On his Inauguration Day, President Trump issued a Presidential Memorandum titled America First Trade Policy. This memorandum directed relevant Cabinet agencies and offices to begin the necessary groundwork contemplated by various Congressional delegations of tariff power to the Executive branch. The memorandum set a due date of April 1, 2025, and the President has since indicated that April 2, 2025, will see major tariff deployments.
CPA is strongly supportive of President Trump’s Trade and Tariff Agenda that seeks to broadly reindustrialize the United States and raise significant revenue as outlined in the America First Trade Policy Memorandum. Importantly, this Presidential Memorandum promises that America’s trade policy will be one that “enhances our nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
However, CPA cautions against adopting a reciprocal tariff strategy aimed primarily at negotiating lower foreign trade barriers and more favorable investment conditions abroad. A reciprocal tariff strategy that prioritizes foreign governments’ willingness to reduce their trade barriers or be more receptive to foreign investment is in conflict with the stated goals of the America First Trade Policy Memorandum and undermines the predictability and stability American businesses need to confidently invest in long-term domestic production. Such uncertainty erodes the effectiveness of tariffs as strategic tools for reindustrializing America, securing supply chains, and generating revenue.
Historical Failures of “Reciprocal” Trade Policy
In 1974, at the outset of the so-called “Tokyo Round” negotiations of the General Agreement on Tariffs and Trade, Congress legislated a requirement for “Reciprocal nondiscriminatory treatment” with Canada, Europe, Japan, and any other “major industrial country” so designated by the president. This remains the law of the land, codified at 19 U.S.C. § 2136.
In one sense, it worked, as Japan eliminated all tariffs on car imports, while we have charged them a 2.5% tariff. However, despite Japan being even modestly disadvantaged in terms of tariff reciprocity, Japan sends America 75 cars for every 1 car we send them. Setting tariffs in response to other countries’ policies is a proven failure.
Furthermore, using tariffs to punish other countries risks unnecessary collateral damage to domestic producers. For example, raising tariffs on all imports from Canada or Mexico to punish those countries while failing to impose a comparable tariff on imports from overseas will disproportionately benefit entirely foreign manufacturing operations. Apparel and vehicles that meet USMCA rules of origin by using a sufficient U.S. content standard under the law should never face higher tariffs than products from overseas that use no U.S. content.
CPA Tariff Recommendations
As the April 1, 2025 deadline approaches, CPA offers the following recommendations as they relate to the use of tariffs for protection, for revenue, and for reciprocity.
Tariffs for Revenue:
CPA fully supports President Trump’s concept of a 10% to 20% supplemental, universal tariff. CPA estimates that even a modest 10% supplemental universal tariff would lead to $728 billion in economic growth and 2.8 million new jobs, while generating $263 billion in new federal revenue to pay for domestic tax cuts.
A Universal Supplemental tariff is best for revenue, because it preserves existing tariff preference schemes, making it the least distortive and thus the most politically viable long term. For example, a universal +20% rate does not result in an imported car with zero U.S. content facing a higher tariff than a car imported with substantial U.S. content.
CPA encourages the Trump Administration to work with Congress in legislating the supplemental universal tariff as part of any tax reform legislation.
CPA fully supports the creation of an External Revenue Service. When the U.S. Customs Service was dissolved as an agency underneath the U.S. Treasury, and reinstituted as a component of the newly created U.S. Customs and Border Protection (CBP) under the Department of Homeland Security (DHS), America’s expertise and focus on tariff revenue quickly atrophied. Fortunately, Section 412 of the Homeland Security Act (6 U.S.C. § 212) does offer the Trump Administration an avenue to quickly rebuild this capacity within the Treasury Department. Section 412 went so far as to direct the Treasury to appoint twenty officials to oversee customs revenue, however every Treasury Secretary to date has failed to do so.
Tariffs for Protection:
Section 232 is an excellent Presidential tool for protecting American producers, and CPA applauds the Trump Administration for already initiating new Section 232 investigations on copper and lumber.
CPA believes it is essential that entire supply chains be considered for the successful deployment of tariffs. Conveniently, Sections I through XX (1 through 20) of the Harmonized Tariff System (HTS) are organized in this way. The Trump Administration should consider initiating a Section 232 review for each of Sections 1 through 20 of the HTS.
Implement “specific” tariffs over “ad valorem” when looking at protective tariff rates. Ad valorem tariffs (tariffs expressed as a percentage, which are applied against an importer’s transaction price, as declared by the foreign invoice the importer supplies) are easily undermined, whether by fraudulent invoices or foreign currency devaluation. Specific tariffs, which are priced in U.S. dollars and apply based on a unit of measurement verifiable by CBP (e.g. per unit, or by weight), are much more effective at giving domestic producers necessary certainty.
Consider the use of Tariff Rate Quotas (TRQs), especially for areas where time is needed for reshoring supply chains. TRQs permit a specified quantity (e.g. units, or by weight) of imported food or merchandise to be entered at a reduced rate of duty during the quota period (typically an annual basis, or quarterly or seasonally). With a TRQ, the in-quota rate can be the revenue tariff, while the over-quota rate is protective. Doing this avoids supply chain shocks while driving reshoring. The in-quota allotment can be lowered each year as production is reshored. The legal infrastructure already exists to deploy TRQs effectively, as the United States has done so in sugar and other commodities for decades.
Tariffs for Reciprocity:
Nothing is more unfair, and more non-reciprocal, than the literal America Last shackles of WTO tariff commitments. Most are unaware that every WTO Member, including the United States, has pledged maximum tariff rates applicable to every other WTO member, and that America has given away the most.
Under the WTO system, there’s no single maximum rate, but rather specific maximum rates — known as “bound rates” — itemized across 5,000+ product categories.
Bound rates for each WTO country are listed in that country’s “Schedules of Concessions”, which is annexed to the General Agreement on Tariffs and Trade (GATT).
What do we mean when we say “Literally America Last”? The United States has given away the most, pledging bound tariff rates that average out at a paltry 3.4%. This is why the majority of imports do not even elect to make use of any of the United States’ free trade agreements with twenty countries.
CPA calls on the Trump Administration to either withdraw from the World Trade Organization entirely, or to “Unbound” the United States’ Schedule of Concessions to the GATT.
Finally, in taking reciprocal tariff actions, CPA cautions against two potential missteps:
Do not fall for the “0 for 0” trap. American-made cars face no tariff in Japan or Mexico, and yet those countries send us 77 and 22 cars respectively for every 1 car we send them.
Other countries will always “outgame” the United States, as they are much more willing to rig the rules in favor of a domestic national champion.
Congress legislated Section 338 of the Tariff Act of 1930 almost a century ago because this problem was well understood. Between 1934 and 1945, the United States signed 32 ‘reciprocal’ trade agreements with 27 countries. And in 1974, Congress legislated a reciprocity requirement for major industrialized countries. These reciprocity requirements have all failed while simultaneously pitting American producers against each other.
Ultimately, tariffs for revenue and protection are best set by looking inwards, at the needs of American producers and consumers, as opposed to in relation to policies in other countries.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
CPA Recommendations for Implementing Tariffs Pursuant to the America First Trade Policy Memorandum
On his Inauguration Day, President Trump issued a Presidential Memorandum titled America First Trade Policy. This memorandum directed relevant Cabinet agencies and offices to begin the necessary groundwork contemplated by various Congressional delegations of tariff power to the Executive branch. The memorandum set a due date of April 1, 2025, and the President has since indicated that April 2, 2025, will see major tariff deployments.
CPA is strongly supportive of President Trump’s Trade and Tariff Agenda that seeks to broadly reindustrialize the United States and raise significant revenue as outlined in the America First Trade Policy Memorandum. Importantly, this Presidential Memorandum promises that America’s trade policy will be one that “enhances our nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
However, CPA cautions against adopting a reciprocal tariff strategy aimed primarily at negotiating lower foreign trade barriers and more favorable investment conditions abroad. A reciprocal tariff strategy that prioritizes foreign governments’ willingness to reduce their trade barriers or be more receptive to foreign investment is in conflict with the stated goals of the America First Trade Policy Memorandum and undermines the predictability and stability American businesses need to confidently invest in long-term domestic production. Such uncertainty erodes the effectiveness of tariffs as strategic tools for reindustrializing America, securing supply chains, and generating revenue.
Historical Failures of “Reciprocal” Trade Policy
In 1974, at the outset of the so-called “Tokyo Round” negotiations of the General Agreement on Tariffs and Trade, Congress legislated a requirement for “Reciprocal nondiscriminatory treatment” with Canada, Europe, Japan, and any other “major industrial country” so designated by the president. This remains the law of the land, codified at 19 U.S.C. § 2136.
In one sense, it worked, as Japan eliminated all tariffs on car imports, while we have charged them a 2.5% tariff. However, despite Japan being even modestly disadvantaged in terms of tariff reciprocity, Japan sends America 75 cars for every 1 car we send them. Setting tariffs in response to other countries’ policies is a proven failure.
Furthermore, using tariffs to punish other countries risks unnecessary collateral damage to domestic producers. For example, raising tariffs on all imports from Canada or Mexico to punish those countries while failing to impose a comparable tariff on imports from overseas will disproportionately benefit entirely foreign manufacturing operations. Apparel and vehicles that meet USMCA rules of origin by using a sufficient U.S. content standard under the law should never face higher tariffs than products from overseas that use no U.S. content.
CPA Tariff Recommendations
As the April 1, 2025 deadline approaches, CPA offers the following recommendations as they relate to the use of tariffs for protection, for revenue, and for reciprocity.
Tariffs for Revenue:
Tariffs for Protection:
Tariffs for Reciprocity:
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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