Donald Trump’s trade policy, most notably his tariffs, still plays a profound role in our nation’s economic landscape. What happens to these policies in the new administration is anyone’s guess. On April 2, 2023, Trump signed an executive order imposing a blanket 10% tariff on all imports from any country that has a trade surplus with the U.S. This ambitious step has ignited national conversations around its potential future impact. As always, the top three contributors to the US trade deficit—China, Mexico, and Vietnam—are at the center of this self-inflicted controversy. As all economic actors prepare for what a possible new situation might bring, it’s important to understand the goals of these tariffs and their overall effect.
Trump’s tariffs are a massive break from decades of trade liberalization. His administration has viewed international trade as a bilateral power struggle that necessitates protecting American interests against what he deems “unfair” practices. The former president aims to reduce the US trade deficit, revive domestic industrial production, ensure national security, and generate revenue to offset tax cuts. Keeping these lofty ambitions at the forefront, tariffs have been a staple of his economic and diplomatic strategy.
Tariffs and Their Implications
Trump’s tariffs are more than a budgetary tool. In doing so, they hope to change the balance of power in international trade to realize their vision of a more democratic, people-centered future. Specifically, China, Mexico, and Canada are the focus of Trump’s ire. He is trying to intimidate them into signing better deals for the US. This punitive approach has changed the very nature of US relations with its trading partners.
The administration’s rollout of these tariffs has certainly not come without hiccups. Since their announcement, they’ve been changed over and over again, creating confusion and doubt for businesses and investors. Stock markets are reacting to this tsunamic volatility. Today, economic players are still trying to find their way through the maze of varying tariffs and trade talks.
“Foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories, and foreign scavengers have torn apart our once-beautiful American Dream. But it is not going to happen anymore,” – Donald Trump
Unsurprisingly, Trump’s rhetoric on this issue plays into the narrative of reclaiming American jobs and industries. He’s long portrayed tariffs as a vital tool in the fight against predatory, unfair competition from overseas. That sort of populist understanding of tariffs as a protective shield appeals to the many, many voters who feel they’ve been left behind by globalization.
Legal Challenges and Future Directions
Though controversial by design, Trump’s tariffs have so far proven resilient to legal challenges—even as they’ve spurred extraordinary regulatory responses. This evolution of CIT opinion happened just one month after CIT ruled against Trump’s extensive use of the International Emergency Economic Powers Act (IEEPA). They ruled that his rationale for imposing a blanket 10% tariff was an overstep of the separation of powers for going around Congress. This ruling has the potential to set a strong precedent to rein in executive power in trade.
As things stand now, the case is headed to the Supreme Court. Its eventual result has the real potential to redefine the scope of executive power and the rules surrounding tariffs. Legal experts suggest that such a decision could either bolster or undermine the president’s ability to impose tariffs without congressional approval.
“If they take away the IEEPA, we will use another section. The tariffs will not go away.” – Howard Lutnick
The possibility of more legal challenges underscores the intense politics involved in trade policy during the Trump administration. His readiness to buck conventional wisdom is indicative of a larger strategy to remake US trade policy.
The Broader Economic Landscape
As economic uncertainty underlies all current business decision-making, companies are still out there left trying to figure out what these tariffs mean for their business. Retailers and manufacturers that import a significant amount of goods from countries targeted by the tariffs have to react quickly to increased costs and modify their pricing strategies. This implementation period may result in higher costs for consumers or changes in sourcing plans for manufacturers.
The current tensions between the US and its major trading partners has highlighted the fragile nature of all global trade relationships. To counter Trump’s tariffs, China announced its own series of retaliatory tariffs. This action further muddies the waters for American businesses and consumers.
Trump’s threats to raise tariffs further serve to muddy the waters. He is reportedly considering more than doubling tariffs on steel and aluminum from 25% to 50%. While these moves are cast as national security measures, they deserve to be examined for their economic effect and long-term sustainability.