On Jan. 20, 2025, President Trump signed numerous executive orders (EO), including the America First Trade Policy. This order instructs various agencies, including the Department of Treasury, Commerce, Homeland Security, and Defense, as well as the U.S. Trade Representative (USTR) to conduct various reviews and investigations into current trade posture with U.S. trade partners. The EO is mainly concerned with identifying any “unfair” trade practices by trading partners, including a section dedicated to specifically reviewing trade with China. The EO further directs the agencies to provide recommendations for modified trade policies and adjusted tariffs.
While the EO itself does not direct any immediate actions regarding trade practices or imposing new tariffs, it opens multiple pathways for further action by the president to follow through on his campaign promises of increasing tariffs on major U.S. trading partners.
Key Points of the Executive Order
Section 2: Addressing Unfair and Unbalanced Trade
This section instructs various agencies, including the Secretaries of Treasury and Commerce and the USTR, to investigate a variety of trade agreements and practices. Specific instructions include:
- identify the causes of U.S. trade deficits in goods and recommend appropriate measures, such as a global supplemental tariff to address those deficits;
- investigate the feasibility of standing up the External Revenue Service, tasked with collecting tariffs, duties, and other foreign trade-related revenues;
- review various aspects of the trade relationships between the U.S. and foreign nations, such as the currency exchange rate, trade agreements and sectoral trade agreements, and operation of the United States-Mexico-Canada Agreement (USMCA);
- evaluate the suitability of tariffs to address current cases of unfair trade practices;
- begin the public consultation process for the USMCA trade agreement, which will be up for review in 2026;
- review de minimis tariff exemptions, which allow imports under $800 to be duty-free;
- The Trump administration asserts that this exemption is what allows counterfeit products and contraband such as fentanyl to be imported into the U.S.;
- report the impacts of the World Trade Organization Agreement on Government Procurement and ensure it is not harming domestic industry; and
- determine if any foreign country subjects U.S. citizens or corporations to discriminatory or extraterritorial tax.
- A separate memorandum to the Secretary of the Treasury and USTR from the President, signed on Jan. 20, states “the OECD Global Tax Deal…not only allows extraterritorial jurisdiction over American income but also limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers…[the deal] has no force or effect in the United States.”
President Trump has set an April 1 deadline for reports and recommendations from applicable agencies.
Section 3: Economic Trade Relations with the People’s Republic of China (PRC)
This section describes specific policies related to trade with China, instructing agencies to review Chinese compliance with existing policies and recommend “appropriate actions to be taken, including the imposition of tariffs and other measures as needed.” Specific actions include:
- Review the current tariff policy under Section 301 and consider potential additional tariff modifications, particularly with respect to industrial supply chains and circumvention through third countries;
- review any “discriminatory or unfair trade practices by the PRC and recommend appropriate responsive actions, including additional tariffs”;
- assess legislative proposals regarding the PRC’s Permanent Normal Trade Relations status and make recommendations regarding proposed changes; and
- review the status of any U.S. IP rights such as patents, copyrights, and trademarks granted to PRC citizens and “make recommendations to ensure the reciprocal and balanced treatment of IP rights with the PRC”.
Section 4: Additional Economic Security Measures
This section instructs the Secretary of Commerce and Secretary of Defense to conduct an economic and security review of the nation’s industrial and manufacturing base to “assess whether it is necessary to initiate investigations to adjust imports that threaten the national security of the United States.” Specific instructions include:
- assess the effectiveness of current exclusions, exemptions, and other import adjustment measures on steel and aluminum in “responding to threats to the national security of the U.S.”;
- assess existing loopholes in export controls, particularly those exploited by adversaries; and
- review “unlawful migration and fentanyl flows from Canada, Mexico, and the PRC and recommend appropriate trade and national security measures to resolve that emergency.”
Possible Tariff Mechanisms and Timing
The America First Trade Policy orders a sweeping review of major U.S. trade policies and practices with a notably heavy emphasis on national security. Documented national security concerns opens the possibility of using several different executive avenues of tariff and policy implementation. Despite Republican control of both chambers of Congress, President Trump has indicated a preference for moving quickly and will likely use executive powers for actions on tariffs. Possible provisions to be utilized are:
International Emergency Economic Powers Act (IEEPA) of 1977
- 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 Jan. 20 with respect to the southern border and energy.
- Significantly, no president has used IEEPA authority to impose tariffs, but its broad language is understood to provide expansive tariff powers.
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% 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 other authority.
Section 201 of the Trade Act of 1974
- This allows for imposition of temporary trade restrictions such as tariffs or quotas to protect domestic industries from a surge of 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, the USTR can recommend duties, restrictions on imports, 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 currently allows stakeholders to apply for exclusions from tariffs for U.S. imports that would otherwise be subject to the tariffs. One example is the exclusion of tariffs on medical products in response to the COVID-19 pandemic.
- Requires 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 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% tariffs on steel and aluminum imports from Mexico.
- Requires completion of a supporting investigation by the Department of Commerce and opportunity for public comment (which can take up to 12 months), and tariffs imposed are tied to specific products or industries, making this a more targeted and administratively burdensome avenue for tariff imposition.
Section 338 of the Tariff Act of 1930
- Empowers the president to impose duties on imports up to 50% ad valorum if he determines that a foreign country discriminates 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.
Responses from Mexico, Canada, and China
Canada
Canadian officials have signaled their motivation and confidence to achieve a trade agreement that would prevent the imposition of tariffs. Prime Minister Trudeau warned President Trump on Jan. 21 that the imposition of 25% tariffs on Canadian goods will be matched by Canadian tariffs, perhaps dollar-for-dollar.
Mexico
Mexican President Claudia Sheinbaum has shown a more assertive stance with U.S. tariff threats than her predecessor did during President Trump’s first term. She has voiced Mexico’s plan to retaliate with their own tariffs on U.S. imports if necessary, vowing not to allow the country to become subordinate to the U.S. President Sheinbaum argues that Mexico is vital to the U.S. economy with its expanding, low-cost industrial base being key to competing with the U.S.’s largest rival, China.
China
China has previously stated its willingness to maintain communication with the U.S. to “properly handle differences and expand mutually beneficial cooperation”. It sought to promote stable and sustainable ties with the U.S., the foreign ministry said. “We always believe that there is no winner in a trade war or tariff war. China will always firmly safeguard its national interests,” ministry spokesperson Mao Ning told reporters at a regular press briefing on Jan. 22.
Conclusion
President Trump will likely embrace national security as a justification for imposing tariffs and related sanctions on various trade partners, while also directing federal agencies to make sweeping changes to existing trade policies and practices. The America First Trade Policy released on Jan. 20 showcases the immediate economic priorities of the Trump administration.
While the order does not mandate any specific immediate tariff increase, a post-inauguration statement made by President Trump on Jan. 20 during the signing of various EOs states that he is considering imposing 25% tariffs on Canadian and Mexican imports and 10% on Chinese imports, effective Feb. 1. As of Jan. 23, there has been no further clarification on the details of these potential tariffs, nor any specific actions taken.
Authored by: Ryan Bernstein, Alex Brackett, Mimi Bair, Sofia Guerra
