After months of anticipation fueled by President Trump’s promises that he would impose tariffs on “Day One” of his presidency, Inauguration Day came and went with no new tariffs imposed. Nevertheless, everything then-candidate Trump discussed during his campaign appears to remain on the table. Among other executive actions taken that also referenced trade imbalances and tariffs (here, here, and here), President Trump signed an Executive Memorandum on America First Trade Policy instructing the trade agencies to review, report, investigate, and make recommendations on a broad array of trade policy and enforcement areas.
The Memorandum requires comprehensive reports within 75 days from combinations of the Department of Commerce, Department of the Treasury, Office of the United States Trade Representative (“USTR”), and Department of Homeland Security (“DHS”), as well as the newly created position of Senior Counselor for Trade and Manufacturing held by Dr. Peter Navarro. From a policy perspective, the Memorandum confirms President Trump’s focus on reciprocal trade, trade deficits, unfair trade practices, and China. To carry out these policy priorities, the Memorandum specifically identifies tariffs, with specific references to imposing global supplemental tariffs, and modifying the tariffs and exclusions imposed on imports from China under Section 301 and imports of steel and aluminum under Section 232. With that said, the Memorandum also references the broad array of legal authorities available to the President to implement non-tariff trade measures.
The agency reports are due by April 1 except for one required by the Office of Management and Budget (“OMB”) which is due April 30. However, as President Trump noted during his press availability while he signed Executive Orders and Presidential Actions, nothing in the Memorandum precludes taking action to impose tariffs at any time — and the President explicitly referenced a desire to impose 25% tariffs on Mexico and Canada by February 1.
Enforcement of Existing Trade Measures
Consistent with President Trump’s remarks prior to taking office, the Memorandum outlines several key directives pertaining to the enforcement of U.S. trade laws. The President has directed agencies to: (1) conduct thorough reviews on policies and regulations related to the application of antidumping and countervailing duty laws; (2) assess the loss of tariff revenues and risks stemming from imports of counterfeit products and contraband drugs utilizing the existing de minimis exemption; (3) assess the effectiveness of exclusions, exemptions, or other import adjustments made to products otherwise subject to Section 232 duties; and (4) review the export control system and make recommendations regarding how to maintain, obtain, and enhance the United States’ technological edge while also identifying and eliminating loopholes in existing export controls. These directives indicate a desire to determine whether existing laws and regulations are sufficient in ensuring compliance and whether any modifications are warranted to protect the intent of the laws and the revenue of the United States. These directives potentially open the door to adjusting import quotas, re-instating an exclusions process, and expanding coverage to third country sources. The Memorandum also suggests modifications to existing trade and national security measures on exports involving strategic adversaries or geopolitical rivals.
New Trade-Related Investigations
In keeping with the President’s focus on trade enforcement, the Memorandum identifies several issue areas in which the Administration intends to examine or investigate potential opportunities to develop additional enforcement actions. These areas include unfair trade practices by other countries (including, but not limited to currency manipulation), the potential establishment of an External Revenue Service to collect tariffs, duties, and other foreign trade-related revenues, and any discriminatory or extraterritorial taxes that U.S. citizens or corporations may be subject to overseas. The Memorandum also calls for agencies to investigate the causes of the annual trade deficit and recommend appropriate remedial measures. These investigations may take a traditional format with notice and comment opportunities either prior to or after April 1.
“America First” Trade Negotiations for U.S. Interests
Outside of trade enforcement and in line with President Trump’s “America First” platform, certain directives in the Memorandum indicate that the Administration may also pursue modifications to existing trade agreements to favor domestic industries. The Memorandum calls for a broad review of all trade agreements, including the U.S.-Mexico-Canada Agreement (“USMCA”), as well as identifying opportunities to negotiate bilateral or sector-specific agreements improving export market access for American workers. Other directives included in the Memorandum, such as review of the volume of Federal procurement covered by the Buy American and Hire American provisions, indicate the development and implementation of policies that favor domestic workers and manufacturers to further reflect the Administration’s “America First” stance. These sections of the Memorandum provide for opportunities for companies to think about their own supply chain and supply chain resiliency, and to identify for the Administration opportunities to strengthen and expand their U.S. manufacturing presence.
Economic and Trade Actions Targeting China
President Trump devotes an entire section of the Memorandum to trade actions targeting China, specifically aimed toward industrial supply chains, circumvention through third countries, and intellectual property rights. He calls for assessments of the Biden Administration’s recently completed Four-Year Review of Actions Taken in the Section 301 Investigation, legislative proposals regarding Permanent Normal Trade Relations with China (which would treat China the same as North Korea, Cuba, and Iran, at least from a tariff perspective), and the current Economic and Trade Agreement between the United States and China, which was negotiated during President Trump’s first administration in exchange for reducing Section 301 tariffs. USTR is also directed to recommend any additional acts, policies, and practices by China that may be grounds for additional Section 301 investigations. Decoupling from China, especially through the lens of supply chain resiliency and key technological sectors, remains a high priority for the Administration.
Impact
President Trump’s choice to employ the entire trade and economic team and its expertise before imposing tariffs suggests a measured approach similar to that of his first Administration. It likely signals that priority is being placed on tax and immigration policy in the first instance like in the first administration. Although speculative, it may also signal a lack of current alignment among the top trade officials in the new Administration, for which a measured approach would allow time to coordinate and complement his trade policy with his other policy priorities. In many ways, the directives outlined in the Memorandum are duties that federal agencies already perform, especially in a change in government. Treasury, for example, submits a report to Congress covering Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States with a specific focus on currency manipulation twice a year. This said, the inclusion of specific directives to “investigate” in the Memorandum signals from the Administration a firmer intention to act on the findings and recommendations of the agencies.
Conclusion
This wave of new policies and reports represents an opportunity for parties to seek dialogue with the Administration. For example, those who are interested should seek to participate in the public consultation process that USTR is directed to undertake regarding the USMCA review. Beyond official opportunities for comment, this Memorandum signals a time for industries to hold conversations with the Administration. An issue of special interest is the Memorandum’s mandate for USTR to identify countries for the negotiation of bilateral or sector-specific agreements, which signals a possible expansion of U.S. export markets.
While the Memorandum discusses potential avenues for more clear-cut policy down the road, there are still many possible outcomes. To best prepare for any of the scenarios resulting from potential policy changes, companies should develop models and data which will give a clear picture on existing and alternative supply chains. With this information, it will be easier to mitigate any challenges arising from policy modifications.
Cassidy Levy Kent has extensive experience assisting clients in understand the evolving U.S. trade policy landscape and structure operations building on supply chain mapping and tariff modeling. Contact us with any questions.