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We’re barreling toward Inauguration Day, which means we may not be too far out from a fresh batch of tariffs.
It’s still a bit murky what exactly President-elect Donald Trump’s tariff strategy will entail. (Exhibit A: What the heck is the External Revenue Service?) Fortunately, dear reader, you have us to summarize what’s been proposed and what could happen in Trump’s second term.
History lesson. Tariffs, or taxes on goods imported from other countries, were once “the primary source of federal revenue” for many countries years ago, according to a report from the Congressional Research Service. Governments now typically use tariffs more strategically, to protect certain industries or as leverage in trade talks, the CRS noted.
The Constitution grants Congress the power to enact tariffs, though Congress has extended some of that power to the executive branch, according to the CRS report. (More on that later.)
What to expect. It may feel impossible to keep all of Trump’s tariff proposals straight. Generally speaking, he appears to want to hit China hard, but won’t be sparing major trading partners, either.
As CFO Brew previously reported, Trump has previously threatened to impose across-the-board tariffs of up to 20%, a 25% tariff on Canadian and Mexican imports specifically, and 60% on goods from China. He also said he could tack another 10% on Chinese products on top of whatever else he enacts. Trump also threatened a 100% tariff on BRICS countries, CNN reported last month.
The threats are already distressing diplomats. A Canadian ambassador said the country is prepared to buy more US products to “appease” the incoming president, the Associated Press reported.
A gradual emergency. Trump may implement his tariff program by declaring a national emergency, CNN reported earlier this month, citing “sources familiar with the matter.” The president can unilaterally regulate international trade (i.e., enact tariffs) under an emergency declaration, thanks to the International Emergency Economic Powers Act.
According to commentary from Brookings Institution fellows Adam Looney and Elena Patel, the president “has an unusually broad menu of options when it comes to tariffs” that bypass review and public-comment processes that come with tariffs enacted under trade acts.
“We can’t think of another economic policy issue where the executive has so much power and escapes the checks and balances that apply elsewhere to executive branch actions,” the authors wrote. “This is a choice made by the US Congress.”
While the president could get down to business right away on tariffs, recent reporting suggests the tariffs may be more gradual. The administration is considering a slow rollout, Bloomberg reported. One possibility officials are floating would involve “graduated tariffs increasing by about 2% to 5% a month.”