11/18/2024 | Press release | Distributed by Public on 11/18/2024 10:23
As the new Trump administration takes shape, supply chain professionals are wondering what changes may be on the horizon for new tariffs. Understanding when and how these tariffs will be implemented will be crucial for supply chain planning and cost management.
There are three mechanisms that could lead to increased tariffs and higher duty rates in the next four years: administrative action, which does not require additional congressional action; legislative action by Congress; and treaty negotiations or the termination of treaties.
As a leading U.S. customs broker, C.H. Robinson has extensive experience with changing trade policy and increasing tariffs over the last decade. Here is a brief guide on when and how tariffs could change under the new Trump administration.
The administration has two primary tools to increase tariffs without congressional approval-either by targeting specific countries or by targeting specific commodities. Both options aim to provide immediate protection from unfair trade practices and must go through a rulemaking process where the administration issues a draft rule, collects public comments, and then issues a final rule for implementation.
Section 301 tariffs gain authority from the Trade Act of 1974 and allow the U.S. Trade Representative to protect U.S. businesses from unfair trade practices of foreign companies. In 2017 and 2018, this was one of the primary tools the Trump administration used to increase tariffs on goods from China. These were implemented in four stages referred to as "lists." Here is the timeline for "List 4":
The List 4 tariffs took approximately three and a half months for full implementation. As the Trump administration is familiar with the process, this could presumably accelerate the timeframe, and tariffs could increase from China as early as mid-March 2025. If your commodities are on the current lists for Section 301 tariffs, rates could potentially increase by 50% or more.
Section 232 tariffs gain authority from the Trade Act of 1962 and focus on protecting certain critical goods from unfair trade practices. These have been used recently by both the Trump and Biden administrations to protect the U.S. steel and aluminum industries from a variety of countries, including China, Canada, Brazil, and Turkey.
One example where Section 232 could be used by a Trump administration would be foreign-made electric vehicles. Other commodities to consider would be airplanes, construction equipment, certain building materials, and energy. The two-to-four-month timeline and process would also apply for Section 232 protection.
There are other tariff measures, like Section 338 and Section 122, that could be imposed by administrative action; however, these have not been leveraged in decades. Section 338 allows the U.S. President to impose additional tariffs of up to 50% on imports from countries that discriminate against U.S. products and completely block imports from such countries if the discrimination increases. Additionally, Section 122 allows the President to impose additional tariffs on imports to address significant balance-of-payments issues.
A universal 10% tariff on all goods, mentioned in President-elect Trump's campaign, or similar action would likely require congressional action. While there are several pathways a universal tariff could take in the Senate legislative process, the work of gathering exemptions would be tedious and time-consuming. For example, Congress would likely exempt foreign-grown produce to avoid increasing grocery prices directly.
Compared to administrative actions, this process would be less likely to come to fruition without large-scale exemptions. The earliest Congress could act on universal tariff increases would be early to late Fall 2025, with a significant chance that it would take longer.
Supply chain professionals also need to be aware that the United States-Mexico-Canada Agreement (USMCA) is up for its 6-year review in 2026. The review process will begin in July 2025, and if one country withdraws from USMCA, it triggers a 10-year sunset process. However, a positive review would result in at least 16 more years of USMCA.
While this does not require any congressional action, if pressure builds to re-negotiate key provisions of USMCA in both the U.S. and Mexico, this could require additional congressional input.
Supply chain professionals should remain in close contact with their customs broker as potential tariff changes are implemented. Four things that should be considered now to prepare are:
Have questions? Connect with us and stay informed on new trade and tariff updates.