Reciprocal Tariffs Will Be a 'Nightmare to Manage,' Trade Lawyers Say
The reciprocal tariffs the Trump administration has promised will present a challenge for CBP to enforce, trade lawyers said during a webinar presented by Baker McKenzie on Feb. 20.
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Chandri Navarro, senior counsel at Baker McKenzie, said that if the tariffs are assessed on a "product-by-product basis," that "would be a nightmare to manage." It is also possible, she said, that they will be "sort of an overall" rate based on "all imports from a particular country," but "the details of how those would be implemented are fairly sparse."
Navarro was referring to the recent memorandum from the White House saying that the U.S. will assess reciprocal tariffs based not only on a country's tariff rates but also any policies that the U.S. deems "anti-competitive" (see 2502130030). She said that the Commerce Department and the Office of the U.S. Trade Representative will "work together to identify a process for doing this" based on studies of unfair trade practices from trade agencies that are due to the administration by April 1. These studies will give President Donald Trump "the support to undertake some of these more extreme measures on trade," Navarro said.
Julia Webster, partner at Baker McKenzie in the Toronto office, said that certain Canadian policies, such as their federal sales and digital services taxes, had "drawn the ire of the U.S. administration," and could be used as justifications for tariffs on Canadian imports. However, she said, "Canada truly is making strides on illegal immigration and illegal drugs" flowing into the U.S., which could limit the administration's wrath. This conciliatory effort by the Canadian government "bodes well for potentially a further pause on the March 4 implementation date for tariffs on all Canadian goods," Webster said.
While the current defrosting of the U.S.-Canada trade relationship is good news, "importers should be thinking about ... duty mitigation strategies, if Canada does implement retaliatory tariffs," Webster said, indicating that there are many strategies importers could take, "especially because we're in a period of pause right now." She recommended meeting with government relations teams to lobby "the Department of Finance [Canada] about the goods that could potentially be subject to tariffs."
Lionel Van Reet, partner in Baker McKenzie's Brussels office, indicated that the EU is preparing a "Trump Welcome Package" to "appease the U.S. tariff appetite." He predicted a decrease in European duties on automobiles and an effort to raise duties on pharmaceutical products from other countries "to demonstrate to the U.S. that EU production is not the bad guy, but, rather, it's other countries."
This approach might become a problem for the EU though, as it runs afoul of World Trade Organization most favored nation rules, Van Reet warned. "Technically, this goes against the WTO, certainly the most favored nation concept. And so that means that if the EU is responding even to ease up the appetite of the U.S. there, the EU will grant an advantage to the U.S. that will not be in line with MFN," he said. Article One of the WTO General Agreement on Tariffs and Trade forbids favoritism to a particular country and this could "have a big impact" on EU trade policy.
Navarro quashed any hope importers may have that these actions will be successfully challenged in the courts: "So I think what we're going to figure out is, can he do this? Yes, he can do this. He has the authority, constitutionally."