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The New England Council would like to thank WilmerHale for bringing together a distinguished panel of experts to provide an update on President Trump’s trade and tariff agenda:
David Ross - Chair, International Trade, Investment and Market Access Practice Group and Former Senate Finance Committee Trade Counsel;
Neena Shenai - Partner and Former House Ways and Means Committee Trade Counsel;
Rhonda Schmidtlein, Partner in WilmerHale’s Trade Practice, former Chair of the U.S. International Trade Commission (ITC); and
Eric Lesser - Senior Counsel and Former White House Economic Official.
Synopsis
The meeting focused on the topic of trade policy uncertainty and the shift in U.S. trade policy that has taken place in just the past eight months. The presenters built upon their discussion with the New England Council from this past February where the issues involving the President’s Executive Orders and unilateral trade actions had brought uncertainty to the marketplace and challenges for companies. The conversation last week shed light on the “real world” implications that have emerged as a result of the President’s trade actions and potential outcomes associated with legal challenges and the use of trade as a policy objective.
Overview
On Monday, September 15, the New England Council heard from four experts on President Trump’s trade and tariff agenda in a follow-up discussion from our February meeting. The Council is grateful for the significant participation of our members in this event and appreciates Eric for taking charge of and directing the overall discussion.
David began the conversation by updating members on the President’s relying on the International Emergency Economic Powers Act (IEEPA) as the authority for tariffs on nations like China, Canada and Mexico related to concerns over fentanyl and illegal immigration. The President has since expanded the use of IEEPA – most notably in April – to combat persistent trade deficits and folded in other statutory authorities to pursue his trade agenda. The President has also paused various tariff applications and has negotiated trade “deals” with various nations in exchange for lower tariffs. Early last month, the IEEPA reciprocal tariffs specific to certain nations took effect. However, a federal appeals court ruled later in the month that the President didn’t have the authority under IEEPA and that decision has been bumped-up for review at the Supreme Court in early November. David added that their decision date is unclear, but what would be more unclear is what happens to the $200 billion in tariff revenue that’s been collected if the Supreme Court rules against the President.
Neena discussed other trade options the President is using, notably through Section 232 investigations that deal with particular imports and their threat to national security. The Trump Administration has initiated ten such investigations thus far – more than the Biden White House did in four years – ranging from lumber to pharmaceuticals and semiconductors to aircraft. Neena ran through the investigative process, noting that after a lengthy examination and reporting period, if the Department of Commerce concludes that a certain product threatens national security, then the President may impose trade remedies such as tariffs and quotas. But, she added, the Trump White House has considerably shortened the investigative process down to several months. She pointed to one important caveat, stating that 232 investigations also cover derivatives. Her example was semiconductors, where a tariff could cover the semiconductor product as well as the electronics in which they are found. As such, the Administration is looking to use Section232 as a means to grow domestic manufacturing and impact supply chains.
Rhonda pointed out that the “trade deal” format of the past is not likely to be adhered to in this Administration, where lengthy legalese-filled documents submitted to Congress are now replaced by a few pages in an Executive Order. She added that Japan and the European Union have signed “centerpiece” deals where hundreds of billions of dollars of new investments in America are anticipated in everything from agricultural to energy products and commercial aircraft to military equipment. She also pointed out certain details of the deals and investments under this new structure that have been agreed upon by South Korea and the United Kingdom. While noting that a China deal has not occurred, and facing a November deadline, the White House has kept in place a pause on levying tariffs as negotiations continue. She added that the White House is actively pursuing agreements with the Philippines, Indonesia, Vietnam, Cambodia, and Thailand. She noted further that the main focus of these trade deals tends to be transactional in nature, with an eye towards leverage and reciprocity and not on lowering tariff barriers and harmonizing regulations, and that the trend is not likely to end anytime soon.
Eric asked for key takeaways from the presenters, and they indicated that the old way of doing things with respect to trade are off the table; that trade is tied-in with national security policy. Further, this may not be just for the Trump Administration, but could extend well beyond as America looks to extend its economic power. For businesses, risk assessment and compliance infrastructure will be key.
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