Lee Smith, leader of the International Trade and National Security Practice of the law firm Baker Donelson, discusses how the policies of the incoming Trump Administration are likely to impact supply chains.
Will the incoming administration follow through on Trump’s promise to impose much higher tariffs on China and other U.S. trade partners? Currently there are two schools of thought, Smith. One says that Trump will indeed slap punitive tariffs of 60% or more on goods from China, and between 10% and 20% on imports from other countries. Another feeling is that the whole issue of higher tariffs will be deployed by Trump for negotiating leverage, instead imposing the new fees on a selective basis.
Smith is leaning toward the latter scenario. Some of Trump’s cabinet picks, especially for the departments of Treasury and Commerce, “suggest there will be a pragmatic approach — not just tariffs across the board just for the sake of it.”
As an instrument of trade policy, tariffs can be used to convince other countries to open their markets, retaliate against them for unfair practices, raise federal revenues, or even punish trading partners for a perceived failure to align their trade and economic policies with those of the U.S. In the first Trump administration, Smith says, tariffs were imposed in order to support U.S. domestic manufacturers, who also took full advantage of laws against dumping and unfair duties to file multiple cases against foreign competitors.
The new administration sees tariffs as a way to undo historical trade policy, Smith says. “It wants to use tariffs to change the state of play.”
What U.S. interests should worry about in the coming year, he says, is a wave of retaliatory tariffs by other countries, as well as further actions to protect their markets against U.S. exports.
Also on the table is renegotiation in 2026 of the U.S.-Canada-Mexico Agreement. Smith says U.S. negotiators will likely be asking for provisions that prevent China from circumventing tariffs on manufactured goods by routing shipments through Mexico.
