Trump puts next building blocks of tariff agenda in place

The next major swath of the Trump tariff agenda became clearer in late July and early August, with numerous executive orders increasing the cost to import products to the U.S. from most countries and additional ad valorem tax hikes on copper-based products. See our Tariff Update for a detailed overview of the White House’s Aug. 1-related announcements.  

The result of the new duties is the highest average effective tariff rate since the first half of the 20^th century, representing the largest tax increase (as a percentage of GDP) in decades. Import tax rates for goods from major U.S. trade partners such as the European Union, Canada, Japan, South Korea and India increased on Aug. 1 and Aug. 7, and tariffs for copper components and products were raised to 50%. Meanwhile, President Donald Trump touted trade agreements with some of those countries, but no official text of the agreements has been released, and foreign officials have disputed headline announcements from the White House, such as investment and purchase commitments in the hundreds of billions of dollars. So far, the main agreement appears to be one of non-aggression over the increased trade barriers to foreign products, as the EU and others have backed down from threatened retaliatory action. In 2020, the first Trump administration announced a similar type of agreement to end Trump’s first trade war with China, de-escalating some import tariffs and touting eye-popping Chinese purchase commitments; however, China did not ultimately adhere to the deal.

In a separate but related executive order issued on Aug. 6, Trump announced so-called secondary tariffs on Indian imports due to India’s continued purchase of Russian oil. This order, which is part of an effort to increase pressure on Russia to end its war on Ukraine, will add 25% tariffs to the already-increased baseline rate of 25% on Indian imports to the U.S. established by the broader July 31 order. While the secondary tariffs also could be applied to China, Turkey and other countries that purchase Russian oil, they have been imposed only on Indian products so far. The secondary tariffs are set to take effect on products from India that enter the U.S. or are withdrawn from a warehouse beginning Aug. 27, except for goods already in transit before 12:01 a.m. on that date and imported or withdrawn from a warehouse in the U.S. before Sept. 17. 

Trump said in comments to reporters on Aug. 6 that he plans to impose a 100% tariff on semiconductors, with exemptions for firms building manufacturing facilities in the U.S. or committing to do so. It is unclear how chips that enter the U.S. as part of a finished product will be treated, but the president said the official announcement of this policy will be made soon. Separately, there is an ongoing Section 232 trade investigation into the national security implications of imported semiconductors, a crucial component in electronics.

The president also has committed to rolling out pharmaceutical tariffs in the near term and said those would be “initially small” but would rise to 150% within 18 months and then to 250%, to incentivize U.S. production. The administration has ongoing investigations into a swath of other products, including critical minerals, timber and lumber, with additional tariffs on those and derivative items expected later this year.

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