NEWS
TRUMP ADMINISTRATION TARIFF POLICY
Jan 17, 2025
LEGAL ALERT
Legal tools and projected scenarios.
Although Congress holds constitutional authority to regulate and impose tariffs, this power has been delegated to the president through various laws. During his first term, Trump used traditional mechanisms such as:
Section 301 (China): Investigation initiated in April 2017; tariffs applied in July 2018.
Section 232 (Aluminum and Steel): Investigation initiated in April 2017; tariffs implemented in March 2018.
By 2025, Trump is expected to utilize more immediate tools, such as Section 203 of the International Emergency Economic Powers Act or Section 338 of the Tariff Act of 1930, which allow the imposition of tariffs without lengthy investigation processes. This could result in a general tariff of 10% on all imports, impacting key trade partners and other nations.
Changes in Trump’s perspective on tariffs.
Initially, tariffs were used by Trump as a tool to negotiate better trade terms. However, his current view emphasizes tariffs as a direct benefit to the U.S. economy, promoting reindustrialization and protecting domestic production. His objectives include increasing the base tariff rate, currently close to 2%.
Strategies to mitigate the effects of tariffs.
Companies can consider the following measures to reduce the impact of additional tariffs:
1. Strengthen lobbying and government relations strategies to influence trade policy implementation and defend their interests in multilateral forums. Staying updated on potential WTO disputes could also open opportunities to counter certain tariff measures through international mechanisms.
2. Implement continuous monitoring systems for trade and customs policies to anticipate regulatory changes. This includes establishing internal teams or hiring consultants to analyze real-time political and economic trends, as well as investing in technology and data analytics to optimize supply chains and respond quickly to new tariffs or restrictions.
3. Develop strategic alliances with trade partners and industry associations to represent shared interests against tariff policies. Exploring alternatives like regional free trade agreements (e.g., USMCA, CPTPP) can also provide access to markets with lower trade barriers, diversifying risk and leveraging competitive advantages.
4. Conduct financial simulations of potential tariff scenarios to assess impacts on costs, prices, and profit margins. These simulations can guide informed decisions, such as price adjustments, contract renegotiations, or market strategy redesigns. Prioritizing internal training on international trade and tariff regulation will also prepare teams to address operational and legal challenges.
5. Consider relocating part of production to the U.S. or countries with advantageous trade agreements to mitigate tariff impacts and align with Trump's potential reindustrialization policies. Explore financing mechanisms to offset the initial costs of such transitions to remain competitive.
6. Anticipate shipments: Import products before the implementation of new tariffs, as these are typically applied prospectively.
7. Include specific contractual clauses: Add provisions to allocate risks of tariff changes, such as tailored force majeure clauses.
8. Utilize Foreign Trade Zones (FTZs): Import goods duty-free until they enter the domestic market or are re-exported without additional costs.
9. Optimize customs planning: Declare adjusted values using the "first sale" method to reduce the taxable base while ensuring compliance with applicable laws.
10. Diversify suppliers: Explore supply chains in countries not subject to additional tariffs to minimize exposure to specific tariffs.
11. Request product exclusions: Participate in exclusion processes, if available, to justify exemptions for certain goods unavailable in the local market.
12. Foster innovation in the supply chain through automation and digitalization of logistical and customs processes. This not only reduces costs but also ensures compliance in a more demanding trade environment.
13. Prioritize sustainability in operations, as future trade policies may include environmental criteria as part of tariff restrictions or benefits.
14. Establish effective communication scenarios with key stakeholders, including investors, clients, and employees, to better manage uncertainty and strengthen confidence in the company’s ability to adapt to changing trade environments.
15. Collaborate with legal and international trade experts to develop defense and appeal strategies against sanctions or tariffs deemed arbitrary or incompatible with international agreements. These actions can provide a more robust mitigation path in complex scenarios.
We are available to support our clients in implementing the necessary measures to mitigate potential tariffs that may arise in this challenging trade context. Our team of experts offers comprehensive advice on customs planning, supply chain optimization, and legal strategies to ensure businesses are prepared to tackle these challenges with practical and effective solutions.
Jair Bravo Gutiérrez
Socio Administrador / Managing Partner