Trump’s Initial Presidential Actions and Their Impacts on Trade

Introduction

President Trump issued several Presidential Actions on the first few days of his second term in office. These proposals have implications across a broad range of trade policy areas. Our team has analyzed the impacts of these Presidential Actions in the following areas: (1) tariffs, supply chain, and the future of international trade agreements and regional Integration; (2) non-tariff measures; (3) digital trade; and (4) trade and climate.

• Tariffs, Supply Chain, & the Future of International Trade Agreements and Regional Integration

In the "America First Trade Policy" memorandum (the “America First Memo”), President Trump directed cabinet members to assess tariff measures to reshape US economic and foreign policy. The memorandum proposes using a global supplemental tariff to address trade deficits in goods, implementing an External Revenue Service (ERS) to collect tariffs, duties, and other foreign trade-related revenues, and adjusting the current de minimis exemption ($800). Regarding China, President Trump requested a review of the US-China trade agreement to determine compliance and assess whether additional tariffs or adjustments to pre-existing Section 301 tariffs on products from China are necessary. 

The potential tariffs and threats of tariff impositions have significant economic and foreign policy implications for the US trading partners, as President Trump views tariffs as negotiation tools. For example, he threatened Colombia with tariffs over blocking flights of deported migrants. As demonstrated in the trade policy objectives during this first term, President Trump favors bilateral over multilateral trade agreements to ensure advantageous terms and renegotiate existing agreements to address trade imbalances. For sovereign trading partners, it is crucial to identify clear,  specific, and long-term U.S. trade and foreign policy demands objectives vis-a-vis yours to leverage and negotiate the best outcomes. This may require strategic negotiations with the US while engaging stakeholders. Potential tariffs would increase costs and expose risks in supply chains for businesses importing goods into the US and manufacturers relying on foreign-origin intermediary goods for their production. Businesses should mitigate these risks by planning for various tariff scenarios and their effects on their supply chains, exploring supply chain diversification, and identifying cost reduction opportunities. 

While there are still many uncertainties regarding the imposition of tariffs, TPEAdvisory can help identify the leverage points using economic data and formulate actionable plans in response to the potential tariffs.

• Non-tariff Measures

  
  

The America First Memo trade policy also proposes reviewing non-tariff measures to protect U.S. national security and boost the domestic economy. These include increased use and stricter enforcement of existing trade defense instruments. Additionally, President Trump tasked the Departments of State and Commerce to review and recommend modifications to the US export control system to address national security and technological concerns and maintain the US's technological advantage. The policy proposals recognize that advanced technology can be used for military and intelligence purposes and threaten US national security. Given the first Trump Administration’s stance on trade relations with China, coupled with the stricter rules proposed during the Biden administration, it is foreseeable that there will be more stringent scrutiny of foreign investment and more restrictions on certain types of exports involving advanced technology will follow. 

The US export controls already have extraterritorial reach. The United States, however, will likely cooperate with allies to harmonize and enforce export control rules on advanced technologies. The Trump Administration may use tariffs as a negotiation tactic to make a deal with trading partners to align their export control rules with US national security objectives and enforce US laws abroad. For businesses exporting US-controlled items or technologies, Trump 2.0 means it is crucial to examine transactions, conduct due diligence, and update compliance programs to avoid potential penalties. The non-tariff measures coming out of Washington D.C. may be rapidly developed, and TPEAdvisory is here to provide timely updates and customized explanations.

• Digital Trade

Digital trade is not explicitly mentioned in the “America First Trade Policy” memorandum or other Presidential Actions. Still, the policy’s call for a revision of existing export control systems and the identification and elimination of technology transfer loopholes will likely affect trade in digital products and digitalised services. Similarly, the comprehensive review of existing trade agreements will likely also involve chapters and provisions dedicated to digital trade.

Other EOs issued by the new US Administration regarding taxation and artificial intelligence may also impact digital trade. For example, the US is pulling out of the OECD Global Tax Deal, whose Pillar 1 negotiations aim to reallocate some taxing rights to market jurisdictions and reduce digital services taxes (DSTs). The Deal’s collapse could induce other countries (e.g., Spain, France, Italy) to reintroduce unilateral DSTs targeting mainly US corporations, leading to potential retaliation by the US. The Trump Administration is also replacing President Biden’s safety-based EO 14110 with a new AI policy, focusing on national security, deregulation, and economic competitiveness.

The new US Administration has repeatedly stated that it seeks to protect domestic companies and ensure US AI dominance. TPEAdvisory can help businesses understand how its approach to digital trade policy may affect their operations.

• Trade and Climate

During his first week in office, President Trump eliminated over 70 climate and green energy initiatives, dismantling Biden-era climate policies. Key actions include withdrawing from the Paris Climate Accord, declaring an "energy emergency" to expand oil and gas production, weakening environmental protections, opening Arctic drilling, and revoking clean energy goals. He also pulled federal funding from under the Inflation Reduction Act and the infrastructure act that supported clean energy development. 

While these actions will likely be challenged in US federal court, ​​they have created uncertainty for investors and potentially damaged the credibility of future US federal policies that aim to drive private investments. This policy reversal may exclude the U.S. from climate-focused trade agreements in the near future. 

These policy agenda potentially shift global clean energy investment flows. U.S. companies risk losing their competitive edge in the global clean energy market as international buyers favor eco-friendly suppliers. Furthermore, U.S. exports may face additional costs under the EU’s Carbon Border Adjustment Mechanism (CBAM), with impacts varying by product type, production method, and production location, as some states maintain stricter carbon emission policies than the federal government. 

Meanwhile, some U.S. states might update their climate actions in reaction to the federal policy changes. Businesses will need to monitor the U.S. climate policy development at both federal and state levels and evalute the impacts on their supply chains as well as their strategic outlooks. 

Conclusion

In the next few months, the Trump administration will continue to develop and release further details of its trade policy agenda and appoint key trade officials to execute it. The TPEAdvisory Team will continue to monitor these developments. If you want to learn more about this and understand how to handle these issues, please contact us -- we are here to help you navigate through this fog.