November 2024 Volume 6

TRUMP II: TARIFFS ON “DAY ONE”? By Omar S. Nashashibi WASHINGTON UPDATE

T he following numbers are not area codes: 122, 201, 232, 301, 338, 421. These are different sections of trade laws that President-elect Donald Trump could use to impose tariffs and import restrictions after he takes office on January 20, 2025. U.S. manufacturers, their customers, and overseas competitors should prepare for a second Trump administration that is expected to move much more swiftly than the first. Candidate Trump famously called the tariff the “most beautiful word” in the dictionary, and we may hear him use it often once he occupies the Oval Office. In his first term, roughly eleven months passed between the time President Trump announced tariffs on China and when they actually took effect. This delay was largely a function of a first-term president who had not made plans to govern, should he win the 2016 election. This time around, the institutional knowledge is in place, an understanding of the process is clear, and the sense that he will move on "Day One" is resonating throughout Washington. Unlike tax policy, President elect Trump can move virtually unimpeded on tariffs, without the burden of congressional oversight and with little opposition in the courts, which often cite the power Congress ceded to the president over trade policy since the 1930s. Unlike the first Trump administration, sources indicate that the president-elect increasingly views tariffs less as leverage in negotiations and more as a policy tool in and of themselves. Tariffs, as a central element of an industrial policy, would embed this trade tool into virtually every aspect of manufacturing, from inputs to final assembly.

Using tariffs as a strategic tool—not as a mechanism to alter supply chains but to boost domestic industry—would mark a significant shift from the original intent of tariffs. It is clear that under a second Trump administration, all supply lines will now go through Washington, D.C. Returning to the “area codes” of tax law, discussions in Washington over the China tariffs currently focus on whether President-elect Trump must conduct a new Section 301 investigation to expand or increase tariffs on Chinese imports. Many believe that since the U.S. government has already concluded a Section 301 investigation into imports from China, it can simply proceed with raising tariff rates, and possibly expanding the scope of goods covered. Forgoing a new investigation would allow for quicker action without having to seek public input, a process that can take months. The Forging Industry Association (FIA) has long contended that a 25 percent tariff on imported Chinese forgings is woefully insufficient. FIA members regularly report a price discrepancy of 40-70 percent between the U.S. and China, as most, if not all, forgings from China are subsidized by the Chinese Communist Party-run government. The FIA will work with the incoming Trump administration, as we have with the current White House, to address the shipment of underpriced and subsidized forgings into the U.S., as well as around the world, originating from or subsidized by the Chinese government. Under U.S. trade and administrative procedural rules, the federal government often must undergo a notice-and-comment period to solicit public input prior to imposing new tariffs. This is a step

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FIA MAGAZINE | NOVEMBER 2024