U.S. Trade Policy Update: Tariffs, Retaliation, and Uncertainty for Business
The global trade landscape is shifting dramatically as President Donald Trump has announces, postpones, and implements sweeping tariff policies aimed at protecting U.S. industry. These measures, including the reinstatement and expansion of Section 232 tariffs on steel and aluminum, potential tariffs on Mexico and Canada, Section 301 tariffs targeting China, and new reciprocal tariff policies, have triggered significant domestic and international reactions. With various nations vowing retaliatory tariffs, the world economy faces growing uncertainty. Furthermore, shifting trade policies continue to create uncertainty for businesses across the United States—many of which depend on imported materials unavailable domestically to sustain production and compete in both domestic and global markets.
For a comprehensive analysis of the specific ‘tools in the toolbox’ a president has at their disposal, check out this resource written by Lulu Geller of Constitution Partners.
The Foundation of Trump’s Trade Policy: Section 232 Tariffs
Section 232 of the Trade Expansion Act of 1962 allows a president to impose tariffs on imports that threaten national security. President Trump has leaned heavily on this authority, reinstating and expanding tariffs on steel and aluminum imports.
In a February 10, 2025 announcement, President Trump issued two presidential proclamations (citing Section 232) reimposing – and dramatically expanding – tariffs on steel and aluminum imports into the United States. In addition to this action, the president’s order revokes tariff-rate quotas (TRQs) that the U.S. had negotiated with key trading partners and eliminates duty drawback options, as well as any exclusion request processes that had existed in the first Trump Administration and into the Biden presidency. Furthermore, it appears that these tariffs will be in addition to the March 4 tariff announcement on all goods entering the U.S. from Mexico and Canada. If those tariffs do come into effect, steel and aluminum imports from Canada and Mexico will be tariffed at 50%.
Regarding the revocation of TRQs, this action will impact Argentina, Australia, Brazil, Canada, the EU, Japan, Mexico, South Korea, the United Kingdom, and Ukraine. The Administration has consistently stated it has no interest in continuing country-specific exemptions, but it remains to be seen if the president is interested in negotiating new agreements with individual nations on TRQs or other factors. Another key concern is the possibility of an expansion into derivative products, a matter that requires further clarification from the Federal Register.
The second presidential proclamation issued on February 10 pertained to aluminum imports. Aluminum tariffs have been increased from 10% to 25% - though Russia still faces the 200% tariff on aluminum imports implemented during the Biden Administration (Proclamation 10522). The end of quota agreements means major global suppliers such as Canada, the EU, and the UK will face higher costs when exporting aluminum to the U.S. Any derivative aluminum products containing even trace amounts of Russian aluminum will continue to be subject to the 200% tariff.
The elimination of the tariff exclusion process, which previously allowed companies to apply for exemptions, signals a substantially more rigid approach to the U.S. trade doctrine. The Customs and Border Protection (CBP) agency has been directed to prioritize classification evaluations and enforce maximum penalties on violators, ensuring strict compliance. The U.S. government has made it clear that duty drawbacks will not apply to steel and aluminum products, further tightening the scope of these tariffs.
This move has sparked concern among key trading partners, particularly Mexico and Canada, whose steel and aluminum exports have surged in recent years. Data from the White House indicates that steel imports from Canada increased by 18% since its initial Section 232 tariff exemption. Mexico has also seen a drastic rise in steel imports, particularly in long reinforcing bars, which increased by 1,678%.
With the potential for additional tariffs on Mexico and Canada under separate trade provisions, businesses that rely on cross-border supply chains should be bracing for significant cost increases.
Section 301 Tariffs: A Renewed Focus on China
The Trump administration is also leveraging Section 301 of the Trade Act of 1974 to impose additional tariffs on China. Section 301 allows the U.S. to take action against countries that engage in unfair trade practices, particularly intellectual property theft and forced technology transfers.
The Biden administration previously maintained tariffs on over $350 billion worth of Chinese goods, and Trump’s latest moves suggest he will expand these measures. The administration has indicated that a 10% tariff will be placed on all Chinese imports, with additional duties on technology and critical minerals.
China is expected to retaliate, likely targeting U.S. agriculture, aerospace, and semiconductor industries—sectors previously hit during past trade disputes. Beijing has already signaled that it will challenge the tariffs at the World Trade Organization (WTO), though the U.S. has historically disregarded adverse WTO rulings on trade policy.
The Push for Reciprocal Tariffs
Trump’s trade war strategy extends beyond Section 232 and Section 301 tariffs. A new directive introduces reciprocal tariffs, meaning the U.S. will impose equivalent duties on trading partners that levy high tariffs on American goods. The administration argues that countries such as the EU, India, and Japan impose higher tariffs on U.S. exports while benefiting from relatively low U.S. tariffs on their goods.
The idea of reciprocal tariffs is not without controversy. While Trump asserts that this policy will protect American jobs and industries, critics warn of a rapid escalation in global trade tensions. The EU, for example, applies a 10% tariff on U.S. automobiles, compared to the U.S.'s 2.5% tariff on European cars. Under reciprocal tariff policies, the U.S. could significantly increase duties on European vehicles, triggering countermeasures from Brussels.
The White House has also suggested that value-added taxes (VAT) imposed by European countries act as a de facto trade barrier. The administration is exploring ways to counterbalance this perceived disadvantage, possibly by treating VATs as tariffs under the new reciprocal framework.
International Reactions and Retaliatory Tariffs
The global response to these sweeping tariffs has been swift and critical. Major U.S. trading partners have signaled that they will respond with retaliatory measures if the tariffs remain in place.
Canada: Prime Minister Justin Trudeau has condemned the tariffs as "entirely unjustified" and has vowed firm countermeasures. Canada previously imposed retaliatory tariffs on U.S. goods such as whiskey, orange juice, and machinery in response to Trump’s first wave of tariffs. Prior to an initial pause on new tariffs in early February 2025, Canada had prepared a fresh retaliatory tariffs list valued at roughly CAN$30 billion. Patrick Firth did a review of these tariffs and prospective retaliatory measures in a previous article for Constitution Partners.
European Union: The European Commission has stated that "unjustified tariffs on the EU will not go unanswered." The EU is expected to reintroduce tariffs on U.S. exports, including bourbon, motorcycles, and agricultural products. The bloc is also exploring options to challenge the tariffs at the WTO.
Mexico: President Andrés Manuel López Obrador has warned that Mexico will respond if the U.S. proceeds with additional tariffs on steel, aluminum, or automobiles. Mexico has previously imposed counter tariffs on U.S. pork, cheese, and potatoes.
China: Beijing has already indicated that it will target U.S. agricultural exports, particularly soybeans, corn, and pork. Since the new Section 301 tariffs from early February, China has imposed a 15% tariff on U.S. coal and liquefied natural gas, and a 10% tariff on crude oil, agricultural machinery, and large-displacement vehicles. Chinese retaliation in previous trade wars resulted in substantial economic losses for American farmers, leading to billions of dollars in U.S. government subsidies to offset the damage.
Australia & UK: Both countries are lobbying for exemptions, but the Trump Administration has been firm in rejecting country-specific carve-outs.
The Economic Impact and Path Forward
The broader economic implications of these trade measures remain uncertain. While the Trump administration argues that tariffs will rejuvenate domestic manufacturing and create jobs, history suggests that the costs could be significant. Higher tariffs often lead to increased prices for consumers and manufacturers reliant on imported materials. Supply chains are already feeling the effects, with some U.S. businesses scrambling to find alternative sources for metals and components.
At the same time, escalating trade tensions could lead to a breakdown in diplomatic relations with key allies. The possibility of a full-scale trade war looms, particularly if retaliatory measures from Europe, Canada, Mexico, and China further restrict U.S. exports.
With Trump also seeking to renegotiate the U.S.-Mexico-Canada Agreement (USMCA) ahead of the scheduled 2026 review, North American trade relations are on shaky ground. Quebec Premier François Legault has urged Canada to begin talks with the U.S. immediately to reduce economic uncertainty, though Trump’s unpredictable stance on trade complicates negotiations.
As March 12 approaches, businesses, investors, and global leaders will be watching closely. The next few months will determine whether these tariffs serve as a negotiating tactic or if they escalate into a full-scale trade war. Either way, global trade is entering a new era of protectionism, uncertainty, and heightened economic risk.
