Donald Trump has declared in sending tariff letters to his counterparts across the world “You will never be disappointed with The United States of America”. Unfortunately, for US trading partners, they almost certainly will be.
Any hopes that the “reciprocal” tariffs initially revealed on 2 April would be the end of Trump’s America First trade policy are misplaced. A series of legal challenges could slow down his tariffs push, with currently two cases expected to be decided by the US Supreme Court. But Trump has other legal mechanisms for implementing tariffs.
Typically, control of commerce rests with the US Congress, not the President. A ruling against reciprocal tariffs, which Trump has justified under the International Emergency Economic Powers Act, would be a setback. Whether Trump obeys such a ruling is another question.
And either way, the Commerce Department, under direction from the President, can undertake investigations which Trump can then use to justify the imposition of tariffs. What are termed Section 232 investigations under the Trade Expansion Act are used to determine whether imports in certain sectors pose a national security threat. These investigations present recommendations and empower the President to act without Congressional approval.
It was this authority that allowed Trump to impose steel and aluminium tariffs in his first term. He used the same mechanism to re-introduce them in his second term, and further increase them to 50 per cent. He also imposed new 25 per cent automotive tariffs.
Even if agreements are reached, they will almost certainly be shallow and weak on enforcement measures.
Seven of these Section 232 investigations have been initiated since March. The sectors targeted are timber and lumber, copper, pharmaceuticals, critical minerals, semiconductors and semiconductor manufacturing equipment, and commercial aircraft and jet engines. Trump has now threatened copper and pharmaceutical tariffs, demonstrating that he is ready to use this authority.
The recommendations offered may not necessarily be for more tariffs, and the suggestions made by the investigations do not have to be followed. But going on Trump’s record of invoking Section 232 authority for previous sectoral tariffs, and the initiation of multiple investigations this year, the risk is certainly high. Treasury Secretary Scott Bessent stated that any tariffs stemming from these investigations are not part of the current trade negotiations on reciprocal tariffs. This has proven to be a sticking point given the uncertainty it presents other countries. It also confirms more sectoral tariffs are being considered by the Trump administration.
In his first term, Trump also deployed another mechanism to impose tariffs. Section 201 under the US Trade Act is another authority for investigations that can result in safeguard tariffs, which Trump applied on solar panels and washing machines. These measures are intended for temporary use if domestic industry is found to be at risk of serious injury from increased imports. Trump used another instrument from the same Act, Section 301 tariffs, to start the first US-China trade war in 2018, also imposing them on the European Union.
So, there are plenty of avenues for Trump to pursue more tariffs, and he has a track record of doing so.
The hope internationally will be that striking agreements with the Trump administration before the 1 August deadline can limit any tariff shock. But negotiations have been a shambles. The short time frame imposed, a mere matter of months, and sheer number being undertaken at once, mean that current talks are unlikely to prove robust. Vietnam and the United Kingdom are the only countries to secure deals so far – well short of the “90 deals in 90 days” promised by White House trade advisor Peter Navarro. (And the deal with Vietnam appears a bust, with Trump making an announcement that reportedly took both Vietnamese and US officials in trade talks by surprise.)
Even if agreements are reached, they will almost certainly be shallow and weak on enforcement measures. The failure to force China to buy more American products in 2020 after the first US-China trade war is evidence of this. The European Union is already signalling its potential agreement with the United States will only be one “in principle”, and South Korea’s new leader remains pessimistic a deal can even be reached.
Trump has made clear that trade relations are subject to his discretion. He threatened Canada and Japan, key allies and trading partners. Canada was quick to reverse its proposed digital services tax in response. This didn’t help in the end. Canada now faces a 35 per cent tariff, despite being left off the initial 2 April list. Mexico also faces a 30 per cent tariff, with Trump blaming the country for allowing fentanyl across the US border. Trump has also threatened a 50 per cent tariff against Brazil in response to the prosecution of former President and Trump acolyte Jair Bolsonaro for attempting a coup after losing the 2022 election. These are blatant signals that the President will continue using trade as leverage.
Arbitrary deadlines set by Washington will come and go. With more legal routes for implementing tariffs open for Trump, any rushed through agreements are sure to prove inadequately binding and will do little to reduce uncertainty as some hope. America will come first under a Trump administration and that means more tariffs and more trade uncertainty.
