the appeals process could go all the way to the Supreme Court. If the IEEPA tariffs are ultimately deemed unlawful, the vast majority of the levies Trump has imposed so far in his second term could come undone. But there are other means by which his tariffs campaign could continue. While the Constitution gives Congress the power to levy taxes and duties, lawmakers have delegated some of their authority to the executive branch through a number of statutes. These laws give Trump at least five fallback options to try to justify his tariffs. In general, these alternatives come with more limits and procedural restrictions, meaning there’s less leeway for Trump to impose tariffs virtually immediately and set the rates as high as he chooses. “The difference between them is how much process they require,” said Ted Murphy, co-leader of the global arbitration, trade and advocacy practice at law firm Sidley Austin. “Why they chose IEEPA, I think in part, was because it comes with no required process. It’s a determination that the president can make on his or her own initiative: There’s no hearing, there’s no report, there’s no nothing.” Section 232 of the Trade Expansion Act of 1962 What it permits: Section 232 gives the president power to use tariffs to regulate the import of goods on national security grounds. Limitations: These tariffs can’t be imposed instantly — the president can only act after an investigation by the Commerce Department determines that importing these products threatens to impair national security. After a probe is initiated, the Commerce Secretary must report the conclusions to the president within 270 days. Unlike the blanket tariffs Trump imposed using IEEPA, Section 232 is designed to be applied to imports in individual sectors, rather than from entire countries. There’s no cap on the level of the duties or their duration. Current uses: Trump used Section 232 to set tariffs on steel and aluminium imports in 2018 during his first term in office. He resumed his focus on these two industrial metals upon returning to the White House, leaning on the findings of the 2018 investigations to impose 50% tariffs. He also introduced levies on imports of automobiles and auto parts based on the conclusions of a Section 232 investigation completed in 2019. Trump directed the Commerce Department in February to open a Section 232 investigation into copper imports, and after receiving the findings announced that a 50% tax would be charged on deliveries of semi-finished and so-called derivative copper products from August 1. There could be more Section 232 tariffs on the way. The Commerce Department has open investigations into the national security effects of imports of timber and lumber, semiconductors, pharmaceuticals, trucks, critical minerals, commercial aircraft and jet engines, unmanned aircraft systems, polysilicon (a key raw material for solar panels), and wind turbines. Section 201 of the Trade Act of 1974 What it permits: Section 201 authorises the president to impose tariffs if an increase in imports is causing or threatening serious injury to American manufacturers. Limitations: Section 201 tariffs can’t be rolled out immediately either. The US International Trade Commission must first conduct an investigation and has 180 days after a petition is filed to deliver its report to the president. Unlike the Section 232 probes, the ITC is required to hold public hearings and solicit public comments. Section 201 is also focused at the industry level rather than broad taxes on all imports from trading partners. The tariffs are capped at 50% above the rate of any existing duties. They can be imposed for an initial period of four years and extended to a maximum of eight years. If the levies are in place for more than a year, they must be phased down at regular intervals. Current uses: Trump used Section 201 to place tariffs on imports of solar cells and modules, as well as residential washing machines in 2018. The solar tariffs were extended and modified by President Joe Biden; the washing machine tariffs expired in 2023. Section 301 of the Trade Act of 1974 What it permits: Section 301 allows the US Trade Representative, under the direction of the president, to impose tariffs in response to other nations’ trade measures it deems discriminatory to American businesses or in violation of US rights under international trade agreements. Limitations: Again, this avenue doesn’t enable an instant rollout of tariffs as the USTR must first conduct an investigation. The agency is required to request consultation with the foreign government whose trade practices are being probed, and solicit public comments, which can result in public hearings. There’s no limit on the tariff rate that can be introduced. The duties automatically terminate after four years unless USTR receives a request for continuation, in which case the levies can be extended. Section 301 investigations focus on one country, but USTR can conduct parallel reviews of a common concern that relates to multiple countries. It did so during Trump’s first term, looking at the digital services taxes of 11 jurisdictions, including France and the UK. Current uses: The first Trump administration used Section 301 to impose tariffs on hundreds of billions of dollars of imports from China in 2018, following an investigation into China’s policies on technology transfer, intellectual property and innovation. The duties on China are still in effect — though some are the subject of ongoing legal challenges — and during his term Biden increased tariffs on certain products from China including electric vehicles. In July of this year, USTR initiated a Section 301 investigation into Brazil, looking at the country’s trade and IP policies, deforestation practices, and ethanol market access. As that probe proceeds, Trump announced that 50% tariffs on many imports from Brazil would commence on August 6 and these duties were imposed using IEEPA. Section 122 of the Trade Act of 1974 What it permits: Section 122 gives the president the ability to impose tariffs to address “fundamental international payments problems”. Limitations: The president doesn’t need to wait for a federal agency to conduct an investigation before he can implement the tariffs. The conditions for using Section 122 powers are to remedy “large and serious” US balance-of-payments deficits, to help correct an international balance-of-payments disequilibrium, or to prevent an “imminent and significant” depreciation of the dollar. The tariffs are capped at 15% and can only be imposed for up to 150 days. Congressional approval is required to keep the duties in place for longer. Current uses: Section 122 has never been used before. In one of the challenges to Trump’s use of IEEPA to impose tariffs V.O.S. Selections, Inc v. Trump, the case brought by five small business owners and 12 states the US Court of International Trade pointed out that if Trump wanted to impose tariffs to remedy trade deficits, this would fall under the purview of Section 122, not IEEPA. Section 338 of the Smoot-Hawley Tariff Act of 1930 What it permits: The Depression-era provision empowers the president to introduce tariffs on imports from nations “whenever he shall find as a fact” that these countries impose unreasonable charges or limitations, or engage in discriminatory behaviour against US commerce. Limitations: There’s no prerequisite for a federal agency to conduct an investigation before the president can apply tariffs. Section 338 duties are capped at 50%. Current uses: Section 338 has never been used before to impose tariffs. If Trump were to lean on this provision, such an unprecedented move may invite legal challenges. The possibility that Trump could tap Section 338 has alarmed some Democrats in the House of Representatives five lawmakers introduced a resolution in March to repeal this section of the 1930 law.

Most of President Donald Trump’s global tariffs were ruled illegal by a federal appeals court that found he exceeded his authority by imposing them through an emergency law, but the judges let the levies stay in place while the case proceeds.The US Court of Appeals for the Federal Circuit on Friday upheld an earlier ruling by the Court of International Trade that Trump wrongfully invoked the law to hit nations across the globe with steep tariffs. But the appellate judges said the lower court should revisit its decision to block the tariffs for everyone, rather than just the parties in the case.“The statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax,” the court said.Friday’s 7-4 decision extends the suspense over whether Trump’s tariffs will ultimately stand. The case had been expected to next go to the Supreme Court for a final ruling. The administration could now turn to the justices, who have largely backed the president on other matters. But the White House could also let the Court of International Trade revisit the matter first.‘Total Disaster’ “ALL TARIFFS ARE STILL IN EFFECT!” Trump said in a post on Truth Social shortly after the decision was issued.“Today a Highly Partisan Appeals Court incorrectly said that our Tariffs should be removed, but they know the US of America will win in the end,” the president said. “If these Tariffs ever went away, it would be a total disaster for the Country.”Trillions of dollars of global trade are embroiled in the legal fight. A final ruling tossing Trump’s tariffs would upend his much ballyhooed trade deals. The administration also would be forced to contend with demands to refund tariffs that were already paid.In telling the lower court to reconsider how broadly its ruling should apply, the Federal Circuit pointed to the Supreme Court’s recent decision on Trump’s efforts to restrict automatic birthright citizenship. That ruling barred federal judges from issuing so-called universal injunctions that go beyond the parties in a case and apply nationwide.”But the Supreme Court left open the possibility that judges in some cases could use other legal mechanisms to reach the same outcome. Indeed, several judges re-issued nationwide injunctions against Trump’s birthright citizenship restrictions, saying the sweeping orders were still appropriate under the new Supreme Court standard.The two cases at the centre of the ruling were filed by Democratic-led states and a group of small businesses. They have argued all along that a ruling against the tariffs must apply across the nation. That issue may now become a focus of further arguments.The tariff cases challenged Trump’s use of the International Emergency Economic Powers Act to sidestep Congress and issue the tariffs, arguing that he did so to force trading partners to negotiate rather than to address any legitimate national emergency. IEEPA does not mention tariffs and had never been used in such a manner.“Notably, when drafting IEEPA, Congress did not use the term ‘tariff’ or any of its synonyms, like ‘duty’ or ‘tax,’” the court said. “There are numerous statutes that do delegate to the President the power to impose tariffs; in each of these statutes that we have identified, Congress has used clear and precise terms to delegate tariff power.”Tim Brightbill, a trade attorney at Wiley Rein who isn’t involved in the case, said the appeals court had concluded that even if IEEPA had permitted the president tariff powers, “the government exceeded its authority with the breadth and scope of these worldwide tariffs.” Administration officials have prepared options to pursue additional tariffs through other federal authorities, even amid an expected appeal, according to a person familiar.The administration had already turned increasingly to Section 232 of the Trade Expansion Act to pursue levies against categories of goods, from lumber to semiconductors.Other legal options lack the swift, immediate impact of the president’s original manoeuvre under IEEPA, which has fewer hurdles because it’s intended to be used in emergencies.In its May 30 ruling, the Court of International Trade found Trump improperly used IEEPA to impose the tariffs, agreeing that such power is vested in Congress by the Constitution. The Federal Circuit judges similarly signalled scepticism of Trump’s claim of broad tariff authority under IEEPA during July 31 oral arguments.Fearing that the court might rule the tariffs illegal and invalidate them immediately, the administration earlier on Friday filed statements by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Secretary of State Marco Rubio warning of dire foreign policy consequences if the court took such action. Bessent said it would lead to “dangerous diplomatic embarrassment” for the US.

A Latin term that used to be little-known outside the world of customs brokers has become the stuff of headlines this year. That’s thanks to a decision by US President Donald Trump to end the tariff-free treatment of “de minimis” merchandise that had been in place for almost 90 years.The phrase — which loosely translates as “too small to matter” — refers to small packages shipped directly to consumers from abroad, millions of which arrive in the US every day. Qualifying as de minimis came with a huge perk: no customs declarations and no duties.This worked to the advantage of Chinese dis-count marketplaces such as Shein Group Ltd and Temu, which have tapped Americans’ appetite for buying cheap clothing, toys, electronics, and more, online. But the tariff exemption came to an end for packages from mainland China and Hong Kong on May 2, and ceased for the rest of the world on August 29.US consumers now face the prospect of higher prices and a longer wait for their orders. Ahead of the de minimis changes taking effect in August, many postal operators paused US-bound parcel shipments, citing a lack of clarity over how the tariffs will be collected.What was the US de minimis exemption?For a package to qualify, it had to have a re-tail value of no more than $800, which was high compared with other countries. The threshold in Canada is C$150 ($109) for parcels from the US and Mexico to be exempt from customs duties and C$20 ($15) for those from elsewhere, while in the European Union it’s €150 ($175). China, for its part, generally waives duties on packages worth up to about $7.The exemption in the US dated back to 1938, when Congress tweaked tariff rules to drop duties on low-cost items to avoid unnecessary expense for little reward, or, as one former Treasury official put it, “spending a dollar to collect 50 cents.” The exemption started at $1, where it stayed for decades before rising to $5 in 1990, $200 in 1993 and then jumping to $800 in 2016 during the Barack Obama presidency.What do the new rules mean for US consumers?The end of the de minimis exemption doesn’t mean Americans can’t order small packages from abroad. What’s changed is that the goods will be channelled through customs and incur levies.Sellers could absorb the additional costs or they could pass them on to consumers — either indirectly through a higher retail price, or directly by making buyers pay the duty.Shein and Temu raised prices on a wide range of products — from dresses to kitchenware — ahead of the tariffs kicking in on May 2. The average price of 98 products listed on Shein tracked by Bloomberg News increased by more than 20% by early May from two weeks prior.Elsewhere, South Korean beauty retailer Olive Young — which has been capitalising on the social media-fuelled popularity of Korean skincare products among American consumers — said it would add a 15% duty to all US orders at the checkout from August 27.The end of the de minimis carve-out could dis-proportionately impact lower-income households in America. Almost 75% of direct shipments imported by the poorest zip codes were de minimis, compared to 52% for the richest zip codes, according to analysis from the National Bureau of Economic Research using data from 2021.Could the end of the de minimis exemption cause supply chain disruption?Mail carriers in more than two dozen countries, including Australia, Singapore and Norway, temporarily suspended shipments to the US ahead of the August 29 de minimis cutoff date, as they grappled with how the new system will be implemented.The restrictions imposed by Deutsche Post and DHL Parcel Germany — part of DHL Group, one of the world’s largest couriers — reflected uncertainty over “how and by whom customs duties will be collected in the future, what addition-al data will be required, and how the data transmission to the US Customs and Border Protection will be carried out,” according to a company statement.Postal services have never had to handle this amount of paperwork before. The packages that enter the US now have to have a customs declaration that details the contents of the parcel, the value, and the country of origin of the goods — not just where they’re shipped from, but where they were made.Beyond the near-term disruption from potential backlogs, many e-commerce deliveries are likely to become slower because the added costs will make air cargo — already an expensive way to move freight — a potentially unprofitable mode of transportation for low-cost goods.Rather than fly on a plane and take a couple of days to arrive, a package might instead take a three-week journey on a container ship from China to the US West Coast.Which companies will be most affected by the de minimis carve-out disappearing?Low-cost online retailers such as Temu, Shein and Alibaba Group Holding Ltd’s AliExpress used the de minimis exemption for years to expand in the US — a trend that was supercharged by the Covid-era boom in e-commerce.Cross-border online retail has been a lifesaver for many Chinese manufacturers running on wafer-thin profit margins as spending by domestic shoppers plunged during the pandemic and never really recovered.Shein pioneered the model of targeting cost-conscious Americans with $2 blouses and $10 shirts during the pandemic, and Temu jumped in around 2022 with its “Shop Like a Billionaire” catchphrase. TikTok Shop, the shopping platform of the popular video app, is a more recent entrant.The end of the de minimis exemption appears to have had a dampening effect on US demand. Shein’s weekly sales dropped by as much as 23% year-on-year in late June before staging a recovery, according to Bloomberg Second Measure, which analyses credit and debit card transactions in the US. Temu saw a deeper decline — its weekly sales slumped by more than a third year-on-year in June and had yet to rebound to the prior year’s levels by mid-August.It’s not just the bottom line of the Chinese marketplaces that will be impacted by the de minimis changes. The exposure to tariffs will also hit “dropshippers,” who use e-commerce platforms to fulfil orders and send goods directly to customers, as well as small US businesses that have been importing products in batches under the $800 threshold to avoid tariffs. Small international businesses selling into the US will be affected too, including those using marketplaces such as eBay Inc and Etsy Inc.There are fears that the end of the de minimis exemption in the US could spur a flood of cheap goods, particularly those from China, to be sent to other countries instead. Amid concerns about domestic producers being undercut, markets including the UK are reviewing their own duty-free treatment of low-value imports.How have Trump’s de minimis changes evolved?Within days of taking office, the Trump administration suspended the de minimis rule for mainland China and Hong Kong. However, it soon delayed the change while the US Postal Service wrestled with how to implement the policy.The suspension was effectively reimposed on May 2, hitting buyers of packages worth up to $800 arriving from mainland China and Hong Kong with either a levy equivalent to 120% of their value or a flat fee of $100.When the US and China later announced an agreement to lower triple-digit tariffs on each other’s imports, Trump signed an executive order cutting the de minimis duty to 54%, while maintaining the flat fee.Then, on July 30, Trump said the de minimis ex-emption would end for items sent from anywhere in the world, although gifts valued at less than $100 will remain duty-free. According to a White House fact sheet, starting August 29, a posted package will be taxed in one of two ways:* The importer can pay a percentage levy on the parcel’s value. This is equivalent to the pre-vailing tariff rate the US has assigned to goods from the country of origin as part of Trump’s broader trade war.* Or, for the first six months of the new policy, the importer can pay a flat duty ranging from $80 to $200 per item, depending on the applicable country-specific tariff rate.What effect has the US de minimis exemption had?With the threshold as high as it was in the US, around 4mn small packages claiming de minimis exemptions crossed into the US every day in 2024, according to US Customs and Border Protection. These parcels often went unchecked be-fore being transferred to a truck for delivery directly to the consumer’s doorstep.This helped Americans access lots of cheap merchandise sold by e-commerce retailers in China. It also strained global supply chains, raised air cargo costs and swamped border enforcement efforts.The packages are thought to be one of the ways illegal drugs such as fentanyl have been smug-gled into the US and how other goods have entered the country in violation of rules against imports from regions known for human-rights abuses.The administration of President Joe Biden was well on its way to cracking down on de minimis abuses before he lost his re-election bid in November 2024, so Trump’s decision to eliminate the exemption wasn’t a complete surprise.How much trade did the de minimis rule affect?The de minimis exemption affected quite a bit of trade in both volume and value, with both rising exponentially. Such packages used to be confined to t-shirts and small electronics, but they’ve expanded to include bigger-ticket items such as electric bikes retailing for $799.According to a White House fact sheet, the number of individual shipments to the US claiming de minimis exemptions surged to nearly 1.4bn in 2024, up from 134mn a decade earlier. While China officially reported about $23bn worth of small parcel exports to the US last year, Nomura Holdings Inc estimates as much as $46bn of US-bound packages came from the country. (There’s a discrepancy because with so many parcels, it’s hard to count all of them in official statistics.) That’s still just a small fraction of the value of total US goods imports, which last year surpassed $3.2tn. Consequently, the suspension of the de minimis ex-emption isn’t expected to have a major effect on the US economy.