Because the United States Constitution gives the power of tariffs to Congress, and not the President, the President is limited in deploying tariffs in the various ways Congress has authorized through specific legislative delegations of tariff setting authority.
In Section 2, President Trump tells his Cabinet to immediately begin the groundwork – think Congressionally mandated homework – necessary to begin using those powers.
Section 2(a): Commerce’s lead tariff powers
Section 2(a) directs the Department of Commerce to get cracking on the ‘homework’ necessary for an invigorated use of both Section 338 of the Tariff Act of 1930, followed by Section 232 of the Trade Expansion Act of 1962.
What are Sections 338 and 232? In short, Section 338 authorizes the President to raise tariffs in response to what we might call today foreign ‘non tariff barriers’ to U.S. exports; essentially, unreasonable regulations with the effect of discriminating against foreign products. Section 338 is thus ‘outward’ looking, focusing on problems abroad. Section 232, by contrast, is ‘inward’ looking, authorizing the use of tariffs to address the national security implications of imports displacing domestic counterparts.
Understanding the contours of Section 338 and Section 232 thus informs the opening of the memo’s second section: “The Secretary of Commerce, in consultation with the Secretary of the Treasury and the United States Trade Representative, shall investigate the causes of our country’s large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits, and recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits.”
Thus, putting in the staff hours to document foreign trade restrictions enables a firmer statutory legal standing for new tariffs per Sections 338 and 232.
Section 2(b): Creation of an External Revenue Service (ERS)
As Charles Benoit, CPA Trade Counsel, has explained, the U.S. Treasury has allowed its statutory responsibility for tariff collection to completely atrophy. While no Presidential tariff power is geared toward generating tariff revenue, President Trump is unquestionably personally dedicated to the goal. His idea to refocus Treasury on tariff revenue through the creation of an ERS, presumably as a Bureau within Treasury akin to the IRS, conveys his seriousness in using tariffs as a revenue stream.
Thus Section 2(b) directs the Treasury Secretary to “recommend the best methods for designing, building, and implementing an External Revenue Service (ERS) to collect tariffs, duties, and other foreign trade-related revenues.”
Jeff Ferry, Chief Economist Emeritus, says that “Exploring the creation of an ERS shows that the Trump administration is serious about levying tariffs in a substantial way both for trade benefits and revenue income to the government. Tariffs will play a major role in enabling tax cuts and federal budget deficit reduction.”
Section 2(c) The Other Tariff Powers.
While Section 2(a) focused on Commerce’s lead powers, Section 2(c) explicitly references the gambit of Presidential tariff powers, tasking USTR with the lead. It says:
Trump’s America First Trade Policy: CPA Reviews New Trade Agenda
On day one of the new administration, rather than any new tariffs, President Trump issued a Presidential Memorandum titled America First Trade Policy.
Many were quick to speculate as to why there were “no day-one tariffs” among the over twenty executive orders signed January 20th, but with the America First Trade Policy memorandum, the President did reassure that, as he made explicit throughout his campaign, tariffs will be central to his Presidency.
The memorandum is addressed to his Secretaries of State, Treasury, Defense, Commerce, and Homeland Security, as well as his U.S. Trade Representative, Assistant to the President for Economic Policy and his Senior Counselor for Trade and Manufacturing, Peter Navarro.
The above Cabinet roles and offices cover the gambit of trade policy, with the notable exception of his Secretary for Agriculture. The Department of Agriculture, at the behest of multinational food processors, has long been a champion of globalist trade policy, eager to help undermine any and all U.S. tariff actions.
What follows is an overview of the America First Trade Policy memorandum, featuring quotes from the memo and insights from CPA.
SECTION 1: BACKGROUND
In the first section, titled Background, Trump says that America First trade policy will be one that is “robust and reinvigorated,” promotes investment and productivity, “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.”
President Trump understands better than anyone in DC that tariffs are excellent not only for protecting American producers and workers, but also as the ideal form of federal revenue. So the absence of a mention for revenue goals was notable. The President has repeatedly pledged to raise hundreds of billions in new tariff revenue, including in the days since releasing the memorandum. However with the exception of Secretary-nominee Howard Lutnick, who shared similar expectations on tariff revenue during the campaign, it’s unclear to what extent the rest of his Cabinet shares Trump’s revenue tariff ambitions.
Omitting the tariff revenue goals in his memorandum could hint to insufficient enthusiasm among his aides. On the other hand, it could reflect the fact that none of the Presidential tariff powers delegated by Congress contemplated revenue raising as a goal.
SECTION 2: ADDRESSING UNFAIR & UNBALANCED TRADE
Because the United States Constitution gives the power of tariffs to Congress, and not the President, the President is limited in deploying tariffs in the various ways Congress has authorized through specific legislative delegations of tariff setting authority.
In Section 2, President Trump tells his Cabinet to immediately begin the groundwork – think Congressionally mandated homework – necessary to begin using those powers.
Section 2(a): Commerce’s lead tariff powers
Section 2(a) directs the Department of Commerce to get cracking on the ‘homework’ necessary for an invigorated use of both Section 338 of the Tariff Act of 1930, followed by Section 232 of the Trade Expansion Act of 1962.
What are Sections 338 and 232? In short, Section 338 authorizes the President to raise tariffs in response to what we might call today foreign ‘non tariff barriers’ to U.S. exports; essentially, unreasonable regulations with the effect of discriminating against foreign products. Section 338 is thus ‘outward’ looking, focusing on problems abroad. Section 232, by contrast, is ‘inward’ looking, authorizing the use of tariffs to address the national security implications of imports displacing domestic counterparts.
Understanding the contours of Section 338 and Section 232 thus informs the opening of the memo’s second section: “The Secretary of Commerce, in consultation with the Secretary of the Treasury and the United States Trade Representative, shall investigate the causes of our country’s large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits, and recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits.”
Thus, putting in the staff hours to document foreign trade restrictions enables a firmer statutory legal standing for new tariffs per Sections 338 and 232.
Section 2(b): Creation of an External Revenue Service (ERS)
As Charles Benoit, CPA Trade Counsel, has explained, the U.S. Treasury has allowed its statutory responsibility for tariff collection to completely atrophy. While no Presidential tariff power is geared toward generating tariff revenue, President Trump is unquestionably personally dedicated to the goal. His idea to refocus Treasury on tariff revenue through the creation of an ERS, presumably as a Bureau within Treasury akin to the IRS, conveys his seriousness in using tariffs as a revenue stream.
Thus Section 2(b) directs the Treasury Secretary to “recommend the best methods for designing, building, and implementing an External Revenue Service (ERS) to collect tariffs, duties, and other foreign trade-related revenues.”
Jeff Ferry, Chief Economist Emeritus, says that “Exploring the creation of an ERS shows that the Trump administration is serious about levying tariffs in a substantial way both for trade benefits and revenue income to the government. Tariffs will play a major role in enabling tax cuts and federal budget deficit reduction.”
Section 2(c) The Other Tariff Powers.
While Section 2(a) focused on Commerce’s lead powers, Section 2(c) explicitly references the gambit of Presidential tariff powers, tasking USTR with the lead. It says:
The citations in the U.S. code not only include Sections 232 and 338 discussed above, but also the following POTUS tariff powers:
Tariff threats are already goading companies to act. Samsung Electronics and LG Electronics are considering moving more home appliance production from Mexico to the U.S., Korea Economic Daily reported, adding that Samsung might increase dryer production in Newberry South Carolina and LG is looking at making some refrigerator models in Tennessee where they currently manufacture washing and drying machines.
Section 2(d): putting USMCA under review ASAP.
The USMCA comes under review next year, but Trump wants the public consultation to begin now.
Encouragingly, given that both NAFTA and USMCA have been a disaster for American agricultural producers, Section 2(d) directs USTR to “assess the impact of the USMCA on American workers, farmers, ranchers, service providers, and other businesses and make recommendations regarding the United States’ participation in the agreement.” (Emphasis added). From fruits and vegetables in the southeast to cattlemen in the west, American farmers and ranchers need relief from unlimited duty-free USMCA imports, not more market access to Canada and Mexico.
The hope provided by Section 2(d), however, stands in conflict with the repeated failed ideology in Section 2(f) below.
Section 2(e): Currency misalignment and forex advantages.
“The Secretary of the Treasury shall recommend appropriate measures to counter currency manipulation or misalignment that prevents effective balance of payments adjustments or that provides trading partners with an unfair competitive advantage in international trade, and shall identify any countries that he believes should be designated as currency manipulators.”
Many currencies are clearly misaligned against the dollar, resulting in serious dollar overvaluation as CPA’s proprietary currency misalignment monitor shows.
Section 2(f): look to trade agreement reciprocity, but what about the WTO?
Section 2(f) specifically directs USTR to “review existing United States trade agreements and sectoral trade agreements and recommend any revisions that may be necessary or appropriate to achieve or maintain the general level of reciprocal and mutually advantageous concessions with respect to free trade agreement partner countries.”
The thing is, when talking about lack of reciprocity in trade agreement concessions, there is only one agreement that stands out: the General Agreement on Tariffs and Trade (GATT), which is the mandatory trade agreement all World Trade Organization (WTO) countries must adhere to.
Every WTO country maintains a “Schedule of Concessions” to the GATT, listing maximum tariff rates across 5,000 product categories, and the United States has committed the absolute lowest maximum rates (known as ‘bound’ rates), with an average of just 3.4%.
Worryingly, the America First Trade Memorandum not only fails to acknowledge this, but Section 2(f) specifies at the end that the review is “with respect to free trade agreement partner countries”. This implies that the GATT/WTO will not be part of that review, and that the review will be limited to the fourteen agreements USTR refers to as “free trade agreements”. The majority of U.S. imports, for almost eighty years, have entered via our GATT-bound concessions, and never through our combined “free trade agreements”.
Section 2(g): more false hopes of ‘market access’ for agriculture.
While Section 2(f) is worrying, perhaps the most disappointing aspect of the America First trade memorandum is seeing American farmers and ranchers singled out for the same failed ideology of the last century, where help lies not in import relief, but in other countries lowering tariffs further. Aka, “market access”, in trade-speak.
This is crystalized with Section 2(g), especially when read in conjunction with Section 4(a) discussed below. Section 2(g) directs USTR to negotiate for more “export market access” for farmers and ranchers
Chasing export markets for agricultural goods is precisely what Henry Clay warned against 200 years ago when he invented The American System. Inevitably, it involves sacrificing one domestic producer for another producer’s export profits. And while it has always been a terrible idea, the realities of modern globalization have compounded the pernicious aspects of international trade in food due to lower nutrition content. Section 2(f) thus also runs counter to the Make America Healthy Again movement.
Earlier this month, CPA released an alarming new report, “U.S. Faces Record Agricultural Imports, Worst Trade Deficit in History,” revealing that the United States is on track to reach a staggering $39 billion agricultural trade deficit in 2024, the largest in its history. The report highlights the devastating consequences of decades of trade liberalization policies that have failed to deliver promised benefits for the majority of U.S. farmers and agricultural producers, especially smaller family farms.
“This would benefit those commodities that overproduce for the domestic market, like soybeans, corn , and wheat; but not for cattle and sheep producers who have historically underproduced for our domestic market. Opening new markets for beef has long been touted as the cure for depressed domestic prices but the benefits did not materialize for ranchers and tens of thousands of them left the industry despite market opportunities abroad.”
– Bill Bullard, CPA Board of Directors, CEO of R-Calf USA.
“Prioritizing export growth has been a harmful and slippery slope to losing domestic market share. For example, the U.S. was able to increase its trade surplus in grains and oilseeds with Mexico after NAFTA and USMCA. Since 2018, we’ve added a $3.8 billion to our grain and oilseed trade surplus with Mexico. This is the big selling point and bonus of opening export markets. However, for this export growth we’ve traded away massive amounts of domestic market share. After NAFTA and USMCA, the U.S. saw ballooning trade deficits for fruits, vegetables, meat and livestock, and other agricultural products. These worsening deficits have far outweighed the surplus gains. The picture gets even worse when you consider motor vehicles where the deficit with Mexico has worsened by $27.8 billion since 2018, or countless other manufactured products. It’s a bad deal.”
– Andrew Rechenberg, CPA economist
Section 2(h): Making trade remedies law slightly less rigged
Tariffs to counter anti-dumping, foreign subsidies, and very limited ‘safeguard’ tariffs for sudden import surges, are the three ‘allowable’ uses of tariffs per the GATT. The GATT and WTO prescribe fairly detailed rules limiting the usefulness of these three tariff “trade remedies”, and the countries dumb enough to have spent the last century confining themselves to these rules have spent incalculable energy and resources suing each other in Geneva over how they play these fiddles while their countries burn.
To be blunt: ‘toughening’ these rules is an awkward fit for a campaign built on rejecting failed free trade ideology.. Private industry should no longer feel compelled to spend millions of dollars to litigate for tariff relief under a rigged set of rules governed in Geneva, even if they’re slightly less rigged. Simply asking the President to use his sweeping tariff powers should be enough.
For this reason, Section 2(h), which seeks to make obscure aspects of these rigged rules such as ‘zeroing’ essentially less-rigged, feels like a distraction at best, or, distressingly, an ominous sign that we’ll continue to suffer under the ‘rules-based trade’ paradigm.
Or, perhaps the explanation is less profound, and simply reflects the fact that the lawyer-practioniers writing this memorandum really, really hate zeroing.
CPA chooses to believe that the fact that Section 2(h) is entirely underlined, unlike any other section, is a typo or Freudian slip of the drafter’s priorities, and not an actual assertion of emphasis.
Section 2(i): De minimis days hopefully numbered.
President Biden completely failed to deal with the de minimis catastrophe, allowing the disaster to grow exponentially to over four million small packages per day.
Hopes are high with the de minimis coalition, of which CPA is a member, that President Trump will act quickly to completely close the loophole. Indeed, the memorandum seems to acknowledge that President Trump’s trade goals are impossible so long as de minimis exists.
Encouragingly, it is the one area of the memorandum where President Trump’s focus on tariff revenue comes through:
Section 2(k): Review government procurement commitments
In Section 2(k), the WTO is finally acknowledged, but only for one of its more minor texts: the World Trade Organization Agreement on Government Procurement (GPA)
On the same day that President Trump withdrew from the World Health Organization, protectionists should lament that the WTO appears to be skating by.
Under the WTO GPA, as well as procurement obligations under many bilateral U.S. FTAs, the United States pledges – with many material exceptions – to treat imported goods as if they were domestically-produced for purposes of U.S. preferential procurement laws (namely, the Buy American Act).
The WTO GPA does have bad, material outcomes, like preventing U.S. Health and Human Resources from using its vast spending to promote domestic self-reliance on essential medicines, something President Trump promised during his campaign.
In August 2020, President Trump issued an Executive Order directing that all procurement commitments for essential medicines be withdrawn from the WTO GPA and other FTA procurement obligations, but errors in drafting by USTR enabled Europe to stall on the withdrawal in Geneva, and then President Biden cancelled the effort altogether.
Unlike in August 2020, Section 2(k) does not direct the withdrawal of any international procurement commitments. Rather it merely directs USTR to “make recommendations to ensure that such agreements are being implemented in a manner that favors domestic workers and manufacturers, not foreign nations”. Hopefully, USTR will come ot the logical conclusion that U.S. government procurement is best governed at home, and not in Geneva.
“Whether they realize it or not, the GPA is negatively impacting all domestic producers, including my company. Government contracts and subcontracts are important to support domestic industry and help it gain scale, making it more commercially competitive. It’s perverse how taxpayer-funded contracts and the WTO GPA are forcing domestic workers to compete against those in Hong Kong, India, and Moldova to win those U.S. government contracts. It’s sapping a key source of demand. The data does not support the argument that we are opening other markets for our goods by participating in the GPA. Just look at the trade deficit.”
– Zach Mottl, CPA Chairman, CEO of Atlas Tool Works, Inc.
SECTION 3: ECONOMIC & TRADE RELATIONS WITH THE PEOPLE'S REPUBLIC OF CHINA (PRC)
Section 3 of the memorandum is entirely devoted to China.
Section 3(a): This section directs USTR to review the January 2020 “Phase One” agreement with China. The top line header of this agreement was the suspension of U.S. tariffs on hundreds of billions of imports from China in exchange for China pledging to buy at least $200 billion more in U.S. goods and services over two years — in 2020 and 2021 — on top of its purchases in 2017.
Ultimately, the deal made no one happy. American producers lamented the loss tariff protection, while globalist groups asserted that China failed to make its promised purchases.
If President Trump concludes that the Phase One deal was broken, then he would be justified in restoring the suspended parts of his original tariff action, which was broken down into lists of products.
Specifically, he would presumably restore the tariffs in “List 4A” (covering 3,207 product categories worth $120B in imports as measured in 2017) back to 15% from their current 7.5%, and impose the “List 4B” tariffs (covering 538 product categories worth approximately $160B in 2017), presumably at 15% like List 4A. Unlike List 4A, the List 4B tariffs never went into effect, being suspended shortly before they would have become active.
Section 3(b): Recall that the original China action made use of the Section 301 tariff power. Under Section 301, USTR is required to undertake reviews at the four year mark. President Biden did this in May 2024, making his own modifications. In Section 4(b), President Trump directs his USTR to review this review. With this action, he could raise tariffs further than President Biden, and also revisit the tariff exclusions maintained and awarded by President Biden. President Trump campaigned on raising China tariffs to 60%.
Section 3(c): Directs USTR to look at new Section 301 actions against China, which would offer additional statutory legal footings for more tariffs against China.
Section 3(d): Incredibly, in 2025, China still enjoys Most Favored Nation (MFN) status, also known as Normal Trade Relations under U.S. law. While roughly forty percent of Chinese imports are subject to the additional Section 301 duties, the remainder enjoy the same tariff treatment the U.S. extends to all WTO countries. Laptops and cell phones from China remain duty-free.
Some courageous law makers have put forward bills to repeal China’s MFN status. In the last Congress, repealing China’s MFN status was an official bipartisan recommendation in reports published by the U.S.-China Congressional Commission as well as the U.S. House Select Committee on the Chinese Communist Party. See CPA’s guide on repealing China MFN for more information.
In Section 3(d), President Trump directs the Secretary of Commerce and USTR to assess these China MFN repeal legislative proposals. Unfortunately, despite all the recommendations, neither of the Congressional committees of jurisdiction – the U.S. House Ways & Means Committee and the U.S. Senate Finance Committee – have put forward their own legislative proposals.
SECTION 4: MORE DETAILS ON THE SECTION 232 RESPONSIBILITIES
This section offers more details for the Administration’s management of the Section 232 process.
Section 4(a), however, seems to exclude farmers and ranchers. It directs the Secretary of Commerce to “conduct a full economic and security review of the United States’ industrial and manufacturing base to assess whether it is necessary to initiate investigations to adjust imports that threaten the national security of the United States”.
It is hard not to read in a deliberate omission of farmers and ranchers, given that they were included elsewhere above.
Section 4(b): The Assistant to the President for Economic Policy is given the responsibility of reviewing and assessing the effectiveness of Section 232 tariff exclusions, exemptions, and other import adjustment measures on steel and aluminum.
As is always the case, importers spare no expense in their campaign for tariff exclusions, whether it be China 301s or the steel and aluminum 232s from the first Trump Administration. CPA recently called on President Trump to repeal Section 232 exclusions as one of his first acts.
“The steel industry is being inundated with dumped steel today. Many players’ profits have gone off a cliff as a result. Nothing on the trade side should be weakened. If anything, trade enforcement needs to be strengthened. Mexico has been in violation of the USMCA negotiated by Trump and (USTR Robert) Lighthizer when it comes to steel. I would hit them not just with the 25% Section 232 steel tariffs but increase it to 40% as a penalty. They should have those tariffs in place now.”
– Dan DiMicco, CPA Vice Chairman, Chairman Emeritus of Nucor Steel
Section 4(c) through 4(f): Direction to explore methods of tightening Chinese export controls, inbound and outbound investment, as well as policies to combat fentanyl trafficking and problems related to ‘connected cars’.
SECTION 5: APRIL 1, 2025 DUE DATE
Section 5 stipulates an April 1, 2025 due date for all of the above reports, and which Secretary is responsible for compiling various portions of the required reports.
MADE IN AMERICA.
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