General Framework
On 20 January 2025, President Trump signed the America First Trade Policy memorandum, setting out a protectionist vision centered on tariffs as the primary trade tool. Key directives include:
- Addressing unfair and unbalanced trade;
- Investigating foreign practices like currency manipulation and digital services taxes;
- Reviewing existing trade agreements (e.g., WTO’s Government Procurement Agreement);
- Proposing a new External Tariff Revenue Service;
- Reassessing the de minimis exemption ($800 threshold), widely used by Chinese e-commerce firms.
Tariffs and Key Measures
Several waves of tariffs were quickly imposed:
- February 2025: 25% tariffs on steel and aluminium, justified under Section 232 (national security).
- March 2025: 25% tariffs on cars and car parts.
- April 2025:
- Reciprocal tariffs from 11% to 50% on imports from countries with a goods trade deficit with the US;
- Universal 10% tariff on most other imports;
- Exemptions include sanctioned states, some energy, pharmaceuticals, and semiconductors.
Legal Justification and Controversy
The White House invoked the International Emergency Economic Powers Act (IEEPA, 1977) to justify these tariffs, citing:
- Unlawful migration (Mexico, Canada);
- Fentanyl inflows (China, Mexico, Canada).
However, legal scholars argue that IEEPA does not authorize tariffs, as the terms duty or tariff are absent from the statute. Past presidents used IEEPA for sanctions, not trade restrictions.
Continuities and Breaks from Trump’s First Term
The second Trump term continues focusing on the massive U.S. trade deficit (US$1.2 trillion in 2024). However, there are key differences:
- No exceptions to steel, aluminium, or car tariffs (except USMCA);
- Tariff scope has dramatically expanded: from US$380 billion (2018–19) to over US$2.5 trillion (2025);
- Tariffs now serve broader purposes, including:
- Funding 2025 tax cuts via budget reconciliation;
- Advancing immigration and drug policy goals;
- A new legal basis (IEEPA) adds greater presidential discretion.
Geopolitical and WTO Implications
Countries have responded in three distinct ways:
- China: retaliatory tariffs;
- India & Israel: bilateral negotiations;
- EU: phased retaliation with diplomatic openness.
Trump’s policy breaks with WTO commitments:
- Uses the national security exception to justify broad tariffs;
- Ignores the Most Favoured Nation (MFN) principle;
- Introduces reciprocal tariffs based solely on goods trade deficits, disregarding US services surpluses;
- Effectively abandons special treatment for developing countries, many of which are now subject to the highest tariffs.
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