Insights

On February 13, 2025, President Trump issued a Presidential Memorandum on “Reciprocal Trade and Tariffs” (the “Reciprocal Tariffs Memorandum”), introducing the “Fair and Reciprocal Plan” to determine “the equivalent of a reciprocal tariff with respect to each foreign trading partner.” The reciprocal tariffs may be implemented as soon as April 2025.[1]

Next Steps

Pursuant to the America First Trade Policy, issued on January 20, 2025, various executive agencies are required by April 1, 2025 to provide the President with reports of results of investigations, including reports on the causes of the U.S. trade deficit, the feasibility of establishing an External Revenue Service, and the identification of unfair trade practices by other countries. After the submission of these reports, the Reciprocal Tariffs Memorandum requires the U.S. Trade Representative (“USTR”) and Secretary of Commerce, in consultation with other executive agencies, to initiate an investigation of harm to the United States from non-reciprocal trade arrangements with other countries. The comprehensive investigation will include an examination of the following activities by trade partners:

• tariffs imposed on U.S. products;
• unfair, discriminatory, or extraterritorial taxes, e.g., a value-added tax (“VAT”);
• nontariff barriers, including subsidies, and burdensome regulatory requirements on United States businesses operating in other countries;
• wage suppression, exchange rate deviation from market value, and other mercantilist policies; and
• any other practice that “imposes any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States.”

Upon completion of the investigation, the USTR and Secretary of Commerce will submit to President Trump a report detailing proposed remedies to achieve reciprocal trade relations with each trading partner.

Authority

The Reciprocal Tariffs Memorandum does not provide the statutory authority under which reciprocal tariffs will be implemented, but, according to the New York Times,[2] the White House clarified that the specific authority may depend on the country. Potential statutory authority includes, 1) Section 301 of the Trade Act of 1974, which gives the President broad authority to take action against discriminatory foreign trade practices and under which the tariffs on China from the first Trump administration are implemented; 2) Section 232 of the Trade Expansion Act of 1962, which relates to national security and under which steel and aluminum tariffs are imposed; and 3) the International Emergency Economic Powers Act, under which the recent 10% tariffs on China are implemented and 25% tariffs on Mexico and Canada are threatened.

Other Considerations

The Reciprocal Tariffs Memorandum makes no reference to potential product or country exclusions or exemptions. Such exclusions may, or may not, become available as the Fair and Reciprocal Plan is further developed. Similarly, it is not yet clear whether and how the prospective reciprocal tariffs will impact existing free trade agreements, but the threatened tariffs could be used by the Trump administration to negotiate new trade agreements and renegotiate existing agreements. Much like Canada and Mexico when faced with 25% tariffs earlier this month, trade partners likely could negotiate with the United States to decrease potential tariffs.

The threatened reciprocal tariffs are against World Trade Organization (“WTO”) commitments and subject to challenges under the WTO dispute settlement system. But the dispute settlement system has been largely paralyzed since the United States implemented a policy of blocking appointments to the WTO’s Appellate Body during the first Trump administration. A policy that continued during the Biden administration.

Compliance and Risk Management

Companies engaged in international trade should prepare for increased scrutiny of imports, especially those subject to large reciprocal tariffs. As previewed in relation to forthcoming tariffs on steel and aluminum, U.S. Customs and Border Protection (“CBP”) will prioritize enforcement against companies that seek to evade duties by misclassifying imports or declaring the incorrect country of origin. Therefore, it will be critical for importers to ensure compliance with all CBP regulations.

This significant shift in U.S. trade policy will have far-reaching implications for businesses involved in international trade. Torres Trade Law attorneys stand ready to provide detailed analysis, compliance guidance, and strategic advice as the reciprocal tariff policy unfolds. We will continue to monitor this situation closely and provide updates as new information becomes available. In the meantime, please do not hesitate to contact us should you have any questions about the impending reciprocal tariffs or proactive customs compliance generally.