The new administration is wasting no time in piecing together a trade policy advancing President Trump’s “America First Trade Policy.” In a January 20th memorandum addressed to a number of federal agencies, President Trump has requested reports on potential measures that might be undertaken on trade issues. Most of the reports are due on April 1st, which would seem to preclude the addition of new tariffs or other trade initiatives until after that date. Seeking to remedy our persistent trade deficit, the US Trade Representative (USTR), along with other agencies, has been asked to identify any instances of unfair trade practices and recommend potential remedies. Currency exchange rates, a persistent topic with China, are to be reviewed in an effort to remedy instances of currency manipulation that may provide our trading partners with an unfair competitive advantage.
The USTR is tasked with reviewing current trade agreements and identifying countries with whom new agreements might be beneficial. The United States-Mexico-Canada Agreement (USMCA) is scheduled for a review in 2026, and the US will assess the impact of the agreement on American workers. This review is a standard part of the agreement, and the administration and congressional committees will be provided a report from the USTR. Other existing agreements will also be reviewed to determine if revisions should be made to make them more reciprocal and mutually advantageous. Potential new agreements could be considered if they will open or expand market access for US products.
Much attention has been given to the possibility of new or increased tariffs, and they are mentioned in the memorandum. Notably, governmental agencies have been asked to assess unlawful migration and fentanyl flows from Canada, Mexico, and China and “recommend appropriate trade and national security measures.” While the passage also mentions “other relevant jurisdictions,” it seems to indicate these three countries are under heightened risk of additional tariffs or other actions. The recent review of the Section 301 tariffs and their effect on China’s policies and practices, including intellectual property protections, might be considered in any decision to increase the existing tariffs. Modifying the existing Section 301 tariffs requires less oversight than implementing new tariffs, so this is viewed as one of the more likely increases. Another passage in the memorandum requires an assessment of Permanent Normal Trade Relations (PNTR) with China. Should China lose its PNTR status, it would open the possibility of significantly higher tariffs being assessed on certain products. Additional duties of 25% on goods from Canada and Mexico are not specifically mentioned in this memorandum, and tariffs on these countries reportedly could be enacted as early as February 1st. It remains to be seen if the President will choose to implement tariffs on two such important trade partners, a move which would surely invite retaliatory tariffs on American products.
The Departments of Commerce (DOC) and Defense (DOD) are tasked with conducting an economic and security review of our industrial and manufacturing base to determine if investigations should be initiated on importations that may threaten national security. It is the national security risk that was the basis for the Section 232 tariffs currently assessed on many steel or aluminum products. A separate report will address exclusions and exceptions currently in place for the Section 232 actions, assessing their effectiveness in responding to the threat and making recommendations based on the findings. There are a number of active programs that modify the 232 actions on steel and aluminum. Importers are allowed to apply for their own proprietary exclusions, a list of generally accepted exclusions has been established, and many countries fall under absolute or tariff rate quotas for goods falling under the tariffs.
The DOC and DOD, in conjunction with other relevant agencies, are charged with reviewing the US export control system and advising if modifications should be made. The DOC has been asked to make recommendations on how to “maintain and enhance our Nation’s technological edge” and to close loopholes allowing the transfer of strategic goods and services under the current controls. Recommendations have been requested on how we achieve compliance by foreign countries, “including appropriate trade and national security measures.” Likely, there will be an effort to gain cooperation by the threat of actions taken in our trade policy. A review of our policies on foreign investments may result in modifications to the Outbound Investment Security Program to address national security threats.
The widely debated $800 de minimis is not overlooked in this memorandum. A recent notice of proposed rulemaking (NPRM), which amends the rules governing de minimis shipments, is currently on a temporary hold. While the NPRM may eventually be published, there will be a comprehensive review to determine the revenue loss and risks of counterfeit goods and contraband inherent under the de minimis. Changes to our de minimis rules are definitely coming, and the recommendations will be interesting as there are divergent ideas on how best to tackle the issue.
President Trump is dedicated to an America First trade policy, and many of these reports will be used to address any perceived instances of unfair or unbalanced trade. The timing of this memorandum stands as a clear indication that trade policy will be a central issue in this administration. Historically, the President has been willing to use tariffs in negotiations to further our goals on issues of national and border security and American competitiveness. It remains to be seen what recommendations will be made and what policies, if any, will be implemented based on those. For the time being, there are no changes to trade policy, and any possible changes that may be coming will not be decided until the reports have been reviewed. Companies involved in international trade are advised to pay close attention to future announcements referencing trade issues.
The above is a short review of some of the more noteworthy issues addressed in the memorandum; other topics, such as our policies regarding antidumping (ADD) and countervailing duty (CVD) cases, have far-reaching effects. The full text of the America First Trade Policy memorandum issued by the White House can be found here.
Best Regards,
Sam McClure, LCB
Director of Compliance & Customs Services