Update: On May 28, the U.S. Court of International Trade ruled that the Trump administration’s April 2 executive order on tariffs are illegal, stating that the tariffs exceeded his power under the International Economic Emergency Powers Act (IEEPA). The court ruling also struck down separate tariffs Trump imposed on China, Canada, and Mexico, where the administration argued fentanyl trafficking as a justification to invoke the IEEPA. The ruling does not impact tariffs Trump has issued on steel, aluminum, and cars.
In arguments for this case, an attorney for the Trump administration said that this decision would “would kneecap the president on the world stage, cripple his ability to negotiate trade deals, imperil the government’s ability to respond to these and future national emergencies.” However, senior White House officials indicated that they attend to appeal the ruling, and would proceed with ongoing trade negotiations with the assumption that they will be successful on appeal and be able to continue imposing the tariffs.
On May 29, a second federal court issued a preliminary injunction blocking the Trump administration from collecting tariffs on the two plaintiffs who brought the case. The U.S. District Court judge issuing the ruling cited that the IEEPA does not give Trump the authority to impose tariffs outlined in the April 2 executive order.
Timeline:
April 2, 2025: Trump issued an executive order declaring a national economic emergency and levying tariffs on goods imports from virtually all U.S. trading partners, at a minimum of 10% but significantly higher for major trading partners.
April 5, 2025: Tariffs go into effect.
April 9, 2025: Trump lowers lowers most of the announced tariffs to 10 percent for 90 days, and increases tariffs on goods from China from 104 percent to 145 percent, including the 20 percent tariff announced in February. The announcement came after several days of alarm and plunging performance in the stock market and instability in the typically more-stable bond market. The original tariff announcement has also severely disrupted U.S. economic and diplomatic relations with other countries, many of which struggled to get responses from the White House on negotiations.
May 9, 2025: President Trump and the government of the United Kingdom announced their intent to continue talks with the goal of agreeing to a new bilateral trade agreement, which would include rolling back some of the specific tariffs imposed on steel, aluminum, and cars produced in the U.K. in exchange for greater market access for U.S. agribusiness and tax and regulatory concessions to U.S. Big Tech companies. The announcement implies that the the 10% tariff President Trump placed on British imports will remain and that a quota of 100,000 cars would see tariffs reduced from 25% to this 10% baseline, while UK-produced steel and Rolls Royce jet engines would see tariffs reduced from 25% to zero.
The initial contours of this U.K. agreement indicate the difficulty in using this approach to advance a coherent strategy to rebalance U.S. trade relationships to support domestic manufacturing. If the Trump administration continues down this path, presumably, we would need to expect announcements in the near-term of nearly 90 individual “trade deals” with each major U.S. trading partner. This strategy represents a step backwards from the closed-door approach to negotiating trade agreements for special interests that has led to our current broken trading system. The Trump administration is side-stepping even the limited transparency and public accountability measures for formulating U.S. trade negotiating objectives, creating opportunities for self-dealing, conflicts of interest, and corruption.
Ad hoc executive agreements like this do not carry the force of law of trade agreements ratified by Congress and could be reversed at the end of Trump’s presidential term, or sooner if the president has a change of heart. As such, uncertainty about the durability of such “deals” will leave doubts among businesses, investors, workers, and consumers desiring predictability to plan for their futures.
On April 2, 2025, President Trump issued an executive order titled, “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits.” The order declares a national economic emergency over large and sustained U.S. trade deficits—the difference between how much the United States sells in exports to the rest of the world and how much it buys in imports. Invoking a variety of emergency legal authorities, the order invokes significant taxes on goods that Americans purchase from abroad, also called tariffs.
While the word “reciprocal” might imply these tariffs are meant to match in some way trade barriers to U.S. exports, the actual calculation of each country-specific tariff has no relation at all to genuine trade barriers. For each country, the “reciprocal tariff rate” is calculated as one-half multiplied by the bilateral trade deficit the United States runs with the country divided by the value of U.S. imports from that country. There is no information at all about legal or regulatory barriers or tariffs on U.S. exports that is reflected in this formula – it is functionally arbitrary in setting the reciprocal tariff levels.
Impact:
In 2024 the average effective tariff rate on goods entering the United States was less than 3%. The “reciprocal” tariffs will raise it to just under 19%. Tariffs will now cover functionally all goods imports into the United States – over $3 trillion. This level of tariffs will raise taxes on U.S. households by roughly $450 billion and will see a sharp reduction in both imports and exports.
Tariffs can be a useful tool in industrial policy for well-defined strategic goals, but broad-based tariffs that significantly raise the average effective tariff rate in the United States are unwise. Without a strategic plan, and applied broadly across all sectors, these tariffs will not provide a meaningful boost to U.S. manufacturing.