U.S. President Donald Trump made many promises on the campaign trail, but repeatedly returned to the application of tariffs as an all-purpose solution to many domestic challenges. Tariffs are, he said grandly, the best word in the English language.
It should not have shocked anyone to see him move early in his return to the Oval Office to threaten foreign governments with higher tariff levels. Within two weeks, Trump had proposed the use of tariffs as a response to Columbia for failing to accept planes with migrants, against BRICS for attempting to use a non-dollar currency, against Canada, Mexico, and China for failure to manage migrants and fentanyl, and against the EU for its overall unfair treatment.
Events change very quickly in this White House. Most of these tariff threats have already been withdrawn or suspended. Columbia’s President Gustavo Petro agreed to resume flights, and the tariff threat was rescinded in a matter of hours. The warning to BRICS has not been followed up with specific actions. The use of tariffs against the EU is, Trump has said, pending.
But the situation with Canada, Mexico, and China proceeded much further. All three were the subject of Executive Orders from the President on Friday, January 31, with tariffs to take effect at midnight on February 3. Federal Register (FR) notices were drafted. All three parties indicated their intention to retaliate against U.S. tariffs.
The FR notice for Mexico was never posted, as a phone call early on Monday, February 3, between Trump and Mexican President Claudia Sheinbaum led to a postponement of tariffs. Sheinbaum promised to step up enforcement at the border and continue a crackdown on fentanyl production and shipments.
A draft FR notice for tariff application against Canada was posted, although, like Mexico, Canada received a 30-day reprieve following a call with Trump in the afternoon of February 3, and the notice was removed from the FR website. Canada’s Prime Minister Justin Trudeau pledged to continue implementing a border protection plan he had announced prior to Trump’s inauguration and add a “fentanyl czar” to manage illegal drug flows.
China, however, did not receive a quick reprieve from the application of additional duties. Instead, all Chinese goods faced an immediate 10 per cent tariff rate (to be applied on top of any existing Section 301 tariffs as well as any existing MFN tariff rates). These tariffs apply to all goods without exemptions and without the use of a range of commonly used tools like Free Trade Zones (FTZs) or duty drawback to mitigate costs.
Chinese firms were also stopped from using a provision of customs called ‘de minimus,’ which allows small value shipments to enter the United States without payment of tariffs. The threshold level for the U.S. had been US$800 per day, but this was eliminated for all goods coming to America from China and Hong Kong. Given the volume of trade, with up to four million packages and parcels arriving per day, the impact of removing de minimus could be substantial.
As the U.S. tariffs on China came into effect, China imposed its own retaliation, promising higher tariffs on specific items like LNG, as well as listing additional U.S. companies on its own “entity list” and launching an anti-trust investigation into Google.
Overall, however, Trump appears to have regarded his opening efforts as quite satisfactory, noting that, “Tariffs are very powerful, both economically and in getting everything else you want. When you’re the pot of gold, the tariffs are very good.”
While the focus on tariffs dominated headlines, behind the scenes the rest of Trump’s trade agenda has been getting manoeuvred into place. This includes confirmation hearings for his key economic staff members, as only Treasury Secretary Scott Bessent was in place at the start of Trump’s second term.
The trade agenda, outlined by Trump in an inaugural day Executive Order, indicates that tariffs are only a piece of an effort to put ‘America First.’ There are, for example, requests for U.S. government agencies to determine what other existing pieces of U.S. legislation could be used to crack down on unfair trade practices; currency manipulation; application of trade rules and remedies like anti-dumping and countervailing duties; export controls; determination of losses from counterfeit and illicit trade including through provisions such as de minimis; adjustment of imports that threaten the national security of the United States (including steel and aluminum); and inbound and outbound investment rules.
The trade agenda document also explicitly requires Trump’s team to examine the impact of the Canada-United States-Mexico Agreement (CUSMA) and suggest necessary adjustments as well as look at other free trade agreements to ensure that the U.S. is still receiving “reciprocal and mutually advantageous concessions” from partners. The reports on all aspects of the agenda are due on April 1, which will provide an important window into likely next steps.
Taken as a whole, these additional elements should be viewed as a preview of an upcoming range of actions to be taken by the United States against others using all available unilateral tools. Trump has not been shy about labelling his entire program as ‘America First,’ and these early moves are a sharp reminder that this is not simply an empty slogan.
Early tariff moves have provided a preview of what to expect from this White House. The President clearly believes that tariffs are a valuable tool that should be deployed to manage a wide range of issues. While these threats to employ tariffs can sometimes be mitigated by actions from targeted partners, this is not always true.
The wider agenda indicates that tariffs will not be the only unusual approach taken by Trump, as he has clearly shown a desire to use tools that give him an unprecedented ability to act unilaterally from the Oval Office with almost no objections from anyone in Congress.
The fact that he has already moved so quickly against both friends and perceived adversaries alike is a warning. Trump’s return to the White House will not look like his first term in office. It will be much more chaotic, less predictable, and even more disruptive.
