| THOMPSON COBURN TRADE ALERT – IMPORTS | |
| HEADLINE | Reciprocal Trade and Tariff Memorandum |
| DATE OF ACTION | February 13 2025 |
| AGENCY | Trump Administration; The Secretaries of the Treasury, Commerce, and Homeland Security; The Director of the Office of Management and Budget; The United States Trade Representative (“USTR”); The Assistant to the President for Economic Policy; The Senior Counsel to the President for Trade and Manufacturing. |
| EFFECTIVE DATE | Implementation undetermined. Unlikely to be before 1 April 2025. |
| BACKGROUND | The Presidential Memorandum of January 20, 2025 (America First Trade Policy Memorandum) outlined the Administration’s opposition to “unfair practices and limited access to foreign markets.” Reciprocal Trade and Tariffs Memorandum (hereafter, the “Memorandum”) seeks to address the “lack of reciprocity” in tariff rates that the Administration says contributes to these issues and the annual trade deficit. |
| DETAILS | The Memorandum does not implement reciprocal tariffs; rather, it is a policy statement and instruction for various agencies to investigate and report on “non-reciprocal” trade measures other countries employ towards the United States. These reports, which do not have a specific due date (other than a fiscal impact assessment from the Office of Management and Budget, which is due Tuesday, August 12), are not expected for months and will assumably propose remedies for tariff implementation. The Memorandum introduces the “Fair and Reciprocal Plan” to counter non-reciprocal trading arrangements by “determining the equivalent of a reciprocal tariff with respect to each foreign trading partner.” To this end, the Secretary of Commerce and USTR are instructed to investigate “non-reciprocal trade arrangements” after agency reports are due (1 April 2025) and submit a report detailing proposed remedies. The Memorandum includes within the scope of non-reciprocal trading arrangements “unfair, discriminatory, or extraterritorial taxes, . . . include value-added tax.” The Memorandum leaves considerable questions unanswered, including the full scope of the measures and their basis in statutory authority; the timing of the investigations, reports, and tariff actions; and the practical manner in which the implementation will occur. Delayed timing leaves opportunities for nations to negotiate, but companies should take steps now to analyze potential exposure and mitigate risk of sudden price increases. |
| BASIS | None provided |
| HTS/ PRODUCTS | To be determined |
| COUNTRY | To be determined |
| CITE | Reciprocal Trade and Tariffs Memorandum Fact Sheet: President Donald J. Trump Announces “Fair and Reciprocal Plan” on Trade – The White House |
Policy Specifics
Section 2 of the Memorandum states that the policy of the United States is to reduce its annual trade deficit and address “other unfair and unbalanced aspects of our trade with foreign trading partners.” To this end, the “Fair and Reciprocal Plan” aims to determine “the equivalent of a reciprocal tariff with respect to each foreign trading partner.” The plan considers the following to be “non-reciprocal” aspects of a trade relationship:
(a) tariffs imposed on U.S. products;
(b) unfair, discriminatory, or extraterritorial taxes imposed by U.S. trading partners on United States businesses, workers, and consumers, including a value-added tax;
(c) costs to U.S. businesses, workers, and consumers arising from nontariff barriers or measures and unfair or harmful acts, policies, or practices, including subsidies, and burdensome regulatory requirements on U.S. businesses operating in other countries;
(d) policies and practices that cause exchange rates to deviate from their market value, to the detriment of Americans; wage suppression; and other mercantilist policies that make U.S. businesses and workers less competitive; and
(e) 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.
Section 3 instructs the Secretary of Commerce and USTR to investigate “the harm to the U.S. from any non-reciprocal trade arrangements adopted by any trading partners” after agency reports under the America First Trade Policy Memorandum are due (i.e., 1 April 2025). After their investigations, they will submit a report “detailing proposed remedies in pursuit of reciprocal trade relations with each trading partner.”
Additionally, the Memorandum instructs the Director of the Office of Management and Budget to “assess all fiscal impacts on the Federal Government and the impacts of any information collection requests on the public,” and to provide a written assessment to the President by 12 August 2025.
Unanswered Questions
The Memorandum leaves considerable questions unanswered.
- Scope and authority questions. What is the full array of trade measures that will be considered for implementation? What authorities will be used to implement any response measures? Do these authorities require additional investigations or reports? Will the President need new authority from Congress to implement any measures, or with the implementation of reciprocal tariffs require an act of Congress?
- Timing questions. How long will the Secretary of Commerce and USTR need to complete their investigations after the agency reports are submitted on April 1? Weeks? Months? Years? How long after these investigations are complete will implementation take? Does the OMB fiscal impact assessment due 12 August mean that implementation cannot occur before this date?
- Implementation questions. What HTS heading or subheading level (i.e., 6-digit, 8-digit, etc.), which comprises tens of thousands of individual classifications and rates, will be the basis for the reciprocal analysis or tariff implementation? Will the reciprocal rates be made unique for each country against which action is taken? Will the U.S. rates adjust if the foreign rates adjusts (up or down)? What are the “collection requests on the public” that are mentioned, and will there be a process to challenge these comments or request exemptions?
What To Do Now
Delayed timing could leave opportunities for nations to negotiate and reduce the impact of these measures, but the bottom line is it is currently unclear how and when these tariffs will be implemented, limiting the ability of industry to adapt. A self-assessment of exposure by country and tariff classification using all available data (i.e., ACE data, internal sales data, etc.) and access to non-U.S. tariff schedules to begin to measure the possible impact of the Reciprocal Trade and Tariff Memorandum. Additional measures include:
- Set up news alerts specific to your merchandise or countries of interest.
- Don’t make decisions too quickly…some of this is likely a negotiation tactic and political theater, similar to the 25% tariffs on Mexico and Canada which were postponed.
- Negotiate appropriate contractual and sales terms to mitigate the impact of sudden and significant costs associated with tariff implementation.