After professing on the campaign trail that “tariffs” are his favorite word, President-elect Donald Trump crystallized his intent last week by saying that on the first day of his administration, he would impose 25% tariffs on all goods imported from Canada and Mexico, and an additional 10% tariffs on products from China. His claimed justification is that these countries are not doing enough to stem the influx of fentanyl and illegal immigrants into the United States.

On November 30, Trump reiterated a campaign threat, declaring that he would impose 100% tariffs on exports from countries attempting to move away from the U.S. dollar as the world’s reserve currency, stating: “The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER.” He warned BRICS nations—Brazil, Russia, India, China, and South Africa, along with additional members such as Egypt, Iran, and the UAE—that they must pledge not to create a new currency or back any alternative to the U.S. dollar, or face severe tariffs. This rhetoric highlights growing tensions over the role of the U.S. dollar in global trade, as countries like Russia and Iran, often subject to U.S. sanctions, seek alternatives to the dollar.

These tariff threats have prompted a firestorm of speculation and commentary on whether he will actually follow through on his threats, and what legal authority he would have to do so. While proclaiming on the campaign trail that tariffs are paid by foreign countries, the unquestionable reality is that tariffs are paid by United States importers – and ultimately passed on to U.S. consumers, in the form of higher prices. Some commentators have noted that Trump’s threatened tariffs could cost the average American family as much as $2600 per year.

While we will have to await Trump’s assumption of office to determine his true course of action, it is useful to review what Trump has done before, and what he might do upon returning to the Presidency.

What Trump Did During His First Term.

Although Article I, Section 8 of the United States Constitution vests in Congress the exclusive power to impose tariffs, the Congress has, over the years, delegated the tariff-setting power to the Executive to enable quick action to address national emergencies and urgent threats. Presidents have exercised this authority sparingly, save for the recent Trump and Biden Administrations.

During his first term, President Trump invoked Section 232 of the Trade Expansion Act of 1962 to declare that imports of steel and aluminum mill products posed a threat to the national security of the United States. Although the United States Trade Representative’s (“USTR”) investigation and report produced scant evidence of an emergency (Defense Secretary Mattis stating that there was none), President Trump imposed additional tariffs of 25% ad valorem on steel mill products and 10% ad valorem on aluminum mill products. These tariffs remain in force today (although the Commerce Department, Bureau of Industry and Security (BIS) operates a robust process which provides product- and importer-specific exclusions from these tariffs).

Trump also invoked Section 301 of the Trade Act of 1974 to claim that China was impairing U.S. export trade by forcing assignment of US intellectual property rights to Chinese firms and then expropriating that property once it had been assigned to the Chinese partner. He initially targeted Chinese product imports of $50 billion for retaliation, but subsequently increased those tariffs to cover over $400 billion of Chinese imports, most with an additional tariff of 25% ad valorem, and some consumer-facing “List 4a” products at 15% ad valorem, later reduced to 7.5% ad valorem as a result of agreement on structural reforms to China’s economic and tariff regimes. Proposed additional tariffs on consumer products, on the USTR’s “List 4b” of retaliation targets, were also suspended.

Under Trump’s first Administration the United States Trade Representative’s office operated a product-specific “exclusion” regime (which ostensibly was created to suspend the special tariff if it could be shown that the US lacked the production capacity to meet current needs, but which, as a practical matter, tended to disproportionately favor persons and companies that were linked to Republican donors).

President Joe Biden, upon taking office in 2021, had no inclination to eliminate or reduce Trump’s China section tariffs.. He continued all the tariffs while declining to launch a new “exclusions” process for Section 301 tariffs, despite substantial pressure from business interests. The Biden Administration “slow walked” the required 4-year review of Section 301 tariffs, until year 6, ultimately concluding that all Section 301 tariffs should remain in effect, and increasing some tariffs (for example, raising the Section 301 tariff on Chinese-origin electric vehicles to 100% ad valorem).

What Powers Will Be Available to the President in his New Term?

A few laws have delegated power to the President to take emergency action which could be construed as giving him authority to impose tariffs.

Of these, the statute most often mentioned as authorizing action on “Day 1” is the International Emergency Economic Powers Act (IEEPA), enacted in 1977. IEEPA authorizes the President to “deal with any unusual and extraordinary threat . . . if the President declares a national emergency with respect to such threat.” See e.g., 50 U.S.C. §§ 1701–1708. While IEEPA has been used widely to impose export and political sanctions, (blocking of transactions, freezing of assets, etc.) it has never been used as authority to impose tariffs. In 2019, then-President Trump threatened to use IEEPA as authority for imposing additional tariffs on Mexican products, but never followed through with declaring a national emergency. Under IEEPA, the President is authorized to take action for one year, although he is empowered to renew the emergency declaration annually.

Another possibility for Day 1 action is the Trading with the Enemy Act of 1917 (TWEA). See e.g., 50 U.S.C. §§ 4301–4341. In 1971, faced with a balance of payments issue, President Richard Nixon imposed a 10% “import surcharge” on most dutiable imports. He did not state the basis for his action, and the surcharges were removed after 4 months. But legal challenges abounded. In Yoshida International Inc. v. United States, 63 CCPA 15 (1975), the United States Customs Court (now the US Court of International Trade) concluded that neither the Tariff Act, the Trade Expansion Act of 1962, nor the Trading With the Enemy Act authorized the President to impose the surcharge. However, the Court of Customs and Patent Appeals (now the US Court of Appeals for the Federal Circuit), while upholding the Customs Court’s findings respecting the Tariff Act and Trade Expansion Act, held that the TWEA did authorize the imposition of tariffs – or at least did not prohibit their imposition.

In holding that the TWEA authorized the Nixon surcharge, the appeals court stressed that its findings were specific to the emergency proclamation under review. That proclamation, the Court noted, did not attempt a Presidential usurpation of Congress’ tariff-setting power. It was limited in scope, leaving many statutory rates of duty imposed by Congress intact, and by its terms was temporary. Still, the Court cautioned “[t]o uphold the specific surcharge imposed by Proclamation 4074 is not to approve in advance any future surcharge of a different nature, or any surcharge differently applied or any surcharge not reasonably related to the emergency declared.” The notion that a tariff must be reasonably related to the emergency declared” may well raise issues concerning whether a tax on licit goods is reasonably related to the entry of persons or illegal drugs.

The Yoshida court concluded its opinion with a stark warning: “Though such a broad grant [of emergency power] may be considered unwise, or even dangerous,   should it come into the hands of an unscrupulous, rampant President, willing to declare an emergency when none exists, the wisdom of a congressional delegation is not for us to decide.  As was said in Norman v. B. & O. R. Co., 294 U.S. 240, 297 (1935), with respect to “gold clause” measures: “We are not concerned with their wisdom.  The question before the Court is one of power, not of policy.”

Section 232 of the Trade Enhancement Act of 1962 authorizes action by the President to “adjust imports” in order to safeguard the national security of the United States. See e.g., 19 U.S.C. § 1862. It is the basis for the current additional tariffs imposed on steel and aluminum mill products. Section 232 is not a good candidate for Day 1 action to increase tariffs, for two reasons. First, it requires the Commerce Department to conduct and study and issue recommendations the President may act against. Second, any adjustment of imports, including tariffs, must be addressed to the imported products claimed to constitute the national security threat. If as the President-elect has said, the national emergency is posed by immigrants and fentanyl, Section 232 would not permit the President to raise tariffs on goods.

Section 301 of the Trade Act of 1974 authorizes the President to take action against foreign nations, including the imposition of tariffs, to address “unfair trade practices” which burden American commerce. See e.g., 19 U.S.C. §§ 2411–2420. It is the basis for the retaliatory tariffs currently levied against most Products of China. Here again, Section 301 is not a “Day 1” remedy, since it first requires a study and recommendations from the United States Trade Representative before the President may act. Whether the President would invoke the 2018 intellectual property finding against China as the basis for assessing 10% additional tariffs on Chinese products is unclear. The United States already faces thousands of lawsuits asserting that then-President Trump, in imposing the Section 301 tariffs on Chinese goods in Lists 3 and 4a, violated statutory procedures and ignored time limits. The lead appeal on this issue will be argued before the Federal Circuit on January 8, 2025. Whether Mr. Trump would be willing to take action under Section 301 that would immediately be challenged (and, indeed, could be added to the challenges already pending) is unknown.

Potential Additional Country -Specific Actions.

Section 338 of the Tariff Act of 1930 allows the President to unilaterally impose duties up to 50% of the value of a products, wholly or in part the growth or product of a foreign country when the President finds that a foreign country imposes, directly or indirectly, an unreasonable charge, exaction, regulation, or limitation on, or discriminates, directly or indirectly, by law or regulation or practice, against U.S. commerce. See e.g., 19 U.S.C. § 1338. After issuance of a Proclamation imposing an additional duty, the President finds that the foreign country has maintained or increased its discrimination, the President may exclude products consistent with the public interest. It is anticipated, but not required, that the President would obtain a report from the U.S. International Trade Commission before taking such actions.

Section 122 of the Trade Act of 1974 authorizes the President to impose a temporary import surcharge for up to 150 days and up to a 15% ad valorem rate, or import quotas or a combination of the two, to address balance of payments deficits, and other problems. See e.g., 19 U.S.C. § 2132. This authority is country-specific and limited in duration and amount so it would not support Presidential action against imports generally. However, China devalued its currency in response to Trump’s section 301 tariffs so this authority could be invoked separately or in addition to section China 301 sanctions.

Legislation is pending which could be reintroduced in a new Congress to revoke China’s Most-Favored Nation Status resulting in the restoration of the 1930 Smoot-Hawley tariffs published in column 2 of the Harmonized Tariff Schedule of the United States.

What About USMCA?

The threats against Canada and Mexico have raised concerns about the continued efficacy of the United States-Mexico-Canada Agreement (“USMCA”), the trilateral free trade agreement that the first Trump Administration signed in 2020, replacing the North American Free Trade Agreement. The US government has already held that Section 301 and 232 tariffs may be imposed on goods from Canada and Mexico, even if the goods are considered USMCA “originating” and otherwise free from regular Column 1 tariffs. USMCA contains dispute resolution mechanisms which will swing into action, but the United States may well invoke the “Essential Security” clause in Article 32.2 of USMCA which allows signatories to take actions for the “protection of its essential security interests”.

USMCA is scheduled for a renegotiation in 2026 and the threat of tariffs may be the United States’ way to try to negotiate additional advantage – or the pretext to walk away from the deal altogether.

In any event, if the tariffs are levied, US importers and consumers will face greater costs and higher prices, and US industries may face retaliation from the affected trading partners.

For assistance in addressing the new tariffs and responses thereto, please contact a Neville Peterson professional.