INSIGHT: Trump’s first-day orders lay groundwork for future tariffs
Al Greenwood
21-Jan-2025
HOUSTON (ICIS)–US President Donald Trump did not propose any new tariffs on his first day in office, but he did issue an executive order that calls for his administration to conduct the investigations needed to impose them under several sections of the law – in many cases, repeating the same playbook Trump used during his first term in office.
- While the investigations take place, the US can use the threat of possible tariffs to negotiate agreements. If the negotiations fail, the US would have taken the steps necessary to respond with tariffs.
- Trump did indicate that he is considering imposing tariffs on Canada and Mexico as early as 1 February. This could rely on using existing laws in unprecedented ways.
- The US chemical industry is vulnerable to tariffs because it has deficits in commodities such as benzene, melamine and methyl ethyl ketone (MEK). Its large exports of plastics make it vulnerable to retaliatory tariffs.
TRUMP LAYS FOUNDATION FOR
TARIFFS
Among the investigations
that will be launched by
Trump’s executive order, those into
national security could lead to Section 232
tariffs, which Trump imposed on steel during
his first term.
Discriminatory trade practices would open the door to Section 201 tariffs, which were imposed on washing machines and solar panels.
Unfair trade practices could lead to Section 301 tariffs. The US imposed these against numerous Chinese imports. That unleashed a trade war, with China imposing retaliatory tariffs, many of which targeted US exports of plastics and chemicals.
POSSIBLE NEW
TARIFFS
Trump’s first-day order
pointed to other reviews that his
administration could complete faster and lead
to new tariffs imposed under different sections
of the law.
These could fall under the International Emergency Economic Powers Act of 1977 (IEEPA), Section 338 and Section 122.
Trump’s first-day order did not mention these specific laws, but it did mention national security, discriminatory actions against US products and balance of payment deficits – all issues that these laws were designed to address.
These laws could allow Trump to impose tariffs on a faster schedule. The IEEPA only requires consultation with Congress, and Section 1222 can apparently be imposed unilaterally, according to the American Action Forum (AAF), a think tank.
THREAT OF CANADIAN, MEXICAN TARIFFS ON
1 FEBRUARY
Trump would need such
speed if he were to impose 25% tariffs on
Canada and Mexico goods on 1 February, a
possibility that he mentioned on Monday,
according to CNBC and other
publications.
Drug trafficking and immigration could provide the national security basis needed under these laws.
REVISITING THE PHASE 1 AGREEMENT WITH
CHINA
Trump’s first-day order
called for a review of the Economic and Trade
Agreement to determine if China is living up to
its end of the deal.
The agreement is more commonly known as the phase one deal, and the two countries signed it in January 2020.
It included commitments by China to purchase more goods from the US; to adopt policies that will protect intellectual property; and to reduce pressure on companies to transfer technology.
China has not fulfilled its import commitments under the agreement, and Trump’s order said the country could impose additional tariffs in response.
US CHEMS VULNERABLE TO
TARIFFS
Unless Trump carves out
exceptions, his proposed tariffs on China and
Mexico could raise costs for US chemical
producers.
Canada provides US refiners with heavier grades of oil that are not produced in sufficient quantities domestically for the nation’s refineries. Canadian oil complements the light grades of oil that the US produces in abundance from its shale fields.
Regional US markets may rely on Canadian imports because they are closer than the more distant sources along the US Gulf. Those customers will have to reroute their supply chains if they want to avoid tariffs.
For the broader tariffs that Trump proposed in his campaign, they could prompt countries to impose retaliatory duties on US shipments of plastics and chemicals.
The US is vulnerable to such tariffs because it has large surpluses of many plastics and chemicals, such as vinyl acetate monomer (VAM), methanol, ethylene glycols (EG), polyethylene (PE) and polyvinyl chloride (PVC).
Tariffs on Chinese imports of rare earth materials would increase production costs for catalysts.
Tariffs on fluorspar and hydrofluoric acid (HF) could increase costs for US producers of fluorochemicals and fluoropolymers.
Insight article by Al Greenwood
(Thumbnail shows cranes and containers, which make up important infrastructure used in international trade. Image by Costfoto/NurPhoto/Shutterstock)
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