Policy Backgrounders

Tariffs: Not Yet but Still a Threat

January 22, 2025

While tariffs did not feature as part of the President’s Day 1 actions, the new Administration has signaled that they will likely be imposed shortly. This includes tariffs on Canada and Mexico, while the trade practices of other jurisdictions, including China and the EU, will be studied more closely before a decision to impose tariffs on them.

• The President has broad authority to impose tariffs and by a Presidential Memorandum on “America First Trade Policy” requested a study of US trade policy and unfair foreign trade barriers, due April 1.
• He said that tariffs of up to 25% could be imposed on Canada and Mexico, the US’ first and second largest trading partners in goods, by February 1.
• The President also threatened tariffs on the European Union because of its trade surplus with the US.
• With respect to China, the rhetoric was more muted, leading to speculation about a possible deal, although the US study will also review China’s compliance with the 2020 trade deal.
• Tariffs currently account for only about 3% of Federal revenues. The President has proposed a new “External Revenue Service” to receive revenues from tariffs and other payments by foreign parties; it is unclear whether the new agency would take over powers currently held by Customs and Border Protection in the Department of Homeland Security and the Internal Revenue Service.