President Modifies “Reciprocal” Tariffs, Allows for Future Tariff Reductions

President Trump issued Sept. 5 an executive order that modifies the scope of the “reciprocal” tariffs and allows for reductions of reciprocal and Section 232 tariffs on imports from countries that conclude trade agreements with the U.S.

Current changes. This EO (1) excludes from the reciprocal tariffs bullion-related articles and certain critical minerals and pharmaceutical products subject to pending Section 232 investigations and (2) extends those tariffs to certain aluminum hydroxide, resin, and silicone products. These changes took effect with respect to goods entered or withdrawn from warehouse for consumption on or after 12:01 a.m. EDT on Sept. 8. See annex I in the EO for the specific HTSUS numbers affected by these changes.

Future changes. The EO states that the president may be willing to suspend reciprocal tariffs, and/or to reduce Section 232 tariffs (i.e., to only apply most-favored-nation duties), for a wide range of products in the following categories when imported from countries with which the U.S. concludes a final trade and security agreement: certain aircraft and aircraft parts, certain generic pharmaceuticals and their ingredients, natural resources and closely-related derivative products unavailable in the U.S., and certain agricultural products not grown or produced in sufficient quantity in the U.S. to meet domestic demand.

Annex III in the EO lists the specific HTSUS numbers that may be considered for such changes. However, the EO notes that different trading partners may receive zero reciprocal tariffs on different products.

The EO states that any determination to lower these tariffs will depend on numerous factors, including the scope and economic value of a trading partner’s commitments to the U.S. in its trade agreement, U.S. national interests, the need to mitigate the national emergency relating to U.S. trade deficits, and the need to reduce or eliminate the national security threats found in Section 232 investigations.

The EO states that the president will generally not make any such tariff changes before the conclusion of a final trade agreement. The EO distinguishes final agreements from the framework agreements that a number of major trading partners have reached with the U.S. to date.

However, the EO appears to make an exception for the European Union by directing the U.S. Trade Representative and the Department of Commerce to modify tariffs on imports from EU member states as deemed necessary to implement the U.S.-EU framework agreement. It also appears to hold open the possibility of such exceptions for other framework agreements as well.