Following his inauguration on January 20, 2025, President Trump did not impose new tariffs immediately. Instead, he issued the expansive "America First Trade Policy" Executive Order (E.O.), directing a comprehensive analysis of U.S. trade policies and relationships. The E.O. instructs federal agencies to complete reviews of various trade policies and existing agreements by April 2025. While this could suggest delays in major trade policy changes until the spring, the White House has signaled that new tariffs might be imposed as early as February.

The America First Trade Policy E.O.

Broadly, the E.O. instructs certain federal agencies to review, inter alia: (1) "unfair trade practices by other countries" and potential tariff modifications; (2) the U.S.'s economic and trade relationship with China; and (3) national security implications of U.S. trade policies. 

First, the E.O. directs the Department of Commerce (Commerce), the Department of the Treasury (Treasury), the United States Trade Representative (USTR), and the Senior Counselor for Trade and Manufacturing (a post to which Trump named his former advisor, Peter Navarro), as well as other agencies, to evaluate so-called "unfair and unbalanced trade" relationships. The E.O. makes clear that tariffs remain in the executive branch's arsenal, as it instructs the agencies to investigate the U.S.'s trade deficits and their economic and security implications, and to recommend possible remediation measures such as global tariffs. The E.O. instructs federal agencies to review existing trade agreements, particularly the United States-Mexico-Canada Agreement (USMCA), in preparation for a planned 2026 review of the agreement, and the World Trade Organization (WTO) Agreement on Government Procurement, to ensure it benefits domestic workers. The E.O. also directs agencies to consider the feasibility of an External Revenue Service (ERS) that would collect tariffs and duties, even though the creation of new agencies is within the purview of Congress and U.S. Customs and Border Protection (CBP) already collects tariff revenue.

Second, the E.O. directs further agency review of the U.S.'s trade relationship with China. The E.O. sets the groundwork for the possibility of tariff modifications with respect to China, noting that the USTR's review of the Economic and Trade Agreement Between the Government of the United States of America and the Government of the People's Republic of China may find that additional tariffs are appropriate. The E.O. instructs the USTR to investigate the effectiveness of the section 301 tariffs (under the Trade Act of 1974) on Chinese goods and make recommendations on possible adjustments to address circumvention through third countries. The E.O. leaves open the possibility of revoking China's Permanent Normal Trade Relations (PNTR) status, asking Commerce and the USTR to evaluate related legislative proposals. The E.O. also reiterates concern regarding China's possible theft of intellectual property. 

Finally, the E.O. concludes with directives for agencies to analyze the economic and national security threats associated with various trade issues. These include targeted reviews of policies related to connected vehicles, steel and aluminum tariffs, and the purported flow of migrants and drugs from Canada, Mexico, and China. Beyond these focused areas, the E.O. calls for sweeping measures such as a comprehensive review of the country's industrial base, proposed reforms to the export control system, and potential modifications to the newly created Outbound Investment Security Program, which was first established under the Biden administration in 2023.

Tariffs on the Horizon

While the E.O. initiates what is sure to be a broad agency-driven review of U.S. trade policy, the White House signaled that it may still be considering imposing new or modified tariffs and highlighted their use as a negotiating tool:

• Tariffs on Canada and Mexico: On January 20, 2025, Trump asserted that tariffs in response to fentanyl trafficking across the Canadian or Mexican border could be imposed in February 2025, signaling potential tariff action in advance of the April 2025 deadline for the agencies' studies ordered by the E.O.
• Tariffs on China: After signing an E.O. delaying the shutdown of TikTok, Trump stated he might consider additional tariffs to pressure China to allow sale of the entity. He also said that the White House was considering a 10 percent tariff on imports from China starting in February 2025, again in response to the purported cross-border flow of fentanyl.
• Universal Tariffs: The president reaffirmed his consideration of universal tariffs, claiming that "essentially all countries take advantage of the U.S.," and that he still "may" impose universal tariffs, "but we're not ready for that yet."

The potential tariffs have prompted concerns about trade policy retaliation from Canada and Mexico. Both nations have signaled that they are prepared to respond with countermeasures if the new administration implements the proposed tariffs. This underscores the delicate balance between advancing the new administration's trade policy objectives and mitigating the risk of escalating trade disputes with key partners. 

Key Takeaways

• Tariff Risks are Imminent: While no new tariffs have been imposed to date, the White House has indicated the possibility of imposing tariffs on imports from Canada, Mexico, and China as early as February 2025, citing concerns about cross-border flows of people and fentanyl. Companies should assess their supply chain exposure to potential tariffs on imports from these countries and develop contingency plans to manage associated cost increases. This might include the identification of alternative suppliers, the diversification of sourcing strategies, and the adjustment of inventory levels to mitigate tariff-related disruptions. In addition, companies should evaluate their contractual agreements with suppliers and customers to ensure flexibility in pricing and delivery terms considering potential tariffs.
• Focus on China's Trade Practices: Given the E.O.'s focus on U.S.-China trade relations, companies should closely monitor any developments in this area, including those related to China's PNTR status and potential updates on section 301 tariffs. Companies should also consider alternative markets or suppliers particularly for critical inputs or sensitive technologies.
• Tariffs as Negotiating Tools: The White House likely will use tariffs as a strategic negotiating tool to secure favorable trade agreements. Companies should start thinking about aligning corporate strategies with the administration's priorities, seeking opportunities to benefit from reshoring initiatives or incentives to support domestic industries.

President Trump's tariffs might not have been imposed on Day 1, but they remain on the horizon. Companies should take this opportunity to consider possible tariff mitigation strategies.

For more information, please contact:

Richard A. Mojica, rmojica@milchev.com, 202-626-1571

Peter Kentz, pkentz@milchev.com, 202-626-5891

Franco Jofré, fjofre@milchev.com, 202-626-1585

Laura Deegan*

*Former Miller & Chevalier attorney

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