In the early days of his new administration, President Trump has set out to impose tariffs on imports from key trading partners. These actions, aimed at addressing perceived unfair trade practices, strengthening domestic industries, and raising revenue for the federal government, have the potential to impact the global economy significantly. As his trade leadership takes shape, the administration is poised to move quickly on promised trade actions against countries of interest, including China, Mexico, and Canada.
First Executive Order on Trade
As promised, President Donald Trump signed an executive order (EO) on trade on the new administration's first day. The EO, known as the America First Trade Policy, is a key component of Trump's economic agenda, which aims to prioritize American interests in international trade. The policy directs the Commerce Secretary, Treasury Secretary, and U.S. Trade Representative (USTR) to investigate and address persistent trade deficits, unfair trade practices, and foreign currency manipulation, with measures such as a potential global supplemental tariff. The order calls for feasibility studies on creating an External Revenue Service to optimize tariff and trade revenue collection. It mandates public consultations and assessments before the 2026 United States-Mexico-Canada Agreement review to ensure its benefits for American stakeholders.
Additionally, the Treasury will conduct a comprehensive review of foreign currency practices to counter manipulation, while the Commerce Department will assess existing trade enforcement mechanisms like antidumping and countervailing duties. These reviews are designed to address compliance and unfair subsidies, providing a thorough examination of the current trade landscape. The EO further requires reviews of U.S. trade agreements to ensure reciprocal benefits and explores new bilateral or sector-specific agreements to expand export market access. The USTR will also evaluate the May 2024 report on China's trade practices and potential tariff modifications, particularly regarding industrial supply chains and unfair trade practices. Additionally, the USTR and Secretary of Commerce will investigate discriminatory policies by China, assess legislative proposals on Permanent Normal Trade Relations, and recommend actions to ensure reciprocal treatment of intellectual property rights.
To safeguard national security, the EO calls for reviewing export control systems to close loopholes exploited by strategic rivals. It also recommends actions to combat unlawful migration and fentanyl trafficking from key countries. Finally, it mandates an assessment of foreign subsidies distorting federal procurement programs.
Unified reports on these initiatives are due by April 2025.
Mexico and Canada Tariffs Delayed
President Donald Trump is considering imposing universal tariffs on all imported goods but has postponed any immediate action, opting to study trade relationships with China, Canada, and Mexico as a pretext for implementing tariffs. He has suggested a potential 25% tariff on Canadian and Mexican goods starting February 1, citing concerns over illegal immigration and fentanyl. The delay in these tariffs could affect the cost of goods for American consumers and the profitability of businesses that rely on imports from these countries.
Outgoing Prime Minister Justin Trudeau warned that if the U.S. imposes tariffs on Canadian exports, Canada will retaliate with dollar-for-dollar matching tariffs. Trudeau acknowledged that while Trump’s tariff threat may be part of a negotiation strategy, Canada is prepared to respond. He also noted that Canada has already planned a $1.3 billion investment in border security to address U.S. concerns about illegal immigration and fentanyl. Furthermore, Canada's government is considering retaliation against up to $150 billion in U.S. goods if tariffs are imposed.
President-elect Donald Trump warned the EU that it would face trade tariffs unless EU member states significantly increased their American oil and gas purchases. The goal is to reduce the US's trade deficit with the bloc. In response, European Commission President Ursula von der Leyen emphasized the EU's interest in replacing Russian LNG with cheaper US gas.
Treasury Secretary Bessent Advances to Floor Vote
The Senate Finance Committee advanced Scott Bessent’s nomination as Treasury Secretary with a 16-11 vote, gaining bipartisan support from two Democrats, Senators Mark Warner (D-VA) and Maggie Hassan (D-NH). During his confirmation hearing, Bessent emphasized the urgency of addressing Trump-era tax cuts, arguing that failing to renew them could destabilize the economy and disproportionately harm middle- and working-class Americans. Democrats pressed Bessent on concerns over income inequality, the national deficit, and the potential inflationary effects of Trump’s proposed tariffs for Main Street businesses.
In his responses to the committee’s Questions for the Record, Bessent affirmed that under his leadership, the Treasury Department would:
- work collaboratively with the Commerce Department and USTR to “build upon and improve existing stakeholder engagement processes for trade and tariff policymaking.”
- “help ensure that American businesses, entrepreneurs, and consumers benefit from the implementation of any trade and tariffs policies, including on matters related to China.”
- see value in tariffs for their role in “pursuing trade negotiation objectives and advancing national security interests.”
- “work closely with the Department of Homeland Security to examine the de minimis exemption and assess whether and how modifications could advance President Trump's trade policy agenda.”
As for the other primary principals who will be involved in Trump Administration trade policy, the Senate Commerce Committee has yet to set a hearing date for Commerce Secretary nominee Howard Lutnick, and the Senate Finance Committee has yet to set a hearing date for USTR nominee Jamison Greer.
The Michael Best Strategies trade team is ready to assist companies in navigating the evolving trade landscape in the White House. Please contact Sarah Helton, Partner and Trade Practice Lead, at sarah.helton@michaelbest.com.