Trump Administration Tariff Regime: Uncertainty and Expectations

As he enters his second week in office, President Donald Trump is forecasting a desire to implement a muscular trade policy leaning heavily on the imposition of tariffs—potentially on a global basis—as a means of extracting favorable trade deals and other economic and political concessions from trading partners across the globe. As of this writing, much remains uncertain with respect to tariff implementation.  What is clear is that President Trump’s tariff-related warnings have commercial and political parties around the world on edge. 

On January 20, 2025, President Donald Trump issued an Executive Order (“EO”) titled “America First Trade Policy,” which aims to correct unfair and unbalanced trade relationships that operate at the expense of American economic wellbeing. The EO directs the Secretary of Commerce, Secretary of the Treasury and the United States Trade Representative (“USTR”) to assess U.S. trade relationships and to determine whether unfair trade relationships should be addressed through the application of global tariffs. The EO expressly identifies Mexico, Canada and China, as countries that will be reviewed. Collectively, these countries account for 40.5 percent of U.S. international trade, ensuring that the Trump Administration’s tariff policy will profoundly impact companies with international operations and supply chains—particularly those that operate in Mexico, Canada and China.

Here’s what companies with international operations and supply chains need to know.

• Initial tariffs on Mexico, Canada and China could go into effect as early as February 1, 2025.
  • In informal press briefings on January 20 and 21, 2025, President Trump announced that he expects to impose 25 percent tariffs on Canada and Mexico, beginning on February 1, 2025. While he did not specify the scope of the tariffs and the possibility for exemptions or exclusions, the America First Trade Policy EO requests that the Departments of Treasury and Commerce assess the suitability of tariffs covering all imports.President Trump tied the imposition of tariffs on Mexico and Canada to policies by both countries that he asserts allowed vast numbers of people to enter the U.S. illegally, as well as entry of a large amount of fentanyl into the country.In the January 21 press briefing, President Trump announced that he was considering a 10 percent tariff on China, beginning on February 1, 2025. He connected the tariff to China’s failure to prevent shipments of fentanyl to Mexico and Canada, which subsequently entered the U.S.
  • President Trump has also expressed that he is considering:
    • 10-20 percent tariffs on all imports from all countries.
    • 60-100 percent tariffs on all imports from China.

• The Departments of Commerce and Treasury, and the USTR are directed to investigate trade-related issues and submit reports to President Trump by April 1, 2025.
  • The Secretary of Commerce is directed to investigate the causes of the U.S.’s large and persistent annual trade deficit, to evaluate the economic and national security implications of the deficit, and to recommend appropriate responses, such as tariffs.
  • The Secretary of the Treasury is directed to review the exchange rates and trading practices of major U.S. trading partners, and to evaluate the feasibility of establishing a federal agency to collect tariffs and other foreign-related revenues.
  • The USTR is directed to review unfair trade agreements and practices by other countries and recommend appropriate remedies, and to review the United States-Mexico-Canada Agreement (“USMCA”) in advance of the agreement’s 2026 renegotiation.
  • All trade reports are due to President Trump by April 1, 2025.

• Mexico and Canada have stated that if President Trump imposes tariffs then they will impose retaliatory tariffs. China’s past policies indicate that it will likely do so as well.
  • On January 21, 2025, Mexican President Claudia Sheinbaum stated that Mexico would respond to U.S. tariffs with retaliatory tariffs to protect Mexican sovereignty.  Her administration has previously stated that they have begun drafting a list of U.S. products to tariff, although the list has not been shared publicly.
  • On January 21, 2025, Canadian Prime Minister Justin Trudeau stated that U.S. tariffs of 25 percent will be matched by Canadian tariffs, perhaps dollar-for-dollar. Canadian officials have identified possible retaliatory tariffs on up to $150 billion of U.S. products, as well as an export tax on 4 million barrels of oil that Canada sends to the U.S. every day.
    • Canadian politicians are not fully aligned on the appropriate response.  The Premier of Alberta, Danielle Smith, is opposed to retaliatory tariffs and is encouraging Prime Minister Trudeau to seek a carve out for Canada through negotiation and attention to President Trump’s concerns.
  • The Chinese government has not announced specific retaliatory measures it will impose but Chinese policy during the first Trump Administrative indicates which tools are favored: depreciating the yuan relative to the U.S. dollar, banning strategic exports, opening antitrust investigations into U.S. companies, rerouting exports through third-party countries, and imposing retaliatory tariffs. China can be expected to deploy some or all of these tools in response to U.S. tariffs.

• President Trump can pursue the authority to impose tariffs through a variety of methods.
  • While his party holds a majority in both houses of Congress, President Trump has demonstrated his interest in acting quickly to implement his trade policy. Accordingly, any action on tariffs is likely to come via the exercise of existing authorities. 
  • President Trump could rely on several different provisions to impose tariffs, including:
    • The International Emergency Economic Powers Act of 1977 (“IEEPA”)
      • Empowers the president to respond to extraordinary threats to the U.S. economy if the president declares a national emergency, which President Trump already did on January 20, 2025 with respect to the Southern Border and energy.
      • No president has used IEEPA authority to impose tariffs, but its broad language is understood to provide expansive tariff powers.
      • President Trump indicated that he intended to utilize IEEPA to impose 25 percent tariffs on imports from Colombia in response to that country’s refusal to accept deportations from the U.S. President Trump held off on imposing the tariffs after Colombia agreed to accept the deportations.
  • Section 122 of the Trade Act of 1974
    • Empowers the president to address “large and serious United States balance-of-payments deficits” via a temporary import surcharge that cannot exceed 15 percent ad valorem or 150 days (unless Congress extends it).
    • These import surcharges could be implemented immediately while the Trump Administration drafts reports, negotiates and adopts a long-term trade strategy.
    • This tool for temporary action could be used in conjunction with or as a precursor to imposition of tariffs under another authority. 
  • Section 201 of the Trade Act of 1974
    • This section allows for the imposition of temporary trade restrictions such as tariffs or quotas to protect domestic industries from a surge of foreign imports.  These are known as “safeguard measures.”
    • Action under Section 201 requires a determination by the U.S. International Trade Commission that an industry has been harmed by imports, and the relief is therefore industry or product-specific, making this a narrower/more targeted form of tariff.
  • Section 301 of the Trade Act of 1974
    • If the USTR determines a trading partner is violating their treaty obligations by engaging in trade practices that are unjustified or discriminatory and that burden U.S. commerce, they can recommend duties, restrictions on duties, and the withdrawal from or the suspension of trade agreements.
    • President Trump used these investigations during his first administration to impose duties on China, which the Biden Administration expanded.
    • Section 301 tariffs require an investigation by the USTR, consultations with the target country, and public input before they are imposed.  This process normally takes at least 12 months, making this a more administratively burdensome avenue for tariff imposition.
  • Section 338 of the Tariff Act of 1930
    • Empowers the president to impose duties on foreign imports up to 50 percent ad valorum if he determines that a foreign country “[d]iscriminates in fact against the commerce of the United States, directly or indirectly.”
    • Section 338 has laid dormant for decades and there is no precedent for its application in the manner expressed by President Trump, but it does not have many procedural hurdles making it potentially attractive for quicker implementation.
  • Section 232 of the Trade Expansion Act of 1962
    • Empowers the president to impose restrictions on imports, including tariffs, when the Department of Commerce determines that trade quantities or circumstances pose a threat to national security.
    • President Trump applied this provision during his first administration to impose 25 percent tariffs on steel and aluminum imports from Mexico.
    • Section 232 requires completion of a supporting investigation by Commerce and an opportunity for public comment (which can take up to 12 months). Tariffs imposed under this section are tied to specific products or industries, making this a more targeted and administratively burdensome avenue for tariff imposition.

Although there is a great deal of uncertainty as to what actions, if any, President Trump may ultimately take from a tariff or other trade remedy perspective, it is prudent to operate under the assumption that he will follow through on some level of tariff action. Ultimately, the best approach is to plan for the impact of tariffs, while simultaneously pursuing what political engagement is available to try and shape trade policy decisions.

For questions about the new executive orders and their implications for companies with international operations or supply chains, or for advice on how to engage the Trump Administration with policy considerations, please contact the authors, your McGuireWoods contact, or a member of the firm’s Government Investigations & White Collar or Consulting teams.