Trump 2.0 Trade Policies: Deep Dive
In recent years, the United States has increasingly utilized a variety of trade statutes to address concerns over national security, unfair trade practices, and surges in imports that may harm domestic industries. Trade action has been a critical ‘tool in the toolbox’ over two Trump Administrations at this point. Key among these statutes are Section 232(b) of the Trade Expansion Act of 1962, Section 122 of the Trade Act of 1974, Section 201 of the Trade Act of 1974, Section 301 of the Trade Act of 1974, and the Trading With the Enemy Act (TWEA) along with the International Emergency Economic Powers Act of 1977 (IEEPA). These provisions grant the President authority to impose tariffs or quotas under specific circumstances, aiming to protect U.S. economic and security interests.
During the first Trump administration, tariffs were imposed on approximately $380 billion worth of imports over several months, with a primary focus on goods from China. Before the temporary suspension of tariffs on imports from Canada and Mexico, the U.S. had been poised to levy tariffs on a combined $1.4 trillion worth of imports from Canada, Mexico, and China. President Trump proceeded with 10% tariffs on imports from China, ultimately pausing (for 30 days) tariffs planned on imports from Canada and Mexico.
During his first term, President Trump extensively leveraged Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974 to implement his trade priorities. In his second term as Commander in Chief, we expect President Trump to expand his trade strategy beyond Sections 232 and 301, leveraging additional statutory authorities to advance his tariff priorities. He is also expected to conduct another review of the trade advantages he believes can be utilized under Sections 232 and 301.
Another key factor to consider is President Trump’s track record of using tariffs as a negotiating tool. During his first term, he announced sweeping Section 301 tariffs without an exclusion process in place. It was only after significant pressure from Congress that the Department of Commerce introduced an exclusion process for certain products based on Harmonized Tariff Codes. Furthermore, President Trump imposed extensive tariffs and successfully pushed individual nations to negotiate unilateral trade agreements with the United States. His approach has consistently involved implementing broad tariffs and later refining their scope through negotiations, including the establishment of exclusion processes.
At A Glance: Potential Trade Actions
Section 232(b) of the Trade Expansion Act of 1962
Section 232(b) provides for the imposition of tariffs or quotas on imports that threaten to impair U.S. national security. Investigations may be self-initiated by the Department of Commerce (Commerce). They may also be initiated based on an application from an interested party or at the request of the head of another U.S. government agency. If Commerce finds that imports of a particular product or products threaten to impair U.S. national security, the president decides whether to impose tariffs or quotas on such imports.
Section 122 of the Trade Act of 1974
This statute authorizes the president to impose quotas and tariffs of as much as 15 percent for up to 150 days against one or more countries that have “large and serious” balance-of-payment surpluses with the United States. Imports from countries with significant current account surpluses (such as China) would be possible targets for any such measures.
Section 201 of the Trade Act of 1974
Section 201 permits the president to impose tariffs or quotas on imports of a particular product where there has been a surge of imports of that product. To have tariffs or quotas imposed under Section 201, the import surge must constitute a substantial cause of serious injury to the U.S. industry producing the product in question.
Section 301 of the Trade Act of 1974
Under Section 301, upon a finding that another country has denied the United States its rights under a trade agreement or has engaged in practices that are unjustifiable, unreasonable or discriminatory and burden or restrict U.S. commerce, the United States may impose tariffs and quotas against the foreign country’s imports. Section 301 investigations are conducted by the U.S. Trade Representative’s Office, which has the authority to impose duties and quotas and to suspend benefits granted to the United States’ trading partners under trade agreements.
The Trading With the Enemy Act (TWEA) and the International Emergency Economic Powers Act of 1977 (IEEPA)
TWEA and IEEPA authorize the president to regulate all forms of international commerce and freeze assets in time of war (TWEA) or in response to “unusual or extraordinary” international threats to the national security, foreign policy or economy of the United States (IEEPA). Past measures imposed pursuant to these statutes have predominantly taken the form of embargoes, economic sanctions and asset freezes, but precedent exists for the imposition of tariffs under the presidential power to regulate imports.
For an in depth explanation of these policies, click below.
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Background
Donald Trump has expressed interest in increasing tariffs in response to unfair trade practices. While the U.S. Constitution grants Congress primary authority over tariff levels, the president also holds significant, though limited, powers in this area. President-elect Trump's comments have prompted a wave of activity among trade lawyers eager to understand the scope of presidential authority to raise tariffs. During our own efforts to explore the extent of this power, we uncovered a forgotten but still active statute that grants the President broad tariff-setting authority. This authority, outlined in Section 338 of the Tariff Act of 1930, is not included in the "Overview and Compilation of U.S. Trade Statutes" published annually by Congress. Though Section 338 has remained dormant for decades, it is still a part of the law and accessible to the president.
Section 338 permits the president to impose “new or additional duties” on countries that have discriminated against commerce in the United States. Section 338 authority is triggered when the president finds that a foreign country has either (1) imposed an “unreasonable charge, exaction, regulation, or limitation” on U.S. products which is “not equally enforced upon the like articles of every foreign country”; or (2) “[d]iscriminate[d] in fact” against U.S. commerce “in respect to customs, tonnage, or port duty, fee, charge, exaction, classification, regulation, condition, restriction or prohibition” so as to “disadvantage” U.S. commerce as compared to the commerce of any foreign country. If the president identifies discrimination, Section 338 grants him the authority to impose additional duties of up to 50 percent of the product's value. If a country persists in discriminating against U.S. goods, the president may take further action to block imports from that country. An investigation under Section 338 can be initiated either by the government or through private-party petitions to the Tariff Commission, now called the U.S. International Trade Commission.
Precedent For Its Use
Section 338 was threatened during various trade negotiations in the 1930s. For instance, in 1932, its use was considered against France due to discriminatory taxes and quotas on U.S. goods. Around the same time, U.S. officials contemplated leveraging Section 338 in talks with Spain over most-favored-nation treatment for American goods. The section was also discussed in broader terms in relation to trade relations with Japan and China. Internal memos from the late 1930s reveal that State Department officials considered invoking Section 338 in response to Japan’s efforts to alter China’s trade relationships in its favor. Later, Section 338 appeared in U.S. diplomatic correspondence concerning trade with China. A 1949 telegram from Secretary of State Dean Acheson to the consul in Shanghai noted Section 338 as a potential response to China’s discrimination against American trade, highlighting that it would allow the president to impose tariffs or even exclude Chinese goods entirely.
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Background
Section 122 of the Trade Act of 1974 grants the president balance-of-payments authority, allowing for the imposition of an additional 15 percent tariff on imports for up to 150 days "whenever fundamental international payments problems require special import measures to restrict imports" in order to address (1) significant U.S. balance-of-payments deficits, or (2) to prevent a substantial and imminent depreciation of the dollar in foreign exchange markets. This authority was added by Congress after President Nixon used the Trading with the Enemy Act (the predecessor to IEEPA) to impose a 10 percent surcharge on U.S. trading partners to address growing trade deficits and the overvaluation of the dollar under the Bretton Woods gold standard. However, this power is limited to a 150-day period, unless extended by Congress.
Precedent For its Use
Although Section 338 grants the president the statutory authority to raise tariffs, doing so would conflict with U.S. commitments under the World Trade Organization (WTO) and other trade agreements. These agreements prohibit the U.S. from raising tariffs beyond established "bound" rates, which are often set at zero. The WTO and similar agreements allow tariff increases only for specific, agreed-upon purposes, such as counteracting subsidies under the WTO's Agreement on Subsidies and Countervailing Measures. However, when negotiating these trade agreements, the U.S. did not retain the right to raise tariffs based on Section 338 criteria. As a result, any attempt by the president to use this authority to raise tariffs or block imports would likely lead to trade challenges from affected countries. Despite this, the Trump administration could view Section 338 as a potential tool for leverage in trade disputes.
The use of these authorities to impose tariffs would likely face challenges from importers or other stakeholders. However, despite the Supreme Court’s recent ruling in Loper Bright Enterprises v. Raimondo (June 2024), any legal challenges to future Trump tariffs would likely encounter significant obstacles. Courts, including the Supreme Court, have traditionally been hesitant to interfere with the president’s foreign affairs and tariff powers. For example, in United States v. Curtiss-Wright Export Corp., the Supreme Court ruled that the president holds certain inherent powers in foreign affairs that do not require explicit statutory authorization from Congress. Similarly, in J. W. Hampton, Jr. & Co. v. United States, the Court upheld presidential authority under Section 315 of the Tariff Act as a valid constitutional delegation of power, provided it sets forth an “intelligible principle.” In Federal Energy Administration v. Algonquin SNG, Inc., the Court affirmed the constitutionality of Section 232(b) tariffs on imported oil, citing the intelligible principle guiding presidential decision-making. Lastly, in Maple Leaf Fish Co. v. United States, the Court of Appeals for the Federal Circuit determined that judicial review of highly discretionary presidential trade actions, like those under Section 201, is extremely limited, allowing such actions to only be overturned in cases of “clear misconstruction,” “significant procedural violations,” or actions outside the president’s delegated authority.
The Maple Leaf Fish Co. case is particularly significant because the Federal Circuit, which has jurisdiction over most trade law appeals, ruled that courts have a very limited role in reviewing trade decisions. While the current Supreme Court may place less weight on precedent, these cases suggest the judiciary is likely to take a deferential approach to executive decisions involving foreign policy, national security, and international economic policy, areas outside their typical expertise. Although legal challenges may take years to resolve, the immediate impact on businesses would be felt through higher costs, disrupted trade flows, and strained supply chains, rather than any eventual legal outcomes. While Congress could theoretically pass legislation to amend or revoke some of the president’s tariff-setting authority, achieving a veto-proof majority to do so seems unlikely in the current political climate.
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Background
The International Emergency Economic Powers Act (IEEPA) grants the President extensive authority to regulate economic transactions during a declared national emergency. Enacted in 1977, IEEPA evolved from the Trading with the Enemy Act (TWEA) and has become a cornerstone of the U.S. sanctions regime. While IEEPA was designed to provide swift economic tools in times of crisis, its sweeping powers and the frequency of its use have raised concerns about the adequacy of its oversight provisions.
Historically, Congress delegated increasing emergency powers to the President, notably through TWEA, which was initially passed during World War I to regulate transactions with enemy powers. Over the decades, TWEA was expanded to include domestic and international emergencies, becoming a key instrument for imposing sanctions during the Cold War. Presidents used it to block financial transactions, seize foreign assets, and control exports. By the 1970s, investigations revealed that the United States had been in a continuous state of emergency for over 40 years, prompting Congress to enact the National Emergencies Act (NEA) in 1976 and IEEPA in 1977 to limit and oversee presidential emergency powers. However, changes such as requiring joint resolutions to terminate emergencies have made oversight more challenging.
Since its enactment, IEEPA has been used frequently to impose economic sanctions, initially targeting foreign governments but later expanding to individuals and non-state groups, such as terrorists and cybercriminals. As of January 2024, 69 national emergencies invoking IEEPA had been declared, with 39 still ongoing. Some emergencies, like the one declared in response to the 1979 Iran hostage crisis, have lasted decades. Despite IEEPA’s broad reach, Congress has rarely attempted to terminate emergencies under the statute but has often directed the President to use its authorities for sanctions.
The growing use of IEEPA, combined with the longevity of declared emergencies, has led to questions about whether the statute strikes the right balance between granting the President flexibility during crises and ensuring congressional oversight. Congress may need to reassess IEEPA’s role in U.S. foreign policy and national security decision-making to ensure it aligns with democratic accountability while maintaining its effectiveness as a tool for addressing emergencies.
Presidential Emergency Use
IEEPA is the most commonly cited authority when the President declares a national emergency under the NEA. Unlike TWEA, which referenced a single set of emergencies, IEEPA requires the President to declare a new national emergency for each separate use. This distinction has led to a significant increase in the number of national emergencies declared under the NEA in the past four decades. While only four national emergencies were declared under TWEA in the 40 years before IEEPA’s enactment, Presidents have invoked IEEPA in 70 out of the 79 national emergency declarations issued under the NEA. As of January 15, 2024, 42 national emergencies were ongoing, with all but three relying on IEEPA.
On average, emergencies invoking IEEPA extend beyond nine years. The longest-lasting emergency, which was also the first, was declared by President Jimmy Carter in 1979 in response to the Iranian hostage crisis. This marked the first use of IEEPA under the National Emergencies Act. Since then, seven successive Presidents have renewed the emergency annually for over 40 years, and as of January 15, 2024, it remains in effect, primarily to address ownership disputes over the Shah’s assets. There are also many instances of IEEPA National Energy Use by Executive Order, ranging from its first use in 1979 until 2024.
The next few years could be some of the most momentous in the history of U.S. trade policy. Investors, companies engaged in international trade and U.S. companies affected by imports should pay close attention to the potentially dramatic changes on the horizon and be prepared for how they may impact their businesses and investments.
The potential use of presidential authorities to impose tariffs under various statutes, including Sections 338 and 122, signals a period of significant trade policy shifts. While legal challenges to such actions are likely, the executive branch's historical deference in foreign affairs and trade matters suggests that any tariffs imposed could face few obstacles in the courts. However, businesses and stakeholders in international trade should be prepared for the immediate impacts of these changes, which could affect costs, supply chains, and trade flows. The evolving political landscape also makes it difficult to predict the long-term legal and economic outcomes, but companies must stay vigilant and responsive to potential shifts in U.S. trade policy.