Monday January, 20 2025 saw the much anticipated swearing-in of President Donald Trump for the second time. As a central element of his campaign, Trump had previously promised tariffs from Day One, however since taking office it now appears tariffs will not be imposed with immediate effect, but over the coming weeks and months (Trump has nonetheless implied that 25% tariffs may be introduced on products from Canada and Mexico as soon as February 1). Instead, the President has instructed federal agencies to compile reports on numerous trade-related items, in anticipation of imposing tariffs alongside other actions at some later date. The deadline for all but one of these reports is April 1, 2025, with the remaining report due on April 30, 2025.

The reports are aimed at examining certain trade policies and procedures, and advising the Administration on recommended actions.  The policies and procedures to be reviewed include:

  • Unfair trade practices by other countries, and appropriate US responses;
  • Implementation of the 2020 Phase One agreement with China;
  • The 4-year review of the Section 301 actions, concluded in May 2024;
  • Legislative proposals regarding the Permanent Trade Relations with China;
  • Public consultation processes for the US-Mexico-Canada Agreement (“USMCA”) in advance of the 2026 renewal deadline, as well as government agency consultations on the USMCA’s broader economic impact;
  • Policies and practices of major trading partners with respect to currency exchange, including appropriate measures to counter currency manipulation/misalignment;
  • Existing trade agreements and sectoral trade agreements, including revisions necessary to ensure reciprocity and mutually advantageous concessions;
  • Policies and regulations regarding anti-dumping and countervailing duty laws;
  • Studies on counterfeit goods and the de minimis exemption from duties for low-value imports;
  • Existing tariff actions, such as the Section 232 tariffs imposed on aluminum and steel imports in 2018 for national security reasons; and
  • Current U.S. export control regulations and other national security review mechanisms covering information and communication technology and services (“ICTS”) and other technologies.

Finally, the memorandum directs federal agencies to consider the feasibility of establishing an “External Revenue Service” to collect tariff revenue.

Key takeaways for businesses from these Day One actions include:

  • Tariffs: While the Trump Administration’s instant actions do not lead to new tariffs being imposed immediately, the memorandum demonstrates a clear and methodical effort to lay the foundations for future tariff actions and other measures. For example, the memorandum requires consideration of potential actions in response to the “national emergency” arising from “unlawful migration” and fentanyl flows into the United States from Canada, Mexico, and China.  We see this provision as a potential basis to apply the previously announced 25% universal tariffs on imports from Canada and Mexico, and 10%-60% tariffs on imports from China.  Businesses should carefully examine anticipated import activities, and investigate opportunities to reduce tariff exposure to mitigate the effects of new tariffs.
  • Export Controls, Sanctions, and Investment Screening:  The studies announced include potential changes to current export control and sanctions regimes and investment screening mechanisms, including ICTS and outbound investment.  We expect these regimes and mechanisms to become more robust over the next year or two, and it is important to continuously monitor to ensure compliance.
  • Intercompany valuations on imports: Companies should carefully consider both the transfer pricing and customs valuation implications resulting from increased costs through tariffs. Opportunities may exist to leverage the company’s transfer pricing and tax structures to optimize the customs valuation of intercompany transactions, thereby mitigating some of the impact of additional tariffs.
  • Reports and Lobbying Efforts: Over the next few months, various agencies will be engaged in preparing these reports, which will serve as the basis for any future trade-related actions. This period may serve as an opportunity for companies to engage in lobbying efforts to mitigate the potential imposition / impact of these future actions. 

Baker McKenzie has extensive experience with assisting clients navigate and mitigate additional tariffs and trade-related actions, as well as conducting reviews of intercompany valuations on imports through the Firm’s cross-functional Customs, Trade and Transfer Pricing working group. This also includes significant experience in advising companies on lobbying efforts in these areas.  We stand ready to assist as needed – please also check our Import and Trade Remedies Blog for regular updates and insight.”

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