Message from the IFSA Government Affairs Team: Tariff Update

10 April 2025

The tariff situation in the U.S. continues to be unpredictable as yesterday, President Trump announced that he was enacting a 90-day pause for the reciprocal tariffs which went into effect yesterday, as noted in a post on Truth Social (copied below).

“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable. Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter!”

As noted in his post, along with pausing the reciprocal tariffs and lowering the rate to 10%, Trump announced that he was raising the tariff rate for China to 125%, effective immediately. The White House also published an executive order regarding the amended reciprocal tariffs which notes the pause of 90 days following outreach from “more than 75 other foreign trading partners, including countries enumerated in Annex I to Executive Order 14257” (note that Annex I is for those countries with reciprocal tariff rates). As noted in the order, the 90-day pause would delay enforcement of the reciprocal tariffs until July 9, 2025, and that these countries would be subject to the 10% baseline rate. Further, the order advises of the increase of the tariff rate on China to 125%, which went into effect today. Of note, as the U.S. implemented an additional 20% tariff on China due to concerns around fentanyl, the total tariff rate for China is 145%, as noted by a White House official (noted in Bloomberg News). Additionally, the executive order noted that the U.S. will apply tariffs on small parcels previously exempt from duties. Starting May 2, the U.S. will tax imports of shipments priced up to $800 at a rate of 120%. The U.S. will also increase the per postal item fee on goods between May 2 and June 1 to $100. This escalation towards China follows a back-and-forth between the two nations which saw each raising levies over the past week with China announcing plans yesterday to raise the rate on U.S. imports to 84%.

While there is the 90-day pause to move non-exempt countries besides China to a 10% tariff rate, the other tariffs which have been implemented remain in place, including the 25% tariff on autos, the 25% steel and aluminum tariffs, and the 25% tariffs on non-U.S.-Mexico-Canada Agreement (USMCA) compliant goods from Canada and Mexico. In comments made after the announcement to reporters, Trump noted that he may look at tariff exemptions for some companies. Of note, he had previously indicated that there would be no exemptions or exclusions, though there are different opinions amongst his Cabinet and advisors on the possible use of exemptions. Further, Trump acknowledged that the volatility of the markets following the tariff announcements and implementation played a role in his decision to pause the reciprocal tariffs.

Trump and Administration officials have indicated that the pause allows for countries to negotiate with the U.S. on trade deals which could result in those countries not facing higher duties following the end of the 90-day pause if they decrease their tariffs on the U.S. or remove other non-tariff barriers. Many countries welcomed the pause for reciprocal tariffs, particularly those who were facing the higher duties, including Malaysia, Vietnam, South Korea, and Thailand. However, even with the pause, uncertainties remain, which will continue to impact markets and may even impact negotiations on trade deals between different countries and the U.S., particularly if the U.S. is not viewed as a reliable trading partner.

The IFSA Government Affairs team participated on a Politico webinar this morning focused on the global trade and tariff environment. The briefing included Politico reporters from Washington DC, Ottawa, Brussels, and Beijing. Key takeaways from the webinar include:

The end goal of the Trump Administration is evolving, but appears to be to reduce the trade deficit and boost domestic manufacturing
There are different factions within the White House and within Trump’s Cabinet regarding how the U.S. should approach tariffs, and it appears Treasury Secretary Bessent has been gaining influence, particularly with the impact of tariffs on the market
There is some movement in Congress to introduce and vote on bills regarding tariff authority, and if there is increased constituent angst about tariffs, Congress may be more willing to push back on Trump
The pause in the reciprocal tariffs may pause any further litigation against the Administration, though it remains to be seen whether any further issuance of tariffs could result in groups filing for preliminary injunction
Concerns from Congress on the impact of the tariffs on small businesses may result in pushback to grant some exemptions
With the pause from the U.S., the EU has paused their planned countermeasures and plan to negotiate with the U.S.
Challenge in the EU will be for Member States to remain united particularly given dynamics in some countries, such as Germany and Italy
There is some relief in Canada regarding the pause, though the previous tariffs on non-USMCA compliant goods are still in place
With the upcoming Canadian elections, Canadian voters may focus on the candidate they believe is better suited to stand up to Trump
While Trump has been critical of China in comments and with the escalation in tariff rates, he has noted his positive relationship with Xi Jinping
China may be better suited for the “pain” of a trade war with the U.S. as they have boosted domestic capabilities and engaged in outreach to regional partners
There may need to be a de-escalation on tariffs prior to any negotiations between the U.S. and China as both sides will want to claim a win
Trump has signaled plans to introduce tariffs on pharmaceuticals which could be announced soon even though U.S. Trade Representative Greer noted that a Section 232 investigation would take place prior to any implementation
While U.S. officials have noted that some negotiations with countries are close to deals, the limited capacity at USTR could impact the ability to have meaningful negotiations, particularly as countries are not likely to give the U.S. everything they want

The IFSA Government Affairs team also continues to participate in food and agriculture coalition calls related to trade matters, including tariffs. On a call this week, prior to the pause in reciprocal tariffs, there was discussion regarding whether there should be any efforts to push for exemptions for food and agriculture products, though there were some concerns raised that this would be more of a benefit for countries exporting to the U.S. and would not impact any retaliatory tariffs on food and agricultural products, and therefore, it may be better to push for food and agricultural products to be addressed in any negotiations between the U.S. and trading partners. It was also noted that companies should ensure they have proper recordkeeping to demonstrate that any products are USMCA-compliant if they are being traded between the U.S., Canada, and Mexico in order to ensure they are not subject to duties. Related to USMCA, it was noted that as renegotiation of that trade deal is set to begin next year, the U.S. may pressure Canada and Mexico to take a similar approach with China as part of the renegotiation.

The IFSA Government Affairs team will continue to provide relevant and significant updates related to tariffs and key administration policies and initiatives, as available. We encourage IFSA members to follow Capitol Compass — produced by IFSA’s association management partner, Kellen — for key federal updates if they are not already. If there are any questions regarding how the IFSA Government Affairs team is addressing key issues related to this administration, please do not hesitate to reach out to staff.