
When President-elect Trump is officially inaugurated on January 20th, tariffs will most certainly be part of what some are calling a “blizzard” of day one executive action. Much of those will be unwinding policies from the Biden Administration that he disagrees with. Still, some announcements will also focus on his vision of tariffs - he has already outlined his intention to increase tariffs on Mexico and Canada (our largest trading partners) by 25% and China by 10%.
These tariffs will likely not be the only tariffs the President announces over the next four years. Tariffs are unique in that they can be issued unilaterally by the Administration with no approval needed by Congress (which is important because tariffs would be tough to get through Congress). Additionally, tariffs have become a top tool for President-elect Trump in gaining leverage around issues with other countries. He has most recently called for tariffs on Denmark, for example, if they are not willing to sell Greenland to the United States.
Several complicating factors surround this policy space. First and foremost, American industries are largely opposed to them as they increase costs, which will likely be paid by the consumer. Additionally, once initiated, tariffs are tough to pull back. The Section 301 tariffs implemented under the first Trump Administration are still in place without any clear opportunities to remove them.
One hurdle that will emerge is concern from Congress. Well-positioned policymakers in the House and Senate have expressed concerns about using tariffs as a long-term policy. While Congress doesn’t play a role in initiating tariffs, they do get a lot of the blame from their constituents. President-elect Trump will need to remain aligned with Congress, which may temper his tariff policy in the future.
There will be many pieces of the Trump economic policy, but tariffs will be a core tool within that policy space. For companies who have concerns about the role of tariffs, it will be important to stay close to policymakers who have more direct communication with the White House, while building a strong message about why tariffs will harm U.S. companies and their consumers.
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