A second Donald Trump presidency ushers in a moment in international trade without precedent…other than the first Trump presidency. It is often difficult to predict how a new administration will act, but in this case, the “new” president has previously shown that he does not always conform to the typical expectations of the office, particularly with respect to international trade. Below we outline a few initial impressions on the potential impacts the Trump presidency will have on global relationships and discuss how you can prepare for the new administration.
International Trade Policy
We expect the second Trump Administration to continue and expand the isolationist and protectionist policies of the first Trump Administration under the “America First” banner. This includes a proposed tariff of 10% to 20% on goods from all countries and a proposed 60% tariff on Chinese-origin goods. While some may write off these propositions as unrealistic, many commenters had similar views leading up to the imposition of the 25% tariff on hundreds of billions of dollars of Chinese-origin goods that took place under the first Trump Administration. To that end, there is a distinct possibility that Trump will implement, or at least threaten as a negotiating tactic, a tariff on most countries and further increase tariffs on China. A universal tariff would likely lead to retaliation from trade partners, including allied nations. In addition, a universal tariff will also face legal challenges in the U.S. federal court system.
Another key point to consider is how the new administration may impact existing trade agreements, or the potential development of new agreements, between the U.S. and its foreign allies. Notably, the US-Mexico-Canada Agreement (“USMCA”) will be up for review in 2026. The USMCA took effect in 2020 under the first Trump Administration and incorporated old provisions of the North American Free Trade Agreement (“NAFTA”) while also introducing new measures related to tariff incentives for the vehicle manufacturing industry in North America, labor rights and protections, and benefits for the digital and technology industries. During the 2026 review, the Trump Administration is more likely to participate in “hardball” negotiation tactics that may not have been expected under a Harris presidency. With respect to the USMCA and any additional trade agreements that may be negotiated under the Trump Administration, we can generally expect less focus on environmental protections, while U.S. labor protections are likely to remain a focus.
China Policy
The United States will continue to pursue an aggressive approach toward China. Under Trump, we expect a more volatile relationship between the U.S. and China than experienced under the Biden Administration. As discussed above, Trump has proposed increasing the tariff rate for Chinese-origin goods to 60%. If this proposition is carried out, the business relationship between the U.S. and China (at least with respect to the trade in goods) will almost certainly cease. The tag-along effects of such a policy could be immense, including increased potential for retaliatory tariffs and, some argue, the risk of more aggressive action by China towards Taiwan.
Similarly, when it comes to the export control portion of the ongoing “trade war,” we expect continued use of targeted export controls related to a variety of critical technologies, including semiconductors and quantum computing, among others. We can also expect continued enforcement against Chinese companies engaged in illicit transshipment of goods to Russia to evade sanctions and export controls. Economic sanctions specifically targeting China, however, would likely only be a tool of last resort (for example, if China invades Taiwan).
National Security
In addition to the China policy outlined above, the incoming Trump Administration will also handle the war in Ukraine much differently than the Biden Administration or a Harris Administration. Trump has promised to end the war in Ukraine “in 24 hours.” Although the exact policy is unclear, many have speculated that Trump will cease providing Ukraine with U.S. weapons and aid and will instead seek to broker a deal requiring Ukraine to cede territory to Russia.
Trump’s more isolationist approach to national security, especially in relation to the Ukraine war, may strain relationships with European allies, particularly if paired with increased tariff action. However, the current Russian sanctions regime may not be so easily dismantled. For example, 2017’s Countering America’s Adversaries Through Sanctions Act (“CAATSA”) limits the president’s ability to remove certain sanctions programs, including sanctions on Russia. But the Trump Administration may focus enforcement resources on other targets, particularly China.
Similarly, Trump has stated that Israel needs to “get it over with” regarding the conflict against Hamas in Gaza. He added, “I’m not sure that I’m loving the way they’re doing it, because you’ve got to have victory. You have to have a victory, and it’s taking a long time.” Trump’s specific policy in relation to Israel’s ongoing military actions is unclear, but he has positioned himself as a strong supporter of Israel. How Trump will reconcile these two positions remains to be seen.
Regardless of the incoming administration, the United States will likely continue its recent uptick in enforcement of the Committee on Foreign Investment in the U.S. (“CFIUS”) regulations, which relate to national security reviews of foreign investments. In addition, the Trump Administration will be tasked with overseeing the new outbound investment regulations, which go into effect on January 2, 2025.
How to Prepare
The second Trump Administration will constitute a changing of the guard from the Biden Administration, likely leading to some drastic shifts in international trade and national security policy. Some tips to prepare for the coming Trump Administration:
- Review your supply chain to determine whether Chinese inputs can be sourced elsewhere. Whether or not a tariff as high as 60% is implemented, doing business with China will not get any easier, and it may become nearly impossible. Plan now because the changes could come quickly.
- Prepare for continued and increased enforcement of all laws and regulations related to China, from new outbound investment rules to ongoing export controls and customs restrictions.
- Advanced due diligence will continue to rule the day. Even with the uncertainty regarding the fate of sanctions and export controls on Russia, the regulatory enforcement agencies are working together more than ever before, and companies must continue to improve due diligence practices to prevent inadvertently violating the strict liability export control and sanctions regimes.
The changing of a presidential administration is a good time to take stock of your understanding of and compliance with international trade and national security laws and regulations. The incoming Trump Administration may lead to tariff chaos to an even greater extent than his first term.
