Following days of speculation, President Donald Trump announced on February 13, 2025, a new tariff policy outlined in a Presidential Memorandum entitled the “Fair and Reciprocal Plan” (Plan). The Memorandum directs key trade and economic U.S. government agencies to take action against trading partners that impose tariffs, taxes, non-tariff barriers (NTBs), or other restrictions on U.S. goods and services. At this time, no new tariffs have been implemented.
This policy directive follows the America First Trade Policy Memorandum issued on January 20, 2025 (discussed in our post here), which required government-wide review of trade policies with agency reports due to the President in April 2025. Following submission of the reports, under the Memorandum, the Secretary of Commerce and the U.S. Trade Representative (USTR)—in consultation with the Treasury Department, Department of Homeland Security and White House economic policy advisers—will initiate investigations into harm to the United States from non-reciprocal trade agreements, likely under authorities including section 301 of the Trade Act of 1974 and section 232 of the Trade Adjustment Act of 1962. These investigations will lead to reports detailing proposed remedies, which are expected to include new tariffs designed to counteract “unfair” or non-reciprocal practices and barriers of each trading partner.
Scope
While the Trump administration has not detailed specific tariff rates or affected countries, today’s memorandum signals a broad, aggressive approach to rebalancing trade relationships. The Plan directs the USTR and the Department of Commerce to evaluate and implement reciprocal tariffs on imports from countries that impose barriers to U.S. exports. These measures could impact a wide range of sectors, including manufacturing, agriculture, and technology. The White House Fact Sheet or the Plan provides the following examples, among others, of trading partners who do not apply reciprocal tariff treatment for U.S. exports:
- The U.S. applies a 2.5% tariff rate on imported cars, whereas the European Union (EU) applies a 10% tariff rate;
- The U.S. tariff on ethanol is 2.5%, whereas Brazil has an 18% tariff rate for U.S. ethanol imports; and
- The U.S. average tariff applied to countries with Most Favored Nation (MFN) status is 5%, whereas India applies 38%, on average, to MFN countries.
President Trump is invoking broad presidential trade powers, including Section 301 of the Trade Act of 1974, which authorizes the U.S. Trade Representative to impose tariffs in response to unfair trade practices.
When Do the Tariffs Take Effect?
Currently, the Memorandum does not provide an effective date for reciprocal tariffs, nor does it provide specifics regarding the scope of countries or products to be included. The Memorandum initiates a 180-day review period, during which the Director of the Office of Management and Budget will assess the economic impact of the Plan on the federal government, and the impact of information collection requests on the general public. That said, the Memorandum does not rule out the possibility of certain tariff actions being announced sooner, particularly if the Administration identifies immediate concerns with certain industries or trading partners.
As discussed above, the Memorandum indicates that the Secretary of Commerce and USTR—in consultation with the Treasury Department, Department of Homeland Security and White House economic team—are required to initiate “all necessary actions to investigate the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners” after submission of the various agency reports due under the America First Trade Policy Memorandum. As these reports are due in April 2025, based on the wording of the Memorandum, it seems that no action will be taken based on this Memorandum before then.
Potential Targets & Methodologies
Although the Memorandum does not name specific countries, it signals potential tariffs against trading partners with high import duties, value-added taxes (VATs), subsidies, non-tariff barriers (NTBs) or regulatory barriers on U.S. goods. The EU, India, Japan and South Korea are potential targets due to long-standing trade imbalances and restrictive market policies in key industries such as agriculture, automotive and technology.
U.S. trade law and the Department of Commerce already provide a variety of mechanisms for redressing the adverse impact of foreign government subsidies and NTBs. For example, the International Trade Administration (ITA) plays a crucial role in understanding the impact of NTBs and VATs, and has dedicated offices responsible for monitoring foreign regulatory practices and helping domestic industry resolve other countries’ alleged trade barriers. ITA also administers the countervailing duty (CVD) laws, which allow domestic industry and labor to seek relief from unfair government subsidies. The Memorandum indicates the Trump administration will also consider such foreign government conduct in the context of its broader reciprocal tariff strategy under alternative legal authorities.
What’s Next?
Today’s action follows a busy period for tariff developments. On February 1, 2025, President Trump announced new tariffs: 10% on energy imports from Canada, 25% on all other imports from Canada, 25% on all imports from Mexico, and 10% on all imports from China. The U.S. agreed to a 30-day pause for Mexico and Canada, but the China tariffs took effect on February 4. On February 10, President Trump also reinstated and expanded Section 232 tariffs, imposing a 25% duty on all steel and aluminum imports, revoking exemptions for Canada and Mexico.
With a formal investigation underway, businesses should consider reviewing the supply chains and assessing potential risks and costs associated with potential tariffs. More details on specific tariff actions are expected as agencies complete their reviews.
Impacted countries are considering and may react with retaliatory measures. The EU, in particular, has strongly condemned the Plan, warning that it would take proportionate countermeasures should the U.S. proceed with new tariffs. The European automotive sector, which faces a 10% EU tariff on U.S. imports compared to the U.S. 2.5% tariff on EU cars, is expected to be a primary target. While the EU could, in principle, lower its auto tariffs to the U.S. level, doing so would require extending the same reduced rate to all non-preferential WTO trading partners under MFN rules. Instead, the EU is considering alternative responses, including imposing counter-tariffs and other trade defense measures under the EU Trade Enforcement Regulation and/or the EU Anti-Coercion Instrument. Beyond trade measures, EU officials are also considering a broader geopolitical response, including increased purchases of U.S. liquefied natural gas and defense equipment, as well as closer alignment with Washington’s China trade policies in an effort to de-escalate tensions.
We will continue monitoring developments and provide updates as new trade measures are announced.
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