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Trump Administration Trade Policy: A Historical Perspective and Key Questions & Takeaways
By Matthew Schaefer, Clayton Yeutter Chair, University of Nebraska College of Law
August 19th, 2025
©2025 Matthew Schaefer
The Historical Perspective
President Trump recently called the word “tariff” the most beautiful word in the dictionary. I, However, President Trump’s love of tariffs is not new. Long before becoming President, Donald Trump as a private business person took out a full-page ad in the New York Times in 1987 calling for tariffs on Japan and China. Tariffs, also referred to as customs duties, are a tax on imported products. The importer is legally responsible for paying the tariff, but often times the cost of an increased tariff is actually split between importer and exporter as the importer uses leverage to insist on a price cut in order to continue purchasing from the foreign exporter. Foreign governments do not pay import duties, but tariffs can certainly impact the exports from and economies of foreign nations.
From 1947 through 2012 – 65 years – U.S. trade policy was largely focused on cutting-tariffs reciprocally with other nations through trade negotiations. To be sure, the United States was one of the largest users of anti-dumping and countervailing duty remedies that imposed additional duties on dumped (i.e. products sold in the U.S. market below home market price) and subsidized imports causing or threatening to cause material injury to a U.S. industry. However, these trade remedy tariff actions, while an irritant to foreign trading partners, impacted roughly only 1% of U.S. imports in any given year. The tariff-cutting negotiations resulted in the United States maintaining one of the lowest average tariff rates in the world.
The United States entered the General Agreements on Tariffs and Trade (GATT) in 1947 and often led the push for new negotiating rounds that would cut tariffs among GATT membership. GATT membership continued to grow throughout the decades and in the 1970’s the so-called Tokyo Round of GATT negotiations not only focused on tariff-cutting but also on reducing non-tariff barriers such as subsidies and protectionist technical standards. In the 1980’s, the United States began entering free trade agreements, first with Israel (1985) and then with neighboring Canada (1989), that essentially eliminated tariffs imposed on trade between the United States and its free trade agreement partner. The United States also led the launching of a new round of GATT negotiations, the Uruguay Round in 1986. The Uruguay Round led to the creation of the World Trade Organization (WTO) in January 1995 with a strengthened and more legalized dispute settlement system, obligations liberalizing trade-in-services and protecting trade-related intellectual property rights, and, of course, more tariff cuts among negotiating countries. WTO membership was 128 nations at its inception, an increase of more than 100 nations since the original GATT 1947. The United States also finalized the North American Free Trade Agreement (NAFTA) in 1994 creating tariff-free trade between the United States, Canada and Mexico, as well as reducing non-tariff barriers to trade and seeking to ensure adequate enforcement of labor and environmental laws of the three countries. Throughout the next 15 plus years, the United States continued to enter free trade agreements, although efforts to conclude a hemispheric wide Free Trade Agreement of the Americas (FTAA) were abandoned in 2007. By 2012, the United States had 20 total free trade agreement partner countries. But it was clear liberalized trade was becoming ever more controversial in the political arena. It was a several-year struggle to obtain Congressional approval of the last three FTAs that entered into force in 2012: Columbia, Panama, and South Korea. The Doha Round of WTO negotiations, launched in 2001, had collapsed by then and was officially ended in 2015. President Obama’s administration negotiated and then signed in February 2016 a Trans-Pacific Partnership (TPP) free trade agreement with 11 other nations, including Japan, in the Asia-Pacific. (The United States did at the time maintain free trade agreements already with 6 of the 11 nations, but not Japan, the largest economy of the other 11 nations). The TPP nations, including the United States, represented over 40% of global GDP. However, Congressional approval of the TPP could not be secured in 2016 as the House of Representatives rejected a bill extending trade adjustment assistance that was seen as a necessary accompaniment to TPP approval legislation. Both 2016 Presidential candidates – Donald Trump and Hillary Clinton – took positions during the campaign opposing the TPP.
First Trump Administration (2017-2021)
On his first day in office, President Trump issued a memorandum withdrawing the U.S. signature from the TPP, indicating he would not proceed to seek Congressional approval for the TPP. The first Trump Administration did utilize several trade statutes delegating authority to the President to raise tariffs that had lay dormant for decades. Section 301 of the Trade Act of 1974, that delegates authority to increase in tariffs against products from a country that maintains unreasonable or discriminatory trade practices that burden or restrict U.S. commerce, had not been utilized to raise tariffs since prior to the WTO’s creation. In 2018, Section 301 was utilized to raise tariffs on roughly two-thirds of China’s imports into the United States as high as an additional 25%. (These additional duties apply on top of the existing normal trade relations (NTR) (or most-favored-nation, MFN) rate found in Column 1 of the Harmonized Tariff Schedule of the United States (HTSUS) that varies by good but generally averages around 4%). Section 301 requires an investigation by the U.S. Trade Representative’s office to determine if a foreign country’s trade practice is unreasonable or discriminatory and burdens or restricts U.S. commerce. The Trump Administration also reinvigorated Section 232 of the Trade Act of 1962 that delegates authority to the President to raise tariffs on imports threatening to impair U.S. national security. In 2018, President Trump raised tariffs on steel (by 25%) and aluminum (by 10%) using Section 232 authority. The previous use of 232 to raise tariffs was in the mid-1980’s. The Trump Administration also used Section 201 of the Trade Act of 1974, or so-called safeguards relief, for the first time since 2001. After required investigations by the U.S. International Trade Commission (ITC), tariffs were imposed on washing machines and solar panels. In terms of tariff-cutting, President Trump utilized residual tariff-cutting authority to reach a mini-deal with Japan, in which Japan gave TPP-tariff treatment to most U.S. agricultural goods, and the United States reciprocally eliminated or reduced tariffs on certain Japanese agricultural and industrial goods (e.g. machine tools, fasteners, steam turbines, bicycles, bicycle parts, and musical instruments). The second chapter of the Japan mini-deal dealt with digital trade. President Trump also used a Section 232 investigation of auto and auto parts imports as leverage to renegotiate the NAFTA and reach a new free trade agreement with Canada and Mexico called the US-Mexico-Canada (USMCA) agreement. The USMCA tightened auto rules of origin from the prior NAFTA, added a digital trade chapter, and created a new labor complaint mechanism as well as other changes, but essentially USMCA is a 90% overlap with the prior NAFTA as it did not cut tariffs further since NAFTA already eliminated them between the three countries. The Trump Administration reached a so-called Phase I trade deal with China in January 2020 as well that had many purchasing commitments for China (in an attempt to lessen the U.S. trade deficit with China) and did lower, at the margins, some U.S. Section 301 tariffs imposed on imports from China (from 15% down to 7.5% on roughly 20% of Chinese imports into the United States). These purchasing commitments by China were never met as the COVID pandemic hit the world a few months after the agreement was reached leading to a recession.
Biden Administration (2021-2025)
The Biden Administration kept in place the additional Section 301 tariffs on China’s imports throughout the four years of President Biden’s term of office. The Biden Administration did reach an agreement with the EU, Japan and the United Kingdom to eliminate imposition of extra tariffs on steel under Section 232 with so-called tariff rate quotas (TRQs) whereby so long as imports did not exceed a negotiated amount such imports would not face the additional Section 232 tariffs. The first Trump Administration also negotiated similar TRQ deals with countries such as South Korea and Brazil and reached voluntary export restraint deals on steel with Canada and Mexico. No traditional tariff-cutting FTAs were negotiated during the Biden Administration. As U.S. Trade Representative Katherine Tai explained: “When efficiency and low cost are the only motivators, production moves outside our borders. It becomes increasingly consolidated in one economy—such as the [People’s Republic of China]—which manipulates cost structures, controls key industries, and became a dominant supplier for many important goods and technologies.” Rather, the Biden Administration launched negotiations on an Indo-Pacific Economic Framework (IPEF). The IPEF involved negotiations on four pillars: 1. Trade (without discussion of tariff cuts); 2. Supply chain resilience; 3. Clean energy, decarbonization, and infrastructure; and 4. Taxation and anti-corruption. An IPEF supply chain agreement was reached in early 2024, but trade pillar was never concluded, in part due to disagreements over labor issues. Similar negotiations were launched in the Americas, and with a couple individual countries. An agreement with Taiwan, the U.S.-Taiwan Initiative on 21st Century Trade, was concluded in June 2023 but did not involve tariff reductions. Instead, it had commitments on anticorruption, good regulatory practices, services domestic regulation, customs administration and trade facilitation, and small and medium-sized enterprises
Second Trump Administration (2025-present)
As President Trump took office for his second term in January 2025, the United States had concluded no traditional tariff-cutting FTAs with any new countries since 2012 (13 years) and there had been no major WTO tariff-cutting negotiating round since 1994 (31 years), and no significant sectoral tariff-cutting (such as on information technology products) in the WTO for at least a decade. Indeed, the Japan mini-deal struck in 2018 really was the one and only significant example of a tariff-cutting agreement in the decade prior to the start of the second Trump Administration.
The first 200 plus days of the second Trump Administration has seen a bevy of tariff increases and threats of tariff increases as well as announcements of trade agreements with over eight countries. It has also seen novel use of the International Emergency Economic Powers Act (IEEPA) as authority to raise tariffs.
IEEPA, enacted in 1977, provides the President authority to take certain actions “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Among the actions the President is authorized to take are the following: “…(B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.” IEEPA does not expressly authorize “tariffs” as many other trade statutes do, such as Section 301 and Section 232. However, it has been argued that IEEPA does give the power to “regulate…importation” and President Nixon’s reliance on that language to increase tariffs in 1971 under a predecessor statute was upheld by U.S. courts. Further, Congress did not expressly limit the use of tariffs under IEEPA (as had been recommended by some testifying before Congress at the time).
In line with a promise made on his first day back in office, President Trump announced on March 4 that he was using IEEPA as authority to impose 25% additional duties on Canadian and Mexican goods, before two days later clarifying that goods meeting USMCA rules of origin would not face the additional duties. In July, the tariff on Canadian goods was increased to 35%. The unusual and extraordinary threat was the fentanyl and human trafficking across the United States’ border with the two neighboring countries. A good deal of Canadian and Mexico goods enter the United States at NTR/MFN tariff rates if those rates are low rather than at the duty-free USMCA rate because many businesses wish to avoid the administrative cost of the paperwork for USMCA eligibility. However, the percentage of exports from Canada and Mexico to the United States at USMCA rates has risen dramatically in the past several months as businesses have scrambled to complete paperwork necessary to be USMCA compliant and avoid the large IEEPA-based tariffs on non-USMCA-eligible imports into the United States.
Also, in early March, China had 20% additional IEEPA-based tariffs imposed on its imports into the United States, and that number rose to 145% as the two countries engaged in retaliatory actions before a truce was reached in May that placed additional U.S. tariffs on goods from China at 30% and China’s additional tariffs on U.S. goods at 10%. That truce was extended an additional 90 days on August 12. Similar to Canada and Mexico, the threat that the IEEPA tariffs were being used to address was the flow fentanyl into the United States from China.
President Trump used Section 232 authority and the prior 232 investigations to eliminate the TRQs on steel (and aluminum) and reinstall the 25% tariff on steel and impose a 25% tariff on aluminum. Subsequently, in early June, those additional tariff rates were raised to 50% on both steel and aluminum. On March 26, President Trump imposed a 25% tariff on imported autos and auto parts relying on Section 232 and the prior investigation on autos and auto parts. An additional duty on copper of 50% was imposed in late July under Section 232 authority.
In early April, on the White House lawn, President Trump announced “Liberation Day” reciprocal tariffs that over 85 nations would face. For some nations, those tariffs would be as high as 30-50%. The unusual and extraordinary threat these IEEPA-based tariffs were responding to, according to President Trump’s executive order, was “a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and U.S. trading partners' economic policies that suppress domestic wages and consumption, as indicated by large and persistent annual U.S. goods trade deficits.” A week later, President Trump gave a 90-day pause to the reciprocal duties to allow time for negotiations with individual countries and established a baseline additional reciprocal tariff of 10% on all countries not subject to separate IEEPA tariffs (Canada, Mexico, and China). The United States and United Kingdom (UK) reached a deal within the 90-day window but for other countries, there was an additional 30-day pause and a new set of threatened tariff rates. The UK deal in late May was a signal of the approach that would occur in other negotiations. It did not eliminate the additional duties on the UK Rather, the U.K. would only face 25% (rather than 50%) tariffs on steel and aluminum and only a 10% additional tariff on autos and auto parts (rather than 25%). For other goods, the UK would keep the 10% baseline tariff rather than face a higher reciprocal tariff.
Over the past month plus, the Trump Administration has reached additional trade deals with the EU and Japan, as well as South Korea, Cambodia, Pakistan, Thailand, Indonesia, Vietnam, and the Philippines. All the agreements keep an additional tariff on goods from those countries but at a rate lower than the threatened reciprocal rate. For example, the EU agreement places a 15% additional tariff on EU products that is lower than the threatened 30% reciprocal tariff and yet higher than the 10% baseline rate. Most of these tariffs are in addition to the normal NTR/MFN rate. While the agreements also feature reductions or other market access commitments by the foreign partner country, and some commitments to invest in U.S. industry, there are a lot of unknowns in the agreements and even disagreements between the countries when describing the agreements in public statements. For these reasons, these agreements are perhaps better described as frameworks that will need further negotiation to fill in the details. No finalized text of any of the agreements has been publicly released.
Unsurprisingly, legal challenges to the Trump tariff actions have occurred in U.S. courts and in the WTO. Legal challenges in the WTO will not change U.S. policy regardless of their outcome. The WTO Appellate Body collapsed in late 2019 during the first Trump Administration as the United States refused to join a consensus to appoint new appellate body members. Three members are required to hear any appeal and the number of appellate body members fell to two in December 2019. Since that time, WTO cases can still be brought against the United States by other WTO member countries and those cases will be heard by three person panels, but the United States can appeal any panel ruling into the so-called “void.” The WTO’s dispute settlement understanding guarantees an automatic right to appeal but one does not exist now. Thus, an appeal falls into a void and prevents adoption of the panel report by the WTO’s members and prevents the panel ruling from becoming binding. Fifty-seven of the WTO’s 166 members are parties an alternative appeal mechanism, called the Multiparty Interim Appeal Arrangement (MPIAA), to prevent the “appeal-into-the-void” problem, but the United States is not party to that arrangement. Many other large WTO members are subject to the MPIAA, including the EU, Japan, Canada, the UK, and China. At the panel level, the United States will invoke the GATT’s so-called national security exception, and prior panel rulings interpreting that exception as not being completely self-judging is one of the reasons the United States allowed the WTO Appellate Body to collapse. In realization of the futility of WTO dispute settlement to change Trump Administration policy, only three countries (Canada, China and Brazil) have brought WTO cases against the IEEPA and Section 232 tariffs imposed in the second Trump Administration, and none of those cases have proceeded to the establishment of a panel as of mid-August 2025; rather, they simply remain in consultations.
Challenges to the IEEPA-based tariffs in U.S. courts do have the possibility of being effective. As of August 2025, at least nine cases have been filed in U.S. courts challenging the legality of President Trump using IEEPA to impose tariffs. Some cases still involve battles over whether U.S. district courts have jurisdiction or whether the U.S. Court of International Trade (CIT) has exclusive jurisdiction over these cases. The Trump Administration has argued that the CIT has exclusive jurisdiction over these cases because that court’s jurisdiction extends to any litigation “arising out of” laws “providing for ... tariffs” and that should extend to any dispute involving a change to the Harmonized Tariff Schedule of the United States (HTSUS). While three district courts have agreed that the CIT has exclusive jurisdiction, the U.S. District Court for the District of Columbia (D.C.) agreed with plaintiffs that IEEPA does not “provide for” tariffs and that suits over its use sit outside CIT’s jurisdiction.
On the merits of the matter, the CIT in its May 28, 2025 ruling examined three sets of tariffs: 1. the so-called “worldwide” tariffs, essentially the baseline reciprocal tariffs that were imposed on nearly all countries; 2. the “retaliatory” tariffs imposed on China as the two countries ratcheted up tariffs prior to their truce agreement; and 3. the “trafficking” tariffs (or fentanyl and human trafficking tariffs).
In its opinion, the CIT discussed the non-delegation doctrine and the major questions doctrine at the outset of analyzing the worldwide and retaliatory tariffs. Specifically, the CIT stated that “under the nondelegation doctrine, Congress must ‘lay down by legislative act an intelligible principle to which the person or body authorized to fix such [tariff] rates is directed to conform,’” adding that an intelligible principle must “meaningfully constrain” the President. On the latter doctrine, the CIT stated that “under the major questions doctrine, when Congress delegates powers of ‘vast economic and political significance,’ it must ‘speak clearly.’” In sum, the CIT thought these two doctrines were useful tools to interpret the IEEPA statute, as statutes should not be interpreted in a way that would lead them to running afoul of the Constitution. The CIT also highlighted that when the Yoshida court upheld President Nixon’s August 15, 1971 order imposing an additional 10% tariff on imports, those tariffs were both temporary and limited by the current rates in Column 2 (non-MFN) of the U.S. tariff schedule. The CIT further noted that the Yoshida court specifically rejected that the words “regulate … importation” could grant an unlimited tariff power to the President. Finally, the CIT pointed to Section 122 of the Trade Act of 1974 as now providing the authority to impose tariffs for balance-of-payments deficits, including trade-in-goods deficits. Section 122, like all other delegated trade authorities, imposes procedural hoops-and-hurdles as well as substantive limits on use of the delegated authority.
On the “trafficking” tariffs, the CIT found that the tariffs did not “deal with” the threats posed by fentanyl and human trafficking. Specifically, the CIT quoted the IEEPA’s language that “the authorities granted to the President by section 1702 of this title may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose.” The CIT held that the term “’deal with’ connotes a direct link between an act and the problem it purports to address.” The CIT found that an attempt to create leverage through tariffs against Canada, Mexico and China in order to pressure those countries to take further actions on fentanyl and human trafficking activities that cross the U.S. border was not directly linked to the unusual and extraordinary threat of those activities. If pressure or leverage creation on other countries was sufficient, the CIT feared there would be no limits to actions taken under IEEPA. As summarized by the Court: “Surely this is not what Congress meant when it clarified that IEEPA powers ‘may not be exercised for any other purpose’ than to ‘deal with’ a threat.” The CIT ruling was stayed pending an appeal of the decision to the Court of Appeals for the Federal Circuit. The Court of Appeals for the Federal Circuit held oral arguments the last day of July and its decision is anticipated sometime in late August or early Fall. It is quite likely that decision will then be appealed to the U.S. Supreme Court.
On May 29, 2025, the U.S. District Court for D.C. (Judge Rudolph Contreras) also held the IEEPA-based tariffs illegal. Judge Contreras found that “regulate” and taxing authority were two different things; tariffs and taxes raise revenue, and the word “regulate” and those surrounding it in the IEEPA statute did not involve raising revenue. Judge Contreras also pointed out that “every time Congress delegated the President the authority to levy duties or tariffs in Title 19 of the U.S. Code, it established express procedural, substantive, and temporal limits on that authority,” and that IEEPA contained no such limits. Additionally, Judge Contreras pointed out that IEEPA also contains authority to regulate exportation and if regulate included taxing authority it would mean that export taxes were authorized by the IEEPA but the Constitution prohibits export taxes. Judge Contreras’ ruling is also stayed pending appeal of it to the Court of Appeals for the DC Circuit.
On August 8, 2025, President Trump warned on his social media account that “if a Radical Left Court ruled against us at this late date, in an attempt to bring down or disturb the largest amount of money, wealth creation and influence the U. S. A. has ever seen, it would be impossible to ever recover, or pay back, these massive sums of money and honor. It would be 1929 all over again, a GREAT DEPRESSION!” U.S. Trade Representative Jameison Greer was more subtle in his recent remarks, indicating confidence that the administration would prevail in the courts but also indicating the administration had alternative plans to rely on other delegated authorities to keep the tariffs in place. U.S. Trade Representative Greer stated in an interview that “[i]f it goes the other way, then we'll manage that. The reality is the countries understand the type of leverage that President Trump has created. That's why they're doing these deals and they're going to stick regardless of what happens in litigation …. It is once in 100 years [that] you have the chance to reorder global trade like this, and we're doing it, and we'll use whatever tools are necessary to do it.”
In sum, the second Trump Administration’s tariff policy stands in stark contrast to the focus of U.S. trade policy on reciprocal tariff-cutting negotiations that occurred from 1947 through 2012. To be sure momentum on tariff-cutting agreements slowed dramatically even before President Trump’s first term when Congress failed to take action to approve the TPP in 2016 at the end of President Obama’s term of office. Trump Administration policy in 2025 even diverges significantly from President Trump’s first term. That first-term ultimately featured higher tariffs on two-thirds of Chinese imports, and steel and aluminum, but also a renegotiated NAFTA --the USMCA with bipartisan support in Congress -- that kept tariff-free trade between the three countries and modernized the agreement to include digital trade commitments. The Biden Administration kept the higher rates of duty on Chinese imports and U.S. Trade Representative Tai expressed concerns with China free-riding on U.S. FTAs so in some ways the trade policy of President Trump’s first term was followed to some degree by his successor. However, the second term of the Trump Administration now features higher rates of duty on all countries, including allies, and targeted tariffs on many more products on national security grounds with more likely forthcoming soon. The average U.S. tariff rate is at its highest level in nearly a century. The coming months’ and years’ economic data (growth, inflation, exports, jobs) will show whether this much more aggressive tariff policy was wise or whether an alternative path of liberalizing trade with allies and continuing to work with allies to jointly place tariff and other pressure China to address its overcapacity, subsidization, and non-market practices in key sectors was a better route. To date, other countries have largely abstained from retaliating. Other countries appear to be in wait-and-see mode and hoping the economic impacts of the tariffs change the Trump Administration policy to some degree. Other countries also witnessed the reaction of the Trump Administration to China’s retaliation and probably did not want to get involved in a ratcheting up of back-and-forth tariffs at this time. However, other countries no doubt are looking to diversify their trading partners in response to the Trump Administration tariff actions, and this can have long-term consequences similar to more overt retaliation. The Court of Appeals for the Federal Circuit, and even the Supreme Court, may force a somewhat less global approach to tariffs depending on their determinations of the legality of IEEPA-based tariffs since alternative delegated authorities at least have some limits and boundaries. However, Section 232 and Section 301 undoubtedly can be used for major tariff actions that might be able to closely approximate the impact of across-the-board tariffs taken under IEEPA. It will be harder (at least facially) to take non-trade-related tariff actions (like those against Canada, Mexico and China for fentanyl trafficking and against Brazil for its prosecution of former President Bolsonaro and against India for purchase of Russian oil) if the Supreme Court determines tariffs cannot be imposed under IEEPA.
Key Questions & Takeaways
1) Is this equivalent to a “forced round” of trade negotiations?
There has been no successful GATT/WTO round of negotiations since the conclusion of the Uruguay Round in 1994. Some argue President Trump’s tariff actions are leading to a “forced round” of trade liberalization. As countries give market access and tariff-cutting commitments to the United States, those commitments must be given to all other WTO countries on a most-favor-nation (MFN) basis under the various WTO agreements, including the GATT (dealing with trade-in-goods). While the public is still waiting on the details of the various commitments countries have made in deals with the Trump Administration, it will be important to see not only what the commitments are but whether they are indeed extended on an MFN basis or whether some countries will ignore their WTO MFN obligations. Of course, the interesting feature of this “forced round” is that the United States does not participate in the tariff-cutting like prior rounds but actually increases tariffs above existing rates. Further, unlike prior negotiating rounds, this forced round only features bilateral negotiations between the United States and others. Bilateral negotiations have long been preferred by the Trump Administration, even going back to President Trump’s first term.
2) Has Congress given away too much unbounded authority on tariff increases to the President?
While presidential tariff-cutting authority under trade promotion authority was always time-limited by Congress, large amounts of tariff-raising authority has been delegated to the President without any sunset. Even in the first Trump Administration, there was unhappiness in Congress with the use of Section 232 and attempts by members of Congress to place further limits on it. However, if Congress delegates authority to the President with no sunset on that authority, it is very difficult to terminate or even place further constraints on that authority later as the President will veto any legislation doing so, thus necessitating two-thirds support in both houses of Congress to override the veto – an uphill climb at any time and even more so today. If IEEPA-based tariffs are ultimately upheld by courts of appeal or the U.S. Supreme Court, this will certainly only increase the power the President has to take tariff-raising actions into the future as IEEPA also has no sunset clause.
3) What is the likely final result of the legal challenges in US courts to the IEEPA-based tariffs?
President Trump’s social media post indicates it is only leftist judges that would strike down the IEEPA-based tariffs. However, the three judges on the CIT that ruled against the IEEPA-tariffs were a Reagan appointee, an Obama appointee, and a Trump appointee. Judge Contreras is an Obama appointee, but also notably appointed by Chief Justice John Roberts to serve a term on the United States Foreign Intelligence Surveillance Court. At this point, it is hard to say that there is any link between which President appointed a judge and their views on the use of IEEPA to impose tariffs. U.S. Trade Representative Greer has indicated confidence in ultimate success for the government. The U.S. Supreme Court has a 6-3 majority for conservative justices and has generally supported President Trump’s actions in other areas. However, in this case several doctrines of great importance to conservative justices – the non-delegation doctrine and the major questions doctrine – may be implicated at least in terms of influencing statutory interpretation. As discussed below, some justices may also be concerned that if tariffs are allowed under IEEPA that tariff actions could be used for almost an unlimited number of rationales, trade and non-trade-related. Further, some justices may comfort themselves in knowing that even if they deny the President the ability to impose tariffs under IEEPA that other delegated authorities will likely allow the President to closely approximate his current tariff policy.
4) If the IEEPA-based tariffs are ultimately invalidated by US courts, what other authorities might the administration rely upon?
The Trump Administration would need to rely on other so-called three-digit authorities: Section 232, Section 301, and Section 122, all of which have procedural hoops-and-hurdles as well as some substantive limits that must be complied with in order to use the particular delegated authority. While expanding use of those authorities to implement across-the-board tariffs globally may stretch those authorities and lead to a whole new round of litigation, these delegated authorities can likely be used to implement tariffs that closely approximate current policy. For example, Section 232 (19 USC 1862) states: “Upon request of the head of any department or agency, upon application of an interested party, or upon his own motion, the Secretary of Commerce (hereafter in this section referred to as the "Secretary") shall immediately initiate an appropriate investigation to determine the effects on the national security of imports of the article which is the subject of such request, application, or motion.” (emphasis added). The text of the law thus refers to a specific “article” being imported and the history of use of the law also indicates it is to involve article-specific investigations and actions. However, the tariff actions against specific products can be, and often are, extended to derivative products. For example, steel tariffs have been extended to products such as refrigerators, freezers and stoves. Currently, there are Section 232 investigations underway for the following products: timber/lumber, semiconductors, pharmaceuticals, critical minerals, heavy trucks, aircraft drones, and polysilicon. President Trump has threatened 100% duties recently on semiconductors, and a whole host of derivative products contain semiconductors. Section 301 perhaps has even greater leeway as it provides that “[i]f the Trade Representative determines that (1) an act, policy, or practice of a foreign country is unreasonable or discriminatory and burdens or restricts United States commerce, and (2) action by the United States is appropriate, the Trade Representative shall take all appropriate and feasible action authorized under subsection (c), subject to the specific direction, if any, of the President regarding any such action, and all other appropriate and feasible action within the power of the President that the President may direct the Trade Representative to take under this subsection, to obtain the elimination of that act, policy, or practice.” While most Section 301 investigations involve a single country, a few focus on particular discriminatory acts (e.g. digital services taxes) engaged in by more than one country. The Office of the U.S. Trade Representative publishes an annual report of trade barriers to U.S. exports in foreign countries (the National Trade Estimates report) and could use that as the basis to launch dozens of Section 301 investigations that focused on individual countries. The 2025 version of the National Trade Estimates report listed trade barriers in approximately 60 countries plus the 27-member European Union. Both Section 232 and Section 301 allow for investigations and determinations to proceed rapidly as both statutes impose maximum but not minimum time frames for various aspects of the process. As to Section 122, even the CIT believes that statute would be appropriate to use for trade-in-goods deficits, but the problem the Trump Administration might see in that authority is that tariffs are capped at 15% and limited to 150 days unless extended by Congress.
5) Even if IEEPA-based tariffs are ruled illegal, would tariffs included in the trade deals themselves provided independent authority to continue charging the increased tariffs?
Tariff-cutting authority for the President lapsed in July 2021. However, the trade deals the second Trump Administration has reached with the EU, Japan, UK and others do not involve the U.S. reducing current tariffs, but rather imposing additional tariffs on products from those countries. Some in Congress might argue such deals need Congressional approval. Indeed, the Congress actually approved the agreement with Taiwan concluded during the Biden Administration after the fact and imposed additional procedural requirements on any future agreements with Taiwan and that agreement did not involve tariff-cutting nor tariff-increases. Presidents in the past have argued agreements are impliedly approved if they do not include any terms or obligations that conflict with current U.S. law. (This was the argument in support of the digital trade chapter within the U.S.-Japan mini-deal during the first Trump Administration, for example, and also the argument by the Biden Administration for its Taiwan deal). One problem with this argument is that the HTSUS is considered a law and Trump’s recent deals imposing additional tariffs make changes to the HTSUS. This may be another issue that leads to litigation in U.S. courts – whether the agreements with foreign countries raising tariffs on products from those countries are valid without Congressional approval and whether they provide an independent basis for changes to the HTSUS.
6) Might Congress pass legislation approving of the Trump tariffs or otherwise delegate broad authority to impose across-the-board tariffs globally?
Most bills introduced in this session of Congress thus far dealing with tariffs would actually limit the President’s authority to impose tariffs. Most of these bills have been introduced by Democrats, but Sen. Rand Paul (R-Kentucky) has introduced the No Taxation without Representation Act of 2025 that would require the President to make a tariff proposal to Congress and then have Congress approve the tariff proposal in order for it to take effect. The bill would also eliminate or curtail many existing authorities the President has to impose tariffs. A bi-partisan bill sponsored by Sen. Maria Cantwell (D-Washington) and Rep. Don Bacon (R-Nebraska) would require the U.S. International Trade Commission to assess the economic impact of proposed tariffs by the President under existing authorities and submit the report to Congress 60 days prior to the tariffs being able to take effect. However, any bill limiting or curtailing existing trade authorities will be vetoed by the President. There is one bill, HR735 introduced by Rep. Riley Moore (R-West Virginia) that actual would authorize a “reciprocal” tariff policy that is quite similar to a bill originally introduced in 2019. Interestingly, the bill would seem to require that reciprocal duties be assessed on a good-by-good basis, rather than a country-wide basis. That would require a lot of detailed analysis and research, one reason why the Trump Administration, seeking to act quickly, resorted to country-wide reciprocal duty rates using a formula based on a country’s trade deficit with the United States. The bill only has 10 or so co-sponsors. Just in the past few days, Reps. Jared Golden (D-ME) and Greg Steube (R-FL) introduced a bill in the House titled the “Secure Trade Act” that would impose a 10% baseline tariff on all countries and either a 35% (non-strategic products) or 100% (strategic products, such as aircraft engine components and microdrones) tariff rates on imports from China. The bill also authorizes the President to impose even higher tariffs on imports from China than the 35% and 100% rates.
7) Is the WTO essentially irrelevant now in terms of establishing and enforcing global trade rules?
The WTO consisted of essentially three pillars: a forum for negotiation, the dispute settlement system, and the trade-policy review mechanism (TPRM). The first two pillars have had significant cracks in them for a long time. The last completed large round in the GATT/WTO system concluded in 1994. While some follow-on sectoral agreements (e.g. telecommunications, banking, and information technology products) were concluded in the first several years after the WTO’s creation, and there have been a few other notable negotiating achievements such as the expanded WTO procurement agreement in 2012, none of these come close to the scope of a full, comprehensive round of negotiations. The chances of any large-scale WTO negotiation in the foreseeable future is non-existent. The dispute settlement system suffered a massive crack with the collapse of the Appellate Body in late 2019. But over 50 countries subscribe to the MPIAA that allows them to avoid the appeal into the void issue. Still operational, is the TPRM in which the trade and economic policies of members are reviewed periodically, with opportunities for questions and examination by other countries. Various committees of the WTO also continue to operate, such as the sanitary and phytosanitary (SPS) committee that seeks to tackle such barriers to trade through consultation and discussion. In short, the WTO continues to have a role, just one much more limited than it had a decade ago. U.S.-China trade relations essentially fell outside the WTO by the middle of the first Trump Administration. Now U.S.-trade relations with the world are in reality outside the confines of the WTO. Other nations’ trade relations with each other, however, to large degree continue to be subject to WTO rules.
8) Are tariffs or threats of tariffs also being used for non-trade purposes?
In addition to the fentanyl and human trafficking rationale for the IEEPA-based tariffs against Canada, Mexico and China, there are numerous other instances in which tariffs have been used for non-trade purposes in the first 200 plus days of the Trump Administration. On August 7th, President Trump issued an EO that found “that the Government of India is currently directly or indirectly importing Russian Federation oil” and thus declared that “articles of India imported into the customs territory of the United States shall be subject to an additional ad valorem rate of duty of 25 percent.” This secondary sanction seeks to have India stop such purchases but the move has been criticized because the United States previously encouraged India to buy Russian oil to help stabilize global energy markets. It has also been criticized for setting back relations built by the United States with India over the past five administrations, particularly given neighboring Pakistan’s products only face a 19% tariff when imported into the United States. On July 30, Brazil was hit with a 40% (on top of the 10% baseline tariff for a total of 50%) additional tariff rate for restricting the free speech of U.S. citizens on internet platforms and continuing to pursue the prosecution of former President Bolsonaro. (Bolsonaro and his allies have been charged with a plot to kill the winning Presidential candidate and a Brazilian Supreme Court justice in an attempted coup). In April, Mexico was threatened with additional duties over water rights issues between the two countries.
9) Tariff Stacking: What tariffs get added on top of others and what ones do not?
As a general matter, each of the tariffs imposed under Section 301, Section 232 and IEEPA are added on top of each other and on top of the existing Column 1 HTSUS NTR/MFN rate. However, there are numerous exceptions. On April 29, President Trump issued an Executive Order with the following stacking rules: For goods subject to the auto and auto parts tariffs, there will be no additional IEEPA-based duties hitting Canada or Mexico, and no additional duties from Section 232 steel and aluminum tariffs. In early June, it was made clear that goods facing Section 232 steel and aluminum tariffs would not face IEEPA-based tariffs on Canada and Mexico. The Section 232 metals tariffs do stack on top of one another, but Section 232 tariffs only apply to the proportion of metal content in a good. For the additional 25% tariff on goods from India for purchasing Russian oil, those generally stack on top of India’s reciprocal tariff rate of 25% but there are exceptions for certain products. The European Union’s agreement with the United States, as implemented by Executive Order, states that for a good with a Column 1 duty rate of less than 15%, the sum of its Column 1 duty rate and the additional duty imposed by the Executive Order will be 15%. For EU goods, already facing a Column 1 duty rate higher than 15%, there will be no additional duty. Japan was able to negotiate a similar stacking rule a week after having its initial trade deal always add the 15% agreed tariff on top of the NTR/MFN rate.
10) Transshipment: Do goods deemed to be transshipped through a third country for purposes of evading tariffs face even higher tariff rates (than the ones sought to be evaded)?
Transshipment of goods, i.e. simply passing goods through a third country and claiming the goods have origin of that third country in an effort to avoid higher duties, has long been a concern of the Trump Administration. Indeed, this concern goes back the first term of President Trump, when there were worries Chinese goods were being transshipped through Vietnam in an effort to evade the Section 301 tariffs imposed on Chinese goods. President Trump’s July 31 executive order imposes a 40% additional duty on any transshipments meant to evade higher duties. However, there are questions as to how transshipment will be deemed to occur – whether it will be by application of long-standing rules of origin that ask whether a good underwent a “substantial transformation” in a country prior to shipment to the United States or whether new rules might be created that would declare that goods that have some non-trivial content from non-market economies such as China to be declared of Chinese-origin regardless of content or further activities occurring in subsequent countries in the supply chain. For example, the July 22 announcement of the agreement between the United States and Indonesia says that the two countries “will negotiate facilitative rules of origin that ensure that the benefits of the agreement accrue primarily to the United States and Indonesia.” The July 31 executive order also directs that “[t]he Secretary of Commerce and the Secretary of Homeland Security, acting through the Commissioner of CBP, in consultation with the United States Trade Representative, shall publish every 6 months a list of countries and specific facilities used in circumvention schemes, to inform public procurement, national security reviews, and commercial due diligence.”
[Update: April 17, 2025]
On April 2, 2025, the Trump administration announced a 10% baseline tariff on imports from all countries and additional country-specific reciprocal tariff rates for many countries. To date, most countries have held off on retaliating with their own tariffs on U.S. goods. China is the major exception; the country has imposed retaliatory tariffs of 125% on U.S. goods so far in 2025. (Canada has also implemented retaliatory measures in response to a different set of U.S. tariffs announced in March). The administration announced a 90-day pause of the reciprocal tariffs on April 9 to allow time for negotiations. The pause does not apply to the 10% baseline tariff or China, which faces a new 145% tariff (125% reciprocal tariff plus a 20% tariff related to fentanyl).
USTR’s seven hours of Congressional testimony helps illuminate U.S. trade policy and reveal Congressional concerns
By Jill O’Donnell, Director, Yeutter Institute
Published April 17, 2025
Themes that ran throughout recent Congressional hearings on the Trump administration’s trade policy included trade barriers to U.S. beef exports, the administration’s approach to the U.S.-Mexico-Canada Agreement (USMCA) six-year review, the level of White House consultations with Congress, and measuring the success of the new tariff regime. U.S. Trade Representative Jamieson Greer appeared before the Senate Finance Committee on April 8, where he faced nearly three hours of questions, and the House Ways & Means Committee on April 9, where the hearing lasted over four hours. The U.S. Trade Representative (USTR) typically testifies each spring about the administration’s trade policy agenda before these two Congressional committees, which have primary jurisdiction over trade policy. Highlights from the proceedings include the following:
Announcement of the nominee for U.S. Chief Agriculture Negotiator is forthcoming. Members questioned whether the office of the USTR, a small agency, has the capacity to manage simultaneous negotiations with the over 70 countries that have sought them with the United States in recent days. Rep. Adrian Smith (NE) noted the positions of Chief Agricultural Negotiator and Chief Intellectual Property Negotiator (which has never been filled) remain vacant. Greer indicated that an announcement on a nominee for Chief Agricultural Negotiator is pending.
Beef exports get repeated airtime. Members in both hearings raised concerns about barriers to U.S. beef exports, particularly to China, the world’s largest importer of beef. Senator Steve Daines (MT) referenced China’s 2017 action to accept U.S. beef imports following a 14-year ban. U.S. beef exports to China rose from $32 million in 2017 to a minimum sustained level of $1.6 billion in the 2021-2024 period (with an increase to $2.1 billion in 2022). “That’s been shut off in the last three weeks,” Daines said. “What can we do to hold China’s commitments to U.S. beef and U.S. ag exports?” Greer said that would depend on “how forward leaning China wants to be” and emphasized the goal of opening other markets for beef so the U.S. does not need to be dependent on China.
Market access is not just about tariffs. Members in both chambers asked why the administration included Australia in the new tariff regime, given the free trade agreement and the trade surplus the U.S. maintains with the country. (Under the U.S.-Australia FTA, all imports from the United States can enter Australia duty-free). Ambassador Greer cited Australia’s ban on U.S. beef, referencing USTR’s annual National Trade Estimate Report on Foreign Trade Barriers, which lists barriers U.S. products face around the globe. Australia banned U.S. beef imports in 2003 following the detection of bovine spongiform encephalopathy (BSE) in the United States. Technical discussions between the two sides to date have not yet resulted in restored access for fresh U.S. beef and beef products.
A top concern related to the upcoming USMCA six-year review: don’t let other countries benefit from the agreement. As the United States, Canada, and Mexico prepare for a formal review of the USMCA in 2026, members of Congress wanted to know how the administration will approach this process. Greer indicated that a top concern is ensuring that other countries do not use the trade agreement as an “export platform” to the United States by setting up factories in Canada or Mexico and benefitting from the agreement. He also stated several times that the administration will follow the timeline and process required by law to prepare for the review. This includes a public consultation period that must begin no later than 270 days before the joint review commences, which is to take place on the sixth anniversary of the agreement’s entry into force, July 1, 2026.
Republican and Democratic members expressed differing views of whether and to what extent the administration consulted Congress on the recent tariff actions. Some thanked Greer for administration engagement on Capitol Hill in advance of the tariff announcements while others indicated they received notice of the intended actions shortly before they occurred, rather than a request for advice or opinions. Greer said USTR staff had over 200 engagements on Capitol Hill in advance of the April 2 announcement. The legal basis for most of the tariffs announced this year is the International Economic Emergency Powers Act (IEEPA), which does not require Congressional approval, but does require the president to consult Congress and submit reports explaining why the tariffs are necessary.
What does success look like? Members of Congress from both parties asked Ambassador Greer how the administration plans to measure the success of the current tariff actions. Greer responded that the trade deficit needs to go “in the right direction” (down), manufacturing as a share of GDP needs to go “in the right direction” (up) and tariffs and non-tariff barriers that U.S. products face in other countries need to go down.
Proposed trade remedies stemming from a U.S. investigation into Chinese shipbuilding practices could result in a hit to U.S. agriculture; a decision is pending in April. In an exchange critical to U.S. agricultural exporters, Greer indicated that a decision is expected later in April on which specific measures the administration will impose following a U.S. Section 301 investigation into Chinese shipbuilding practices that have made the country dominant in this sector. The investigation was initiated in 2024 under the Biden administration in response to a petition by a group of labor unions. The administration’s proposed remedies included fees ranging from $1 million to $1.5 million on Chinese-built, Chinese-linked merchant vessels that call at U.S. ports. Rep. Randy Feenstra (IA) said Iowa soybean producers told him of canceled soybean orders in the face of anticipated fees. “This could have been a communications issue,” Greer said. “I think some people thought that all of those measures would be imposed. Those were proposed measures for people to comment on and receive feedback. We’ve now had that process where we’ve had the feedback, and now we consider which of those measures is most appropriate.” Public hearings on the matter were held on March 26 and 27, with agricultural industry representatives testifying against the proposed port fees, which could significantly raise transportation costs for U.S. agricultural exports.
If reshoring manufacturing is a goal, does the U.S. have enough workers? Senator Ron Johnson (WI) questioned whether there are enough workers to meet administration goals for reshoring manufacturing in the United States and spoke in favor of a diversified supply chain around the world to avoid reliance on China. “I think trade is a win-win situation. It should be,” Johnson said. Greer responded that “the factories that are being built and will be built in the United States will leverage both automation and workers.”
[Update: March 4, 2025]
The report below analyzes new U.S. tariffs of 25% on Canadian and Mexican goods (and 10% tariffs on Canadian energy products) that took effect on March 4, 2025. It considers the effects of the 10% tariff on imports from China that took effect on Feb. 4 and the resulting retaliatory tariffs on U.S. products. It does not yet consider the additional 10% tariff on Chinese imports that took effect on March 4. Future updates will be published here.
Understanding Trump's New Tariffs - February 12, 2025
KEY TAKEAWAYS
- The legal basis for the new tariffs on China and the threatened tariffs on Canada and Mexico is a 1977 law called the International Emergency Economic Powers Act (IEEPA). This is the first time IEEPA has been used to impose tariffs.
- Unlike other U.S. laws presidents have used to impose tariffs, under IEEPA, tariffs can be imposed virtually immediately with no investigation required in advance. Any legal challenges are likely to face an uphill climb, as U.S. courts have traditionally given very wide latitude to Presidential actions under IEEPA.
- The agriculture sector would experience a double whammy of lost competitiveness from U.S. tariffs and loss of export markets through trading partners’ retaliation. Products affected by trade retaliation would be pork, beef, corn and soybean products. For U.S. producers, finding new markets when retaliation makes their products less competitive takes time.
- Because the United States imports crude oil from Canada and Mexico and refines it including in Colorado and Wyoming, tariffs on these imports would increase the cost of all refined fossil fuel products in the U.S. Our U.S. tariffs would also impact fertilizer prices, as the U.S. imports most of our potash from Canada.
- The 10% minimum tariff on China significantly broadens the set of goods that face the trade tax, compared to the 2018 trade war in which the tariffs were much more targeted. This, combined with China’s retaliation on U.S. energy goods, motor vehicles, and agricultural equipment, will have a negative economic impact on the U.S. that is larger than the 2018 trade war. The cost of the new broad-based tariffs for the U.S. economy is on the order of $30 to $100 billion.
Legal, Economic and Agricultural Perspectives
Since taking office on Jan. 20, 2025 President Trump has moved swiftly to impose or threaten to impose wide-ranging new tariffs on U.S. trading partners. A 10% tariff on all imports from China—additional to tariffs that were already in place on Chinese imports—took effect on Feb. 4. Tariffs of 25% on imports from Canada and Mexico were announced then forestalled for 30 days. These tariff actions were based on an unprecedented use of an existing law. The president also signed a proclamation raising tariffs on steel and aluminum and has indicated he may take additional tariff actions. The objectives of the tariffs appear to vary with each case. The administration is signaling that it intends to make trade policy an ongoing, high-profile part of its agenda, connected to overall economic policy. Decisions will impact businesses, farmers, consumers, the economy, and the trading system. Understanding them requires legal, economic, and diplomatic lenses – an approach that defines the Yeutter Institute. Our three faculty chairs in law, agricultural economics, and economics offer their perspectives below on the initial tariff actions of the new administration.
Legal: An Unprecedented Use of an Existing Law to Impose New Tariffs
By Matthew Schaefer, Clayton Yeutter Chair and Professor of Law, Nebraska College of Law
On February 1, 2025, President Trump signed three executive orders imposing additional tariffs on goods from Canada, Mexico and China. Tariffs, also referred to as customs duties, are taxes on imports. U.S. importers are responsible for paying the tariff, although tariffs can negatively impact foreign exporters as U.S. importers look for alternative sources of supply or seek to renegotiate contracts for the purchase of goods from the foreign exporters.
The executive orders call for a 25% additional tariff on imports from Canada (although just 10% for energy resources), a 25% additional tariff on imports from Mexico, and a 10% additional tariff on imports from China beginning just past midnight on February 4th. Canadian and Mexican goods currently receive tariff free treatment into the United States as they have since the mid-1990s under the North American Free Trade Agreement (NAFTA) and its successor agreement the USMCA that entered into force in 2020.
The additional tariff of 10% on Chinese imports will be added to the additional 25% or 7.5% tariffs imposed on two-thirds of imports from China since 2018 under Section 301 of the Trade Act of 1974 during the first Trump Administration and maintained by the Biden Administration. Both of those tariff rates are added on top of the Normal Trade Relations (NTR) tariff rate for goods, although NRT tariffs tend to be quite low (3-4% on average).
The legal basis for these new threatened tariffs is the International Emergency Economic Powers Act (IEEPA), enacted in 1977. IEEPA provides presidential authority “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” In his executive orders dealing with Canada and Mexico, President Trump declared a national emergency at those borders related to concerns over fentanyl and other drug trafficking, and with respect to Mexico’s border, illegal immigration. With respect to China, President Trump declared a national emergency resulting from sustained influx of synthetic opioids, including fentanyl, and the “failure of the PRC government to arrest, seize, detain, or otherwise intercept chemical precursor suppliers, money launderers, other TCOs, criminals at large, and drugs.”
IEEPA empowers the President to “regulate … any … importation … of … any property in which any foreign country or a national thereof has any interest by any person … subject to the jurisdiction of the United States.” This is the first time that IEEPA has been used for tariffs. (However, President Nixon used the Trading With the Enemy Act (TWEA), a statute that IEEPA in part sought to limit and replace, to impose across the board tariffs in 1971 when the U.S. declared it would abandon the gold standard for the U.S. dollar). The use of IEEPA to impose tariffs for the first time is quite significant because other statutes delegating the power to the President to impose tariffs for national security reasons or to address unfair foreign trade practices have more procedural requirements and indeed require an investigation that takes time. Under IEEPA, tariffs can be imposed virtually immediately with no investigation required in advance.
More traditional trade remedy statutes such as Sec. 301 and Sec. 232 that were revitalized and used by the Trump Administration during President Trump’s first term operate differently. Section 301, meant to address unfair and unreasonable foreign trade practices, and Section 232, that addresses imports threatening to impair U.S. national security, require lengthy investigations prior to taking tariff actions. If the IEEPA-based tariffs are imposed, it is likely that there will be legal challenges brought in U.S. courts.
U.S. courts have traditionally given very wide latitude to Presidential actions under IEEPA and any such challengers will face an uphill climb, even with new Supreme Court jurisprudence giving less latitude to executive branch actions based on congressional delegations of power. President Nixon’s TWEA tariffs survived a court challenge in the early 1970s with the court finding the power to “regulate” included power to tariff, although critics point out IEEPA’s long list of delegated powers does not include explicitly the power to “tariff” or “tax,” and no prior President used IEEPA for imposing tariffs.
China has filed a World Trade Organization (WTO) dispute settlement case against the United States based on the IEEPA tariffs. However, ever since the WTO Appellate Body collapsed in December 2019, the United States has maintained the ability to appeal any first-level WTO panel report “into the void,” thereby preventing its adoption by the WTO dispute settlement body and thus preventing the ruling from becoming binding. A USMCA challenge by Canada and Mexico if the tariffs are imposed later is likely too.
Importantly, both the WTO agreements and the USMCA contain so-called national security or “essential security” exceptions, and the USMCA exception is less qualified than the WTO exception. The USMCA’s “essential security” exception appears to be completely self-judging and does not contain some of the limiting language that one finds in WTO agreements’ national security exceptions. The U.S. believes even the WTO national security exception is entirely self-judging, even though WTO panels have found some small, outer bound limits. The wording of the USMCA’s “essential security” exception indicates even more strongly that the exception is entirely self-judging: “Nothing in this Agreement shall be construed to … preclude a Party from applying measures that it considers necessary for … the protection of its own essential security interests.”
On social media, President Trump also cited trade deficits with the three countries as a reason for imposing tariffs: “…The USA has major deficits with Canada, Mexico, and China (and almost all countries!), owes 36 Trillion Dollars, and we’re not going to be the “Stupid Country” any longer. MAKE YOUR PRODUCT IN THE USA AND THERE ARE NO TARIFFS!” Most economists believe any focus on bilateral trade deficits, and certainly with Canada and Mexico, makes little sense given the economic integration between the three countries that makes North American goods globally competitive.
The leaders of both Mexico and Canada reached deals with President Trump on February 3, 2025 to suspend these tariff actions for 30 days with steps to address border issues and fentanyl. Mexico’s President agreed to send 10,000 troops to the border that will be specifically dedicated to stopping the flow of fentanyl and illegal immigration. Canada also agreed to dedicate an additional 10,000 troops to the Northern border as well as help form a Canada-U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering. Canadian Prime Minister Trudeau also signed a new intelligence directive on organized crime and fentanyl, backing it with $200 million.
The China tariffs were in fact imposed as of February 4, 2025. China was not able to obtain any last hour reprieve from additional tariffs on its products being imported into the United States, although it is expected that President Trump will be speaking with China President Xi in the near future. As promised, China has taken retaliatory measures against the United States. China is imposing a 15% tariff on U.S. coal and liquefied natural gas and a 10% tariff on U.S. crude oil, agricultural machinery, and certain automobiles and trucks. It is also imposing new export controls on two dozen metal products, including tungsten that has many industrial and defense product applications, and tellurium that is used in the production of solar cells.
President Trump also repealed the so-called de minimis exception, that exempts shipments valued under $800 from tariffs, for all Chinese imports. Chinese exports of low-value packages to the United States rapidly rose from roughly $5 billion in 2018 to $66 billion in 2023. However, the President put a temporary pause on the repeal after realizing that both U.S. Customs and Border Protection and the U.S. Postal Service would need time to implement tariffs on so many small value shipments.
Prior to its last hour reprieve from the imposition of tariffs, Canada had threatened to impose 25% tariffs on $30 billion worth of U.S. imports immediately and an additional $125 billion worth of U.S. imports 30 days later. Several Canadian provinces also threatened to take U.S. alcoholic beverages off shelves of government-run liquor stores, and Ontario even threatened to terminate government contracts with certain U.S. companies, such as Elon Musk’s Starlink. Mexico also threatened an unknown level of retaliation.
On February 11, President Trump signed a proclamation raising Sec. 232 national security-related tariffs on aluminum from 10% to 25% and restoring the full 25% tariff on steel even for steel imports from countries that had previously negotiated exemptions from the tariffs in exchange for limiting exports to the United States. This list of countries includes Argentina, Australia, Brazil, Canada, Japan, Mexico, South Korea, the European Union, Ukraine, and the United Kingdom. Canada and Mexico are the two largest sources of steel imports into the United States, although the main aim of the tariffs is to counteract the overcapacity in these industries created by China's large subsidization of these industries.
Agricultural: The Stakes for Nebraska Agriculture and Beyond
By John Beghin, Mike Yanney Yeutter Institute Chair and Professor of Agricultural Economics, University of Nebraska-Lincoln
If implemented, all three tariff actions described in the Feb. 1 executive order on Canada, Mexico, and China would impact Nebraska’s economy. Farm income would decrease as Nebraska produces large surpluses of key commodities and depends on export markets, principally, Mexico, Canada, and China. If these countries retaliate with their own tariffs, Nebraska exports are compromised and new markets have to be found, which takes time.
When the U.S. agricultural economy is hit with retaliatory tariffs, foreign competitors can move quickly to take advantage of their new, more competitive position in export markets. For crops with inventory, the response is instantaneous especially with competitive tenders for which U.S. crops would be disqualified by the foreign (significant) tariff. Even with tight inventory, competition is there in tenders and price effects will be more pronounced. There is also a longer-term supply response once foreign acreage gets allocated to grow these crops, like the expansion of Brazilian acreage for soybeans. That does not go away even after the retaliatory tariffs are removed.
Some countries and firms diversify their sourcing/procurement by allocating purchases to different countries to avoid “getting burned” by any specific trade partner (Japan did that). In these cases, the U.S. may preserve some of these export markets but one could expect to see them reduce purchases because the U.S. price inclusive of the tariff is higher than competitors and substitutes exist.
For U.S. producers, finding new markets when retaliation makes their products less competitive takes time. They can submit bids to tenders in countries that did not retaliate. They would need to identify transportation to these new markets (tenders are for both the commodity and its transportation). It would take time to find reliable and economical transportation to be competitive (for example Cargill often loses wheat markets to Ukrainian suppliers because they cannot find transportation that is as cheap as Ukrainians can find). In addition, establishing long-term trusted relationships when tenders are not involved can take time. For meat markets it may be more complicated because of plant and animal health and food safety requirements to fulfill in these new markets. That takes time too.
Products affected by trade retaliation would be, pork, beef, corn and soybean products. Our U.S. tariffs impact the cost of fossil-fuel based products and fertilizer prices (the U.S. imports most of our potash from Canada). Hence, the cost of production in farming would increase and competitiveness would decrease. According to the Nebraska Farm Bureau, in recent years 95% of Nebraska’s corn exports, 90% of soybean exports, 57% of soybean meal exports, 32% of pork exports, and 23% of beef exports went to these three countries. Hence agriculture would experience a double whammy of lost competitiveness from our own tariffs, and loss of markets through retaliation.
The United States imports crude oil from Canada and Mexico and refines it including in Colorado and Wyoming. Tariffs on these imports would increase the cost of all refined fossil fuel products in the U.S. There may be a small benefit to U.S. frackers who are likely to see a higher local price. However, overall the energy sector would lose from the tariffs because of higher costs. Refined energy products (such as gasoline) prices would increase, and consumers would react by decreasing their gasoline consumption. Retaliation would hurt U.S. exports of fossil energy products to the three countries (about $26 billion of crude petroleum, $48 billion of refined petroleum, and about $16 billion of petroleum gas (as per the Council of Foreign Relations). Hence again a double whammy of lost competitiveness from our own tariff, and loss of markets through retaliations.
Nebraska manufacturing would be affected as well as it imports metallic products to be transformed into agriculture-related equipment which is typically re-exported. The building industry would be affected as well with a 25% increase in the price of imported lumber and other imported material. The U.S imports about 80% of its lumber use. Transportation cost in all sectors would also be affected with cost increase with higher energy prices.
Nationally, these impacts would be generalized to most sectors, especially the car industry, which is among the most integrated in the U.S.-Mexico-Canada region. The state-level impact would depend on the sectoral composition of the state, and its dependence on the three countries for its imported inputs and destination markets for its products.
Consumers in Nebraska and beyond would be facing higher prices for food items, namely fruits and vegetables, which we import from our neighbors. Food is characterized by two-way trade as we export and import a large amount of agricultural and food products. (In fiscal year 2024, the U.S. imported over $206 billion worth of food and agricultural products and exported over $174 billion in this sector, according to the U.S. Department of Agriculture). Food sectors are highly integrated in North America under the U.S.-Mexico-Canada trade agreement (USMCA). Many products would be affected, and supply chains would scramble to find cheaper alternatives. Consumers would face higher gasoline prices, higher car prices, and more expensive building costs in real estate. As the U.S. imports many finished consumer products from China, your regular trip to Hobby-Lobby would be more expensive! The magnitude of the price increase would be smaller than the tariffs since value is added beyond the border once goods enter the country. The more value that is added, the less the impact of the tariff on the final price. In terms of the immediacy of the price impact, perishable products for which substitutes are few would typically experience the price increase the fastest. Products for which inventories are large and which are not perishable goods would see slower price changes.
Finally, there would be a loss of income for the many industries negatively affected by the trade war translating into lost consumer income. The loss of jobs would be moderate (estimates are around 100,000 to 150,000 jobs). It is moderate relative to the vast churning of the U.S. labor market (of the same scale as our monthly labor market changes).
Economic: New China Tariffs Have Greater Impact than the Whole of the 2018 Trade War
By Edward Balistreri, Duane Acklie Yeutter Institute Chair and Professor of Economics, University of Nebraska-Lincoln
On February 4, the United States started imposing additional broad based 10% tariffs against China. While not as dramatic as the proposed Canadian and Mexican tariffs (which were postponed in a last-minute reprieve), the China tariffs are likely to have a significant impact on the US economy. In fact, the 10% additional tariff on all goods from China is likely to have a larger overall impact on U.S. welfare than the whole of the 2018 trade war.
The 10% additional tariff covers a significant group of goods which were spared in the 2018 trade war. Furthermore, the 10% additional tariff on goods that do already have substantial tariffs has a compounding effect on economic distortions. Our quantitative models suggest that the 10% minimum tariff on China combined with China’s retaliation on U.S. energy goods, motor vehicles, and agricultural equipment will have a negative economic impact on the U.S. that is larger than the 2018 trade war. The cost of the new broad-based tariffs for the U.S. economy is on the order of $30 to $100 billion, which is larger than our estimate that the 2018 trade war cost the U.S. between $17 and $80 billion. The large range in estimates depends on the quantitative model structure with the low estimates dependent on perfect competition and the larger estimates accommodating a more advanced model of imperfect competition.
A feature of the 2018 trade war was that U.S. tariffs on Chinese goods were targeted. Electronic equipment is the most important sector of U.S. imports from China, but the tariffs on this sector were relatively modest. In data collected for 2017, prior to the trade war, the U.S. imported roughly $200 billion of electronic equipment from China. Yet many electronic goods had low, or no, new tariffs imposed (e.g., iPhones) as the 2018 trade war developed. Overall, the average tariff rate across the electronic equipment sector increased to 8.6%. Adding an additional 10% brings the tariff rate up to 18.6%. In contrast, targeted sectors like iron and steel saw U.S. tariffs on imports of over 22%. The indiscriminate addition of 10% tariffs on all Chinese goods significantly broadens the set of goods that face the trade tax.
Economic models of trade indicate a compounding, or non-linear, effect of trade distortions. Consider a sector like non-ferrous metals (e.g., aluminum, copper, zinc, lead). As a part of the 2018 trade war the average U.S. tariff on these goods from China went from 8% to 18%. This represents a significant market distortion as U.S. firms pay higher prices for these inputs and increase their demand for higher cost substitutes from non-Chinese sources. The effect of adding an additional 10%, bringing the tariff rate up to 28%, is larger than the original 10% tariff increase. The compounding effect represents a tradeoff between the distortionary effect of the tariff on domestic and international prices balanced with the tariff revenue.
A small tariff has a relatively small distortionary effect on markets. The incidence of the collected tariff revenue is shared, however, among U.S. and Chinese agents. This is because Chinese export prices fall and gross-of-tariff U.S. import prices rise. Initially, the small U.S. tariff can benefit the U.S. as the transfer of tariff incidence on China (through lower export prices) outweighs its distortionary effect. This is the classic case of a beggar-thy-neighbor tariff. As the tariff becomes large, however, the distortionary effect dominates, and U.S. welfare falls. One can deduce this by imagining the growth of the tariff rate to a large prohibitive tariff on Chinese goods. The prohibitive tariff generates (large) distortionary losses for the U.S. while offering no tariff revenue. With no tariff revenue there is no transfer of the U.S. tax incidence on the Chinese---no beggar-thy-neighbor transfer. Our empirical analysis of the actual 2018 U.S. tariffs on China indicate that these tariffs are not “small” in the sense that their distortionary effect dominates the revenue transfer. The February 4th 10% additional tariffs move us further into this range of large welfare-reducing tariffs. Furthermore, China’s retaliation always works to reinforce the distortionary costs while reducing the revenue transfer to the U.S. This increases the burden of the trade war on the U.S.
The newly implemented broad-based additional tariff on Chinese goods of 10% may seem a modest escalation relative to the postponed high tariffs on Mexico and Canada and the campaign threats of massive tariffs on China. Our analysis indicates that these new Chinese tariffs need to be taken seriously. Their overall estimated cost for the U.S. is at least as big as the costs associated with the 2018 tariffs. Our quantitative models suggest that the costs of the new tariffs are between $30 and $100 billion for the U.S. The worry is that these tariffs are only the first salvo in a new trade war that threatens to spill beyond the U.S. and China. In a recent paper with Christine McDaniel, we find that the costs might go up by 10-fold under a retaliatory trade war consistent with Trump’s campaign rhetoric of 60% minimum tariffs on China and 10% minimum tariffs on the rest of the world.
New Tariff Timeline:
Opinions expressed are solely those of the authors and not the Yeutter Institute or the University of Nebraska-Lincoln.