
On February 1, 2025, President Trump signed an Executive Order imposing a 25% tariff on nearly all goods imported from Mexico and Canada and an additional10% tariff on all Chinese imports. That Executive Order also included a retaliation clause authorizing even stronger penalties to be imposed in response to any retaliatory measures taken by those countries against the US. Meanwhile, as a way of mitigating the impact to the US economy, the Trump Administration also capped the duty on certain Canadian goods like crude oil and critical minerals at only 10%.
These tariffs were announced not even two weeks into President Trump’s second term, following his inauguration on January 20. Given that tariffs were rolled out in the second year of the first Trump Administration, it would appear that tariff measures are a higher priority this time around compared to the first.
Trump tariffs might also target Japan
Tariffs on Canada, Mexico delayed one month, while tariffs on China go live
Conversely, the tariffs on China took effect as planned on February 4. In response, China immediately announced retaliatory measures against the US. Specifically, it imposed a 15% duty on US coal and liquefied natural gas (LNG), and a 10% duty on crude oil, farm equipment, pickup trucks, and large-engine automobiles. These tit-for-tat measures took effect on February 10.
Furthermore, the Trump Administration announced that on February 20 it would place 25% tariffs on steel and aluminum imports from every country, with these measures set to go live on March 12. Although President Trump did impose a 25% duty on steel and a 10% duty on aluminum imports from major economies and regions including Japan back in 2018 during his first administration, in actuality there were numerous exemptions made, which means that the aim this time around is to do away with those exemptions and make these tariffs more effective than before.
The Trump Administration can be expected to roll out more tariff measures going forward as well. President Trump made it clear that he may impose tariffs on semiconductors, crude oil, natural gas, and other imports starting around February 18. He is also still considering the option of placing across-the-board tariffs on all countries, as he suggested he would during his campaign. The implementation of such tariffs could come in April or thereafter, once the Department of Commerce, the US Trade Representative (USTR), and other agencies have completed the necessary investigations.
The real goal is slashing trade deficits; Japan potentially also a target of flat tariffs
President Trump is deeply dissatisfied with the US trade deficit. Trump seems to believe that trade deficits allow the US’s trading partners to hurt the US with unfair tricks, and eliminating those deficits will bring a proportional growth in the US’s GDP and strengthen the US economy. That appears to be a perception of President Trump’s rooted in his intuitions as a businessman, but economically speaking, it may not be accurate.
Assuming that additional tariffs are used to curb imports, goods imported into the US would become more expensive in proportion to those tariffs. It would be US importers who pay those tariffs, and ultimately the costs would be borne by US consumers and companies. Additional tariffs are tantamount to a tax hike in the US, which would adversely affect US personal consumption and impact demand more broadly.
Incidentally, the US’s top three import partners in 2024 were Mexico, China, and Canada, in that order. The US also runs its largest trade deficit with China. The fact that President Trump began by applying tariffs on these three countries would suggest that he also aims to slash the country’s trade deficits.
Furthermore, Japan was the US’s fifth-largest import partner in 2024, and it also held the seventh-highest trade deficit in goods. As President Trump aims to shrink the country’s trade deficits, Japan might well become the target of full-fledged tariffs.
At a press conference following the US-Japan Summit Meeting held in Washington, D.C. on February 7, President Trump said “We didn’t discuss tariffs too much” at the summit. However, at the outset of the summit, he had brought up his concerns over the trade deficit with Japan, remarking that he wanted to make the trade balance between the two nations “fair”. He had also hinted, moreover, that if this fairness were not achieved, he might be inclined to impose tariffs. In particular, he commented that auto tariffs are “always on the table”.
Going forward, if President Trump does place blanket tariffs on imports from all countries or even many countries in an effort to reduce the US’s trade deficits, Japan could potentially find itself in the crosshairs. And the possibility would remain that automobiles—which make up a little under 30% of the total value of imports from Japan to the US—could be subject to those tariffs.
Three hurdles for the Trump tariffs
The first-ever tariffs based on the International Emergency Economic Powers Act (IEEPA)
IEEPA grants the President the authority to deal with any unusual and extraordinary threat to the national security, foreign policy, or economy of the United States if the President declares a national state of emergency. This Act has been applied on numerous occasions in the past to deal with terrorist organizations and state sponsors of terrorism, for example. But this is the first time that a US President has invoked the IEEPA to levy tariffs.
When Trump rolled out tariffs during his first administration, the legal basis for doing so came from Section 232 of the Trade Expansion Act and Section 301 of the Trade Act. Section 232 of the Trade Expansion Act gives the President the right to take remedial measures when the Department of Commerce has determined that the importing of certain goods could potentially endanger US national security. And Section 301 of the Trade Act grants the US Trade Representative (USTR) the authority to invoke import control measures under instructions from the President if a foreign country’s trade practices are unreasonable or discriminatory.
However, in this case, applying tariffs based on these two Trade Acts likely involved some difficulty. That is because it is rather hard to argue that the flow of fentanyl and of illegal immigration could pose a threat to US national security, or that they are attributable to the unfair trade practices of the nation’s trading partners.
Furthermore, if across-the-board tariffs are placed on all imported goods pursuant to these Trade Acts, they would bring a significantly greater administrative burden compared to the tariffs placed on individual products that were rolled out by the first Trump Administration. Section 232 of the Trade Expansion Act, along with Section 301 of the Trade Act, requires investigations to be conducted before any additional tariff measures can be put in place. Under Section 232 of the Trade Expansion Act, an investigation must be carried out by the Department of Commerce within 270 days, while under Section 301 of the Trade Act, the US Trade Representative (USTR) is required to complete an investigation within 12 months.
Faced with these circumstances, which could perhaps be referred to as a “legal hurdle”, the current Trump Administration presumably decided to impose across-the-board tariffs on these three countries based on the International Emergency Economic Powers Act (IEEPA).
Expanding across-the-board tariffs based on the International Emergency Economic Powers Act (IEEPA) also comes with hurdles
Before the President can exercise his powers under the International Emergency Economic Powers Act (IEEPA), he is obligated by law to discuss the issue with Congress. Whenever a President seeks to impose new tariffs, the law requires also him to brief Congress beforehand about the background factors and the necessity of such measures. In this process, it is possible that Congress could oppose these additional tariffs, blocking any such measures from being adopted.
Plus, under the IEEPA, the President would be required to report again to Congress at least once every six months about the status of any measures that have been implemented, and this could also constrain the Trump Administration from imposing across-the-board tariffs.
In addition, it would indeed be difficult for the President to declare a growing trade deficit or the like to be an economic crisis and then impose blanket tariffs on all countries or a great many of them. Congress would likely also question such a move. Implementing across-the-board tariffs would thus require the President to clear a “Congressional hurdle” as well.
The ”three hurdles” to the expansion of across-the-board tariffs sought by the Trump Administration
Moreover, additional tariffs would raise the prices of all imported parts, materials, staples, and finished products, which could lead to frustration among companies and consumers alike. In fact, when the Trump Administration announced on February 1 that tariffs would be imposed on those three countries, the National Retail Federation (NRF), the American Petroleum Institute (API), the United Steelworkers Union (USW), and other associations all voiced their strong opposition. Republican Senator Tim Scott of South Carolina vehemently criticized Mr. Trump’s tariff measures, calling them “nothing more than a tax on South Carolina families”.
If these additional tariffs bring a conspicuous rise in prices, the public’s hope for the Trump Administration to stabilize prices after the former Biden Administration failed to do so could sour, which would create a “public opinion hurdle”, and potentially even produce a headwind for the Republican Party in the 2026 midterm elections.
Thus, if the Trump Administration seeks to expand its across-the-board tariffs, it would conceivably face roadblocks in the form of a “legal hurdle”, a “Congressional hurdle”, and a “public opinion hurdle”. For this reason, any expansion of such tariffs would likely be more limited in scope compared to what President Trump suggested during the election campaign.
And yet, just how limited these measures would end up being is still very much uncertain. The fact that across-the-board tariffs would harm the global economy, the US economy, and the Japanese economy is—in all likelihood—inevitable.
Profile
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Takahide KiuchiPortraits of Takahide Kiuchi
Executive Economist
Takahide Kiuchi started his career as an economist in 1987, as he joined Nomura Research Institute. His first assignment was research and forecast of Japanese economy. In 1990, he joined Nomura Research Institute Deutschland as an economist of German and European economy. In 1996, he started covering US economy in New York Office. He transferred to Nomura Securities in 2004, and four years later, he was assigned to Head of Economic Research Department and Chief Economist in 2007. He was in charge of Japanese Economy in Global Research Team. In 2012, He was nominated by Cabinet and approved by Diet as Member of the Policy Board, the committee of the highest decision making in Bank of Japan. He implemented decisions on the Bank’s important policies and operations including monetary policy for five years.
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