Tariff Trump Risk: U.S. Tariff Risk Overview: As of January 2025, former President Trump's tariff threats loom large, with potential new tariffs on imports from multiple countries, including China, Mexico, and the EU. Businesses must stay proactive, adapting to the evolving trade landscape and exploring strategies to mitigate the impact of these risks. We look at 13 things you now need to know.
1. Introduction to U.S. Tariff Risk
As we move into 2025, the risk of additional tariffs being imposed on goods imported into the United States is both real and immediate. This uncertainty stems from former President Donald Trump's actions during his first term and his ongoing statements suggesting that he may impose further tariffs should he return to office. While we do not necessarily take his remarks literally, the potential impact of these tariff threats on businesses worldwide remains significant and warrants close attention.
2. Campaign Trail Promises
Throughout his campaign, Trump has discussed the possibility of introducing additional tariffs on various imports. His proposed tariff rates are high and varied, underscoring his belief that tariffs are a powerful tool to reshape U.S. trade relations. Some of the most notable promises include:
10%–20% on all imports from any country, potentially leading to sweeping changes across a wide array of industries.
60% on Chinese goods, following the continued tension between the U.S. and China over trade imbalances and intellectual property concerns.
100% on electric vehicles (EVs) produced in Mexico by Chinese-owned companies, highlighting the ongoing concerns about China’s influence on North American manufacturing.
100% on goods from U.S. companies that relocate production overseas, reinforcing his "America First" trade policy.
3. Recent Tariff Threats
In the past few weeks, Trump has reiterated his tariff threats through social media, further escalating the risk. His recent statements have included:
25% tariff on all goods from Canada and Mexico unless they take steps to halt the flow of drugs and migrants into the U.S.
10% tariff on all Chinese goods until China addresses its role in drug trafficking.
100% tariff on imports from BRICS countries unless they abandon plans for a new BRICS currency and cease supporting alternatives to the U.S. dollar.
Additional tariffs on EU products unless the European Union increases its purchases of U.S. oil and gas.
A potential tariff on Denmark unless they agree to sell Greenland to the U.S.
These threats suggest that Trump's tariff policies could extend beyond traditional economic considerations and become a geopolitical tool for advancing broader U.S. interests.
4. Legal Basis for Tariffs
The legal foundation for imposing tariffs lies within the U.S. Constitution, which grants Congress the power to regulate trade. However, Congress has delegated much of this authority to the president through various trade statutes, providing flexibility for the president to act unilaterally in certain circumstances.
During his first term, Trump utilized well-established trade statutes that required lengthy investigations, often resulting in tariffs being imposed a year or more after their announcement. For example, the Section 301 tariffs on China in 2018 followed an exhaustive investigation into China's trade practices. However, Trump is likely to seek faster mechanisms for implementing new tariffs.
5. Likely Use of Statutes for New Tariffs
Given the urgency associated with his proposed tariffs, Trump is expected to use quicker mechanisms such as:
Section 203 of the International Emergency Economic Powers Act (IEEPA)
Section 338 of the Tariff Act of 1930
These provisions require minimal procedural steps and only the president's declaration, allowing new tariffs to be imposed rapidly, potentially starting as early as February 2025. This approach would bypass the traditional investigative and legislative processes, enabling swift implementation that could affect imports from all countries, including longstanding trade agreement partners like Canada, Mexico, and Korea.
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