The second Trump administration will likely act quickly and aggressively on trade policy, particularly the imposition of tariffs. Based on what President Trump did during his first term, and on what he said he will do if re-elected, we expect the United States to increase tariffs shortly after former President Trump is sworn in on January 20, 2025.
The president has the power to determine and assess tariffs under many different statutes. Most statutes require that there be some finding or determination before the president can modify/impose tariffs. During his first term, President Trump imposed additional tariffs on various articles using these “traditional” statutes, such as Sections 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962. Because of the process requirements under these statutes, duties were imposed a year or more after the investigations were first announced.
This time around, we expect President Trump to act more swiftly in imposing tariffs by using statutes that do not require much process, such as Section 338 of the Tariff Act of 1930 and/or Section 203 of the International Emergency Economic Powers Act. But by how much tariffs will increase? On which countries? On everything or on specific products? While no one really knows at this point, President Trump offered some clues on the campaign trail, suggesting the following targets and tariff rates:
- Additional tariffs on all imports, regardless of country of origin (10% or 20%)
- Additional tariffs on products of China (60%)
- Additional tariffs on EVs made in Mexico by Chinese-owned companies (100%)
- Additional tariffs on products of U.S. companies who move production abroad (100% or 200%)
If tariffs like these are imposed, other countries will retaliate against U.S. imports. They may also impose heightened tariffs against imports from other countries, to counter the impact on their domestic industries of trade diversion caused by U.S. tariffs.
Uncertainty around President Trump’s plans, and how other countries will respond, makes it difficult for companies to plan.1 Nonetheless, and while limited options exist to avoid across-the-board additional tariffs, companies should be thinking about immediate actions they can take to mitigate the impact of tariffs, such as: pulling shipments forward as much as possible (since the tariffs will be effective on a going forward basis); contract provisions that address the risk of additional tariffs (i.e., “Trump Majeure” clauses); customs valuation planning opportunities (e.g., use of “first sale” value for customs purposes); and/or use of Foreign Trade Zones to improve tariff efficiency.
Companies have more options to avoid and/or mitigate the impact of targeted tariffs (e.g., an additional 60% tariff on China origin products), including relocating production to countries that present lower tariff risk. The United States uses a subjective “substantial transformation” test to determine the country of origin of articles for purposes of these types of additional tariffs, so identifying which productions operations need to be moved is critical (i.e., country of origin analyses matter).
Increased tariffs will also generate opportunities for companies that produce in the United States, or that can move production to the United States. As tariffs increase, exporting countries and/or exporters to find ways to lower the prices of articles shipped to the United States (to try to offset some of the impact of U.S. tariffs). This may harm domestic producers, who could then seek to utilize U.S. trade remedy laws to impose further tariffs on imported articles to protect domestic market share. Also, companies producing in other countries that are harmed by trade diversion caused by heightened U.S. tariffs may also seek recourse under those countries’ trade remedy laws.
The next few years will be a bumpy ride. Companies need to prepare the best they can and be prepared to be nimble once the tariffs start flying.
1 Here is a short slide deck that contains a summary of our base case on how the tariffs may roll out.
