Update on President Trump's Two Executive Orders on Tariffs
President Trump released two executive orders (EOs) regarding tariffs released by the White House. IFCA has been receiving calls from our members asking what was in it. Here are a few key takeaways from the executive orders issued last week:
- The EO titled Further Modifying Reciprocal Tariff Rates establishes a host of new ad valorem duties, raising tariff rates above the previous 10% baseline for nearly 70 countries. The change is scheduled to go into effect starting at midnight on August 7th.
- Under Section 2 of the EO, the Harmonized Tariff Schedule will be modified as indicated in Annex II, which is linked to within the text of the above EO. Tariffs will remain at previous rates for goods meeting certain transit and warehouse deadlines. There is no change to the zero-tariff rate status of imports from Russia and other countries that do not have formal trading partner status with the U.S. We are advising members to consult their freight brokers to monitor the in-transit status of goods.
- The EO titled Amendment to Duties to Address the Flow of Illicit Drugs Across Our Northern Border increases the fentanyl-border security tariff on imports of Canadian goods from 25% to 35% in certain instances. According to the White House, “Goods qualifying for preferential tariff treatment under the United States-Mexico-Canada Agreement (USMCA) continue to remain” exempt from these tariffs. This exemption applies to USMCA-compliant fertilizers. Non-compliant potash will remain capped at 10%.
- Both EOs rely at least in part on the International Emergency Economic Powers Act (IEEPA), which requires a presidential declaration of emergency. Reliance on IEEPA for these sorts of trade negotiations was unprecedented until President Trump’s utilization of that law. Trump’s use of IEEPA is currently subject to a legal challenge that was argued Tuesday in the federal Court of Appeals for the DC Circuit. Whether that court will rule against the Administration remains to be seen. A negative ruling will undoubtedly lead to an appeal to the Supreme Court. Either way, much of the Administration’s actions in these executive orders can be interpreted as a means of seeking to force trade partners into negotiating new agreements with greater urgency.