Trump’s Tariffs Set to Shake Global Trade: Key Questions Ahead of Monday’s Rollout
As President-elect Donald Trump prepares to take office, the global economy braces for impact. Trump has promised sweeping trade actions starting Monday, with potential tariffs that could reshape international commerce. With three-quarters of Canada’s exports heading to the U.S., few countries face higher stakes.
Here are five key questions about Trump’s tariff plans and what they could mean:
1. What Legal Tools Will Trump Use?
Trump is expected to draw on a variety of U.S. trade laws to impose tariffs. These include:
- Section 232 of the 1962 Trade Expansion Act, which allows tariffs on national security grounds, previously used for steel and aluminum.
- Section 301 of the 1974 Trade Act, which targets unfair trade practices, most notably with China.
- Section 122 of the 1974 Trade Act, permitting tariffs to alleviate trade imbalances for up to 150 days.
- The 1977 International Emergency Economic Powers Act (IEEPA), which could enable tariffs in a declared national emergency.
The IEEPA, though untested for tariffs, offers a fast route, particularly if Trump declares a “broken border” as a national emergency.
2. How Big Will the Tariffs Be?
Trump’s tariff threats have ranged widely—from 10% to 25% on all imports, and up to 1,000% on specific goods like automobiles. The latest proposal targets a 25% levy on imports from Canada and Mexico, a move experts warn could trigger a recession if broadly applied.
Even short-lived tariffs on Canada could have long-term consequences, shifting investments and halting production decisions. Companies like Honda have already hinted at potential production cutbacks in Canada.
3. How Quickly Will the Tariffs Roll Out?
Trump’s team is reportedly considering a gradual rollout, starting with modest tariffs and escalating over time. This strategy could test market reactions while using tariffs as leverage in negotiations.
Initial actions might include tariffs on China and announcements of investigations under sections 232 or 301. A gradual approach may also align with Trump’s congressional allies, who aim to pass a marquee tax-cut bill later this year. Tariff revenues could play a role in that process.
4. What Are Trump’s Goals?
Trump’s tariff strategy appears to have three objectives:
- Combatting unfair trade practices, especially with countries like China.
- Generating federal revenue to support the budget.
- Negotiation leverage, using tariffs as a tool to secure concessions on issues like migration, organized crime, and drug trafficking.
Canada has already announced measures to address border security and fentanyl trafficking in response to Trump’s threats, underscoring the effectiveness of tariffs as a bargaining tool.
5. What Could Stop Trump?
Trade experts agree that legal challenges are unlikely to stop Trump’s tariffs in the short term. Courts have historically deferred to presidential authority on national security and trade matters.
The stock market, however, may act as a deterrent. A sudden crash or negative headlines about rising prices—like skyrocketing guacamole costs before the Super Bowl—could pressure Trump to scale back his plans.
If Trump proceeds aggressively, lawsuits will undoubtedly follow. But as trade lawyer Scott Lincicome warns, the damage may already be done by the time courts intervene.
Monday’s rollout will mark the first step in Trump’s broader trade strategy, setting the tone for his presidency. Whether gradual or sweeping, these actions will reverberate across global markets, with Canada and Mexico bracing for significant impacts.
With uncertainties still looming, countries and businesses are watching closely, preparing for a new era of trade policy under President Donald Trump.