April 8, 2025 • 27 mins
The Trump administration’s tariffs are among key topics that BI litigation and policy analysts are following this week, including among others reciprocal tariffs, tariffs on steel and aluminum and tariffs on Canada, China and Mexico. Ted Murphy, partner at the global law firm, Sidley Austin, and co-leader of Sidley’s Global Arbitration, Trade and Advocacy practice joins Bloomberg Intelligence litigation analyst Holly Froum to talk about President Donald Trump’s evolving trade policy, how it differs from his first term, potential legal challenges to the tariffs, and how companies can navigate this ever-changing landscape.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:15):
Good morning and welcome to the Votes and Verdicts podcast
hosted by Bloomberg Intelligence, the investment research arm of Bloomberg LP.
In this podcast series, we talk about the intersection of
business policy and law. My name is Holly from I'm
an analyst with Bloomberg Intelligence Cover and consumer and industrials litigation.
Today's podcast we'll focus on the very dynamic area of tarras.
(00:37):
I'm delighted to be joined today by Ted Murphy, partner
at the global law firm Sidley Austin. Mister Murphy is
the co leader of Sidley's Global Arbitration, Trade and Advocacy practice.
He's counseled numerous companies and trade associations on international trade
and customs law, advising clients on international trade, trade policy
and customs compliance issues. Thank you for joining us today, Ted.
(01:00):
Today's date is April second, Ted, can you describe your background,
how you ended up co leading Sidley's trade advocacy practiced
and what type of issues you've helped your clients navigate.
Speaker 2 (01:11):
Thanks, Ollie, happy to happy to be here. Yeah. So,
my background is I've been practicing international trade and customs
law since the mid nineteen nineties and in that time,
I've had the good fortune to represent sort of many
companies and trade associations and all aspects of US customs law,
(01:33):
trade policy, and other international trade laws. In the last
ten years or so, in particular, it's been sort of
dealing with the changing US trade policy from a period
of sort of ever increasing trade liberalization to the period
(01:53):
we're in today of sort of rising economic nationalism or
potentially protectionism, and helping companies and trade associations sort of
deal with that change.
Speaker 1 (02:06):
Got it. So we're really glad to have you here
because we're going to get in today's topic, which is tariffs.
And it couldn't be a more perfect time to have
this discussion because the Trump administration has said the President
will announce his so called Liberation Day tariffs or reciprocal
tariffs today at four pm. Trump has imposed a slew
of terraff so far and at this juncture, just to
run through them briefly, He's imposed twenty percent tariffs on China,
(02:29):
twenty five percent terraces on steel and aluminum, twenty five
percent terraffs on goods from Canada and Mexico that do
not qualify for preferential treatment under the US Canada Mexico agreement,
And as I mentioned earlier, Trump has threatened or pledged
tariffs too, so he said that he will impose reciprocal terriffs.
He's also proposed that terriffs be imposed on copper, agriculture, pharma,
(02:53):
and chips, and he's also targeting the lumber imports and
China ship building industry. So ted with regard to tariffs
that have been imposed on goods from China, Canada, and Mexico,
can you explain what legal authority Trump used and why
in your view he used that particular authority.
Speaker 2 (03:10):
Happy to and this is one of the things that
we believe. We believe President Trump's view of tariffs has
evolved from his first term, and this is sort of
a good example of that. For the tariffs that he
imposed on Canada and Mexico and on China, he used
(03:31):
a trade statute that had never been used before to
impose tariffs, the International Emergency Economic Powers Act, and that
statute grants very broad authority to the president to deal
with national emergencies, and as I mentioned, it's never been
(03:52):
used before to impose tariffs. But President Trump determined that
there was in fact a national emergency with regard to
fentanyl imports from all three countries and illegal migration issues
from Canada and Mexico. So again, the underpinning for those
(04:16):
for those additional tariffs is a national emergency that was
predicated on fentanyl shipments and illegal immigration issues.
Speaker 1 (04:27):
Got it. So I understand that the term national emergency
is not defined in that statute. In your view, is
the fact that emergency is not defined help or hurt
potential litigans seeking to challenge Trump's action.
Speaker 2 (04:44):
Yeah, this is one of the things that makes this
development sort of so interesting is that you're absolutely right.
The term national emergency is not defined in the statute.
So what is a national emergency? A national emergency is,
at least in the first instance, whatever the President says
(05:06):
it is. It's sort of widely expected that there will
ultimately be challenges to these tariffs on various grounds, including
whether or not in fact, there is a national emergency.
Since it's not defined in the statute, that would likely
make it harder for a plaintiff to show to a
(05:29):
court satisfaction that fenton all imports and illegal immigration is
not a national emergency. In other words, the judiciary is
likely to defer to or not is likely to not
substitute its judgment for that of an elected president as
to what is a national emergency. So, since it's not defined,
(05:53):
we expect that the president will be given a fair
amount of leeway in define what is a national a
national emergency.
Speaker 1 (06:04):
So given that, given the fact that you think that
he'll be given leave away by the courts, do you
have any view as to whether illicit drugs and unlawful
migrants would constitute a national emergency under I or the
International Emergency Economic Powers Act.
Speaker 2 (06:23):
Yeah, I mean it's again, it's it's hard to say.
I think, you know, I don't. From my own sort
of personal view, I would I would think there is, uh,
you know, there is a good claim that isn't in
fact a national emergency, or stated differently, I don't know.
Uh you know, how many deaths do you need from
fentanyl to qualify as a national emergency? I? You know?
(06:46):
In other words, I don't. I don't think that number
needs to be very high. Similarly, with illegal immigration, you know,
I think that that would also qualify as a national emergency,
or at least I certainly think I don't think a
court would again substitute its judgment for the judgment of
an unelected president. Yeah, I think some of the issue
(07:10):
is is sort of over time, like, you know, how
long could this remain in effect? Like over time? You know,
is the national when is the national emergency over? And
that that is an interesting question that courts may eventually
have to grapple with.
Speaker 1 (07:27):
Interesting. So it sounds like you think he's on pretty
good legal footing here, or relatively good legal footing. Trump
carved out exceptions from these tariffs on goods from Canadon
and Mexico if the goods qualified for preferential treatment under
the US Canada Mexico Agreement. How does a company go
about determining whether their goods qualify for such treatment and
(07:48):
what goods are left to tariff if all us MCA
goods are exempted.
Speaker 2 (07:55):
Yeah, that's a good question. So the us mc A
is a is a trade agreement. So if we just
step back for a second, what the purpose of that
agreement is is to provide preferential tariff treatment to goods
that have enough USMCA production and or content. So, in
(08:18):
other words, goods that are that meet certain defined rules
of origin under the agreement. So for you know, again
the way the agreement works is the three countries got
together and figured out how much production or how much
North American content do we want to require in order
(08:40):
for the product to get preferential tariff treatment. So there's
a very detailed set of rules of origin including in
the agreement that basically answers those questions on a product
by product basis. So companies, companies need to take, you know,
sort of their facts, their product operation, their bills of material,
(09:02):
the origin of the components they're using, and determine whether
what they're doing in the US, Canada, or Mexico is
enough to confer originating status under the USMCA, and if
it is, then you would be exempt from these tariffs.
Speaker 1 (09:21):
As of now, it sounds somewhat complicated.
Speaker 2 (09:26):
Turning to.
Speaker 1 (09:28):
Tariffs on aluminum and steel, I understand that Trump used
a different statute to impose those tariffs, and specifically section
two thirty two of the Trade Expansion Act. Can you
explain why he used that statute rather than the International
Emergency Economic Powers Act that he used with regard to
(09:51):
the twenty five percent terriffs on Canada, Mexico and China.
Speaker 2 (09:55):
Yeah, yeah, absolutely, yeah. Yeah, And so again one of
the themes of what and Trump is doing this term
as opposed to his first term. In his first term,
he used sort of more traditional trade statutes, and those
trade statutes come with required process, right, they require the
(10:16):
Secretary of Commerce to do an investigation and write a report,
or they require the US Trade Representative's office to do
an investigation and get public comment and hold public hearings,
et cetera. This time around, President Trump is trying to
move more quickly. He's less interested in the process, so
(10:38):
he's trying to move much more quickly. So for I
guess you mentioned for Canada, Mexico, and China, he used
AIPA because that statute comes with no required process. It
allows the president to take action based on his or
her determination that there's a national emergency. There's no hearing required,
(10:59):
no public comment. He or she can just act based
on his or her own determination that there's a national emergency.
When it came to steel an aluminum, really what he
did was he modified He didn't do a new investigation
under section two thirty two. Instead, he modified the remedy
(11:19):
that was imposed from the two thirty two investigation on
steel and aluminum that was conducted during his first term.
So in essence, he sort of did the same thing
he you know, is in other words, he was able
to act quickly without any sort of hearing or public
comment because he wasn't doing a new investigation. He was
(11:41):
just modifying the remedy from the investigation that was conducted
during his first term. Got it.
Speaker 1 (11:49):
I wonder if the fact that he's using these like
procedural mechanisms to or or lack of procedural mechanisms to
impose arris more quickly, I wonder if that's going to
come up in a potential legal challenge. So you mentioned
that there is no product exclusion process for steel and
aluminum tariffs. Can you explain what that means and if
(12:11):
that's a departure from prior policy and why that elimination
of exclusions may be significant.
Speaker 2 (12:18):
And it is a departure from sort of prior policy. So,
when this two thirty two investigation was originally conducted during
President Trump's first term, you know, tariffs were imposed. What
the Trump administration then did was proceed to negotiate agreements
with other countries for quantitative limits on the amount of
(12:41):
steel and aluminum they would ship to the United States.
Or other types of arrangements to eliminate the tariffs. In addition,
they created a product exclusion process. The idea being that
if you were a US company who you know, needed
to acquire certain steel or aluminum and that wasn't available
(13:04):
or wasn't produced in the United States and you had
to import it into the United States, you could go
to the government and request an exclusion from the additional tariffs.
But again predicated primarily on the fact that that product
was not being produced domestically. So if we didn't produce
it here, you could get an exemption from the tariffs.
(13:27):
When President Trump modified that he just recently that remedy
he eliminated the country specific arrangements, so the quotas that
other countries had agreed to or the other arrangements, and
he eliminated the product exclusion process. In addition, he is
(13:48):
creating a process that would make it easier for the
domestic industry to add products to the covered list of
articles subject to tariffs. So this is very different. So
in the first term, it was sort of you know,
tariffs that led to negotiations with countries, uh, you know,
(14:10):
for agreements on you know, limits on how much they
would ship to the United States. There were also sort
of safety valves. If the domestic industry wasn't producing certain products,
you could you had to import it, you could get
exemptions from the tariffs. This time around, it's you know,
it doesn't work that way. There are sort of, at
least at least currently there are sort of no exemptions,
(14:34):
which again I think shows President Trump's the evolution of
his thinking about tariffs. That they weren't they're not just
tariffs for leverage to use in negotiations. They are well.
While he still believes the tariffs can be useful as
leverage and negotiations, he also believes now in tariffs for
the sake of tariffs, the tariffs are good in and
(14:56):
of themselves. And I think this is a this is
an example of that. Wow.
Speaker 1 (15:00):
Yeah, I think it's one of the justifications he said.
And I think even in that executive order in which
he mentions section two thirty two is that one of
the things threatening to impair national security is the lack
of domestic production of those metals. So it makes sense
(15:21):
why he would have eliminated those exclusions. So it seems
like he's creating a more hospitable environment for tariffs. As
we discussed earlier, the President has said he will impose
reciprocal tariffs, and we're expecting to hear more about those
later today. For reciprocal tariffs, you've said the President may
use his power under section three point thirty eight of
(15:44):
the Tariff Act of nineteen thirty. Can you explain what
that statute provides and why you think it will be
used for reciprocal tariffs.
Speaker 2 (15:55):
Yeah, so this is another trade statute that has never
been used before to actually impose tariffs. So, similar to AIPA,
Section three thirty eight of the Tariff Act of nineteen
thirty has never actually been used to impose tariffs. You know,
we think it is. What that provision provides is that
(16:18):
the President can impose an additional tariff of up to
fifty percent on countries that the President determines are discriminating
against the United States. So again, what's one of the
things that's important here is that this provision does not
come with any required process. Again, unlike Section two thirty
(16:42):
two or section three oh one of the Trade Act,
you know, those statutes come with required process that must
be followed in order to get to the imposition of
additional tariffs. Section three thirty eight really just doesn't. It
just says the president can do it if the President
finds as a fact that other countries are discriminating against
(17:05):
the United States. So given what President said, President Trump
has said about the need for reciprocal tariffs, that the
need we need reciprocal tariffs because other countries are sort
of charging us higher tariffs than we are charging them.
It seems sort of tailor made for a discrimination claim
(17:26):
that would fit under section three three eight. And as
I said, it also has the added benefit of not
not coming with any required process. So it's something he
could do and have take effect basically immediately if he
wanted to.
Speaker 1 (17:42):
Got it. So, you mentioned that section three thirty has
never been used to impose tariffs. Why do you think
that is?
Speaker 2 (17:50):
You know, I, you know, I think there's there are
other statutes that have sort of sort of took its
place over time, you know, namely section three oh one
of the Trade Act of nineteen seventy four, which has
been used repeatedly and it's currently being used now. That one. Also,
(18:11):
there's some overlap in this idea of countries that discriminate
against the United States. So I think the conventional wisdom
is that section three three eight just was sort of
overtaken by other statutes, and that those other statutes were used.
But if you were looking for an avenue to act quickly,
(18:35):
you know, without having to go through a lot of
required process, three three eight sort of fits. The bill
got it.
Speaker 1 (18:43):
So you said you believe reciprocal terrorists are likely to
be imposed on a country and our sectoral basis first,
can you explain why that's so?
Speaker 2 (18:54):
Yeah, I mean, I you know, I think a lot
of what our view is obviously informed by what President
Trump's says he's going to do, and that has obviously
sort of evolved over time in you know, including right
up through today. But he has talked a lot, you know,
He's talked a lot about sort of unfair treatment by
(19:16):
sort of other countries. You know, he talked on the
campaign trail and early earlier in his administration about the
possibility of imposing sort of a universal tariff, so you know,
an x percent tariff on everything from everywhere. Sort of
at the other end of the spectrum are reciprocal tariffs,
(19:36):
which if you take that literally, you know, it would
be one hundred and fifty different tariff rates for every
article imported into the United States right depending on its
country of export. So you know, if you imported a
widget from France and you imported the widget from the
same widget from Japan, that those two widgets could have
(19:59):
different tariff rates depending on what France charges on US
widgets and what Japan charges on US widgets. So, taken literally,
reciprocal tariffs would be calculating it would be a herculean task,
and then you'd have questions about whether it could ever
be implemented. So I don't think we're going to see
(20:20):
true reciprocal tariffs on a one for one basis, which
then sort of brings you back to sort of country
specific or jurisdiction specific tariffs. So an additional twenty percent
tariffs on everything from the EU, or another fifteen percent
tariff on everything from South Korea, for example, I think
(20:42):
that's likely what you're going to see. President Trump has
also talked about sectoral tariffs, you know, so he's focused
on the auto industry, for example, and he did just
recently announce that there'd be a twenty five percent additional
tariff on automobiles and auto arts effective tomorrow. Actually, and
(21:04):
he's talked about the pharmaceutical industry and the semiconductor industry
and lumber. What we understand today though, based on what
the White House has said most recently, is today we're
going to see country specific tariffs, not sectoral tariffs, but
those sectoral tariffs might still be coming.
Speaker 1 (21:26):
Yeah, that makes sense. Do you anticipate lawsuit challenge challenging
these tariffs and what type of challenges do you think
maybe brought and who do you think could bring those challenges?
Speaker 2 (21:41):
Yeah, I think there's a good chance. There's a good
chance you'll see litigation, both sort of international and domestic. So,
you know, other countries have already who've been subject to
tariffs thus far, have already you know, initiated proceedings at
the World Trade Organization. So we would expect, you know,
(22:02):
depending on what happens today, we would expect that other
jurisdictions that are affected today would likely do the same
the same sort of thing. So we think there'll be
sort of challenges at the international level. Uh. You know,
of course the wt O, uh, you know, primarily based
on actions taken by the United States. Litigation at the
(22:24):
WTO can only go so far because there isn't There
aren't any appellate judges at the wt O. But but nevertheless,
we expect that will actions will be filed there and
then domestic uh litigation. Yeah, we're we're we are expecting that.
We're expecting that. I think, you know, President Trump is
(22:45):
taking a sort of unprecedented action uh against you know,
friends and allies uh, as well as competitors. Uh. And
he's using statutes that haven't been used before. So so yeah,
I think that creates anvironment for legal challenges. Again, though
those legal challenges take a long time. You know, for example,
(23:07):
there is a legal challenge going on right now from
some of the Section three oh one China tariffs President
Trump imposed during his first term, and that litigation is
still pending in US courts. So you know, here we
are sort of six years later and that litigation is
(23:27):
still pending from Trump one. So we do expect litigation,
but both at the international and domestic level, but it
will not get resolved very quickly most likely.
Speaker 1 (23:39):
I think that's really safe to say. Yeah, it'll be
interesting to see what happens. As I said, at the outset,
this area is very dynamic. I don't think it's an
exaggeration to say every day seems to bring a new tariff,
a modification, or an update to existing policy. So in
this type of dynamic climate, how best can companies deal
with the changing landscape.
Speaker 2 (23:59):
Yeah, it's really true that announcements are made almost every day,
and sometimes multiple announcements a day, and sometimes they sort
of change or amend, you know, the previous day's announcements.
So so one of the things we do with clients
is say, don't we don't want to sort of chase
(24:20):
every announcement or you know, in other words, what we
want to do is really sort of step back from
this a little bit and see if we can see
the forest for the trees that while there's a lot
of announcements and you know, every day and the details
sort of do obviously matter. Stepping back, the question is,
(24:40):
you know, directionally, do we have a sense of where
the US is going? Because I think it's important to
remember that, you know, governments don't trade. What governments do
is provide incentives to companies who trade. And the question
then for companies is you know, what are the incentives
(25:00):
the US government is giving you? And this is you know,
one of the one of the issues that that companies
and our clients sort of have is you know, companies
are economically rational actors. They can sort of deal with
any set of incentives provided those incentives are clear and
(25:22):
long term. So what lots of companies are trying to
do now is figure out, well, what are the incentives
the US government giving? Are you know? Are they are
they you know? And and are they long term? You know,
if these tariffs are all you know, if they're imposed
today and go away tomorrow, because it's all about a negotiation,
(25:44):
that's not very long term. But if you think the
US is embarking on a higher tariff rate environment that
he might talk about a twenty five percent tariff, may
engage in negotiations, but then they result in the terror
of going down to five or ten percent. You know,
you can plan around that. So trying to figure out
(26:07):
whether these these changes in tariff policy are they sort
of short term or is there a sort of more
of a long term message here is what most companies
are trying to figure out right now.
Speaker 1 (26:21):
Sort Of I wonder if there's like a recipe for figuring.
Speaker 2 (26:23):
That out, A formula, Yeah, maybe maybe if.
Speaker 1 (26:28):
You have, if you had it published it, it would
be the most widely sought after formula.
Speaker 2 (26:34):
I think, yeah, that's right.
Speaker 1 (26:37):
And just before we wrap up, I know that you
periodically publish some information to for people, you know, the
general public to see about these terroriffs. Can can you
tell listeners how they access that?
Speaker 2 (26:54):
Sure? Yeah, I call them my dear friend's emails on
trade developments that I find that I find interesting. Yeah,
folks can get added to my distribution list by dropping
me an email at Ted dot Murphy at Sidley dot com.
They're also posted on my LinkedIn page and folks can
(27:19):
reach out to me through there as well.
Speaker 1 (27:21):
Great. Thank you so much, Ted for joining us
Good morning and welcome to the Votes and Verdicts podcast
hosted by Bloomberg Intelligence, the investment research arm of Bloomberg LP.
In this podcast series, we talk about the intersection of
business policy and law. My name is Holly from I'm
an analyst with Bloomberg Intelligence Cover and consumer and industrials litigation.
Today's podcast we'll focus on the very dynamic area of tarras.
(00:37):
I'm delighted to be joined today by Ted Murphy, partner
at the global law firm Sidley Austin. Mister Murphy is
the co leader of Sidley's Global Arbitration, Trade and Advocacy practice.
He's counseled numerous companies and trade associations on international trade
and customs law, advising clients on international trade, trade policy
and customs compliance issues. Thank you for joining us today, Ted.
(01:00):
Today's date is April second, Ted, can you describe your background,
how you ended up co leading Sidley's trade advocacy practiced
and what type of issues you've helped your clients navigate.
Speaker 2 (01:11):
Thanks, Ollie, happy to happy to be here. Yeah. So,
my background is I've been practicing international trade and customs
law since the mid nineteen nineties and in that time,
I've had the good fortune to represent sort of many
companies and trade associations and all aspects of US customs law,
(01:33):
trade policy, and other international trade laws. In the last
ten years or so, in particular, it's been sort of
dealing with the changing US trade policy from a period
of sort of ever increasing trade liberalization to the period
(01:53):
we're in today of sort of rising economic nationalism or
potentially protectionism, and helping companies and trade associations sort of
deal with that change.
Speaker 1 (02:06):
Got it. So we're really glad to have you here
because we're going to get in today's topic, which is tariffs.
And it couldn't be a more perfect time to have
this discussion because the Trump administration has said the President
will announce his so called Liberation Day tariffs or reciprocal
tariffs today at four pm. Trump has imposed a slew
of terraff so far and at this juncture, just to
run through them briefly, He's imposed twenty percent tariffs on China,
(02:29):
twenty five percent terraces on steel and aluminum, twenty five
percent terraffs on goods from Canada and Mexico that do
not qualify for preferential treatment under the US Canada Mexico agreement,
And as I mentioned earlier, Trump has threatened or pledged
tariffs too, so he said that he will impose reciprocal terriffs.
He's also proposed that terriffs be imposed on copper, agriculture, pharma,
(02:53):
and chips, and he's also targeting the lumber imports and
China ship building industry. So ted with regard to tariffs
that have been imposed on goods from China, Canada, and Mexico,
can you explain what legal authority Trump used and why
in your view he used that particular authority.
Speaker 2 (03:10):
Happy to and this is one of the things that
we believe. We believe President Trump's view of tariffs has
evolved from his first term, and this is sort of
a good example of that. For the tariffs that he
imposed on Canada and Mexico and on China, he used
(03:31):
a trade statute that had never been used before to
impose tariffs, the International Emergency Economic Powers Act, and that
statute grants very broad authority to the president to deal
with national emergencies, and as I mentioned, it's never been
(03:52):
used before to impose tariffs. But President Trump determined that
there was in fact a national emergency with regard to
fentanyl imports from all three countries and illegal migration issues
from Canada and Mexico. So again, the underpinning for those
(04:16):
for those additional tariffs is a national emergency that was
predicated on fentanyl shipments and illegal immigration issues.
Speaker 1 (04:27):
Got it. So I understand that the term national emergency
is not defined in that statute. In your view, is
the fact that emergency is not defined help or hurt
potential litigans seeking to challenge Trump's action.
Speaker 2 (04:44):
Yeah, this is one of the things that makes this
development sort of so interesting is that you're absolutely right.
The term national emergency is not defined in the statute.
So what is a national emergency? A national emergency is,
at least in the first instance, whatever the President says
(05:06):
it is. It's sort of widely expected that there will
ultimately be challenges to these tariffs on various grounds, including
whether or not in fact, there is a national emergency.
Since it's not defined in the statute, that would likely
make it harder for a plaintiff to show to a
(05:29):
court satisfaction that fenton all imports and illegal immigration is
not a national emergency. In other words, the judiciary is
likely to defer to or not is likely to not
substitute its judgment for that of an elected president as
to what is a national emergency. So, since it's not defined,
(05:53):
we expect that the president will be given a fair
amount of leeway in define what is a national a
national emergency.
Speaker 1 (06:04):
So given that, given the fact that you think that
he'll be given leave away by the courts, do you
have any view as to whether illicit drugs and unlawful
migrants would constitute a national emergency under I or the
International Emergency Economic Powers Act.
Speaker 2 (06:23):
Yeah, I mean it's again, it's it's hard to say.
I think, you know, I don't. From my own sort
of personal view, I would I would think there is, uh,
you know, there is a good claim that isn't in
fact a national emergency, or stated differently, I don't know.
Uh you know, how many deaths do you need from
fentanyl to qualify as a national emergency? I? You know?
(06:46):
In other words, I don't. I don't think that number
needs to be very high. Similarly, with illegal immigration, you know,
I think that that would also qualify as a national emergency,
or at least I certainly think I don't think a
court would again substitute its judgment for the judgment of
an unelected president. Yeah, I think some of the issue
(07:10):
is is sort of over time, like, you know, how
long could this remain in effect? Like over time? You know,
is the national when is the national emergency over? And
that that is an interesting question that courts may eventually
have to grapple with.
Speaker 1 (07:27):
Interesting. So it sounds like you think he's on pretty
good legal footing here, or relatively good legal footing. Trump
carved out exceptions from these tariffs on goods from Canadon
and Mexico if the goods qualified for preferential treatment under
the US Canada Mexico Agreement. How does a company go
about determining whether their goods qualify for such treatment and
(07:48):
what goods are left to tariff if all us MCA
goods are exempted.
Speaker 2 (07:55):
Yeah, that's a good question. So the us mc A
is a is a trade agreement. So if we just
step back for a second, what the purpose of that
agreement is is to provide preferential tariff treatment to goods
that have enough USMCA production and or content. So, in
(08:18):
other words, goods that are that meet certain defined rules
of origin under the agreement. So for you know, again
the way the agreement works is the three countries got
together and figured out how much production or how much
North American content do we want to require in order
(08:40):
for the product to get preferential tariff treatment. So there's
a very detailed set of rules of origin including in
the agreement that basically answers those questions on a product
by product basis. So companies, companies need to take, you know,
sort of their facts, their product operation, their bills of material,
(09:02):
the origin of the components they're using, and determine whether
what they're doing in the US, Canada, or Mexico is
enough to confer originating status under the USMCA, and if
it is, then you would be exempt from these tariffs.
Speaker 1 (09:21):
As of now, it sounds somewhat complicated.
Speaker 2 (09:26):
Turning to.
Speaker 1 (09:28):
Tariffs on aluminum and steel, I understand that Trump used
a different statute to impose those tariffs, and specifically section
two thirty two of the Trade Expansion Act. Can you
explain why he used that statute rather than the International
Emergency Economic Powers Act that he used with regard to
(09:51):
the twenty five percent terriffs on Canada, Mexico and China.
Speaker 2 (09:55):
Yeah, yeah, absolutely, yeah. Yeah, And so again one of
the themes of what and Trump is doing this term
as opposed to his first term. In his first term,
he used sort of more traditional trade statutes, and those
trade statutes come with required process, right, they require the
(10:16):
Secretary of Commerce to do an investigation and write a report,
or they require the US Trade Representative's office to do
an investigation and get public comment and hold public hearings,
et cetera. This time around, President Trump is trying to
move more quickly. He's less interested in the process, so
(10:38):
he's trying to move much more quickly. So for I
guess you mentioned for Canada, Mexico, and China, he used
AIPA because that statute comes with no required process. It
allows the president to take action based on his or
her determination that there's a national emergency. There's no hearing required,
(10:59):
no public comment. He or she can just act based
on his or her own determination that there's a national emergency.
When it came to steel an aluminum, really what he
did was he modified He didn't do a new investigation
under section two thirty two. Instead, he modified the remedy
(11:19):
that was imposed from the two thirty two investigation on
steel and aluminum that was conducted during his first term.
So in essence, he sort of did the same thing
he you know, is in other words, he was able
to act quickly without any sort of hearing or public
comment because he wasn't doing a new investigation. He was
(11:41):
just modifying the remedy from the investigation that was conducted
during his first term. Got it.
Speaker 1 (11:49):
I wonder if the fact that he's using these like
procedural mechanisms to or or lack of procedural mechanisms to
impose arris more quickly, I wonder if that's going to
come up in a potential legal challenge. So you mentioned
that there is no product exclusion process for steel and
aluminum tariffs. Can you explain what that means and if
(12:11):
that's a departure from prior policy and why that elimination
of exclusions may be significant.
Speaker 2 (12:18):
And it is a departure from sort of prior policy. So,
when this two thirty two investigation was originally conducted during
President Trump's first term, you know, tariffs were imposed. What
the Trump administration then did was proceed to negotiate agreements
with other countries for quantitative limits on the amount of
(12:41):
steel and aluminum they would ship to the United States.
Or other types of arrangements to eliminate the tariffs. In addition,
they created a product exclusion process. The idea being that
if you were a US company who you know, needed
to acquire certain steel or aluminum and that wasn't available
(13:04):
or wasn't produced in the United States and you had
to import it into the United States, you could go
to the government and request an exclusion from the additional tariffs.
But again predicated primarily on the fact that that product
was not being produced domestically. So if we didn't produce
it here, you could get an exemption from the tariffs.
(13:27):
When President Trump modified that he just recently that remedy
he eliminated the country specific arrangements, so the quotas that
other countries had agreed to or the other arrangements, and
he eliminated the product exclusion process. In addition, he is
(13:48):
creating a process that would make it easier for the
domestic industry to add products to the covered list of
articles subject to tariffs. So this is very different. So
in the first term, it was sort of you know,
tariffs that led to negotiations with countries, uh, you know,
(14:10):
for agreements on you know, limits on how much they
would ship to the United States. There were also sort
of safety valves. If the domestic industry wasn't producing certain products,
you could you had to import it, you could get
exemptions from the tariffs. This time around, it's you know,
it doesn't work that way. There are sort of, at
least at least currently there are sort of no exemptions,
(14:34):
which again I think shows President Trump's the evolution of
his thinking about tariffs. That they weren't they're not just
tariffs for leverage to use in negotiations. They are well.
While he still believes the tariffs can be useful as
leverage and negotiations, he also believes now in tariffs for
the sake of tariffs, the tariffs are good in and
(14:56):
of themselves. And I think this is a this is
an example of that. Wow.
Speaker 1 (15:00):
Yeah, I think it's one of the justifications he said.
And I think even in that executive order in which
he mentions section two thirty two is that one of
the things threatening to impair national security is the lack
of domestic production of those metals. So it makes sense
(15:21):
why he would have eliminated those exclusions. So it seems
like he's creating a more hospitable environment for tariffs. As
we discussed earlier, the President has said he will impose
reciprocal tariffs, and we're expecting to hear more about those
later today. For reciprocal tariffs, you've said the President may
use his power under section three point thirty eight of
(15:44):
the Tariff Act of nineteen thirty. Can you explain what
that statute provides and why you think it will be
used for reciprocal tariffs.
Speaker 2 (15:55):
Yeah, so this is another trade statute that has never
been used before to actually impose tariffs. So, similar to AIPA,
Section three thirty eight of the Tariff Act of nineteen
thirty has never actually been used to impose tariffs. You know,
we think it is. What that provision provides is that
(16:18):
the President can impose an additional tariff of up to
fifty percent on countries that the President determines are discriminating
against the United States. So again, what's one of the
things that's important here is that this provision does not
come with any required process. Again, unlike Section two thirty
(16:42):
two or section three oh one of the Trade Act,
you know, those statutes come with required process that must
be followed in order to get to the imposition of
additional tariffs. Section three thirty eight really just doesn't. It
just says the president can do it if the President
finds as a fact that other countries are discriminating against
(17:05):
the United States. So given what President said, President Trump
has said about the need for reciprocal tariffs, that the
need we need reciprocal tariffs because other countries are sort
of charging us higher tariffs than we are charging them.
It seems sort of tailor made for a discrimination claim
(17:26):
that would fit under section three three eight. And as
I said, it also has the added benefit of not
not coming with any required process. So it's something he
could do and have take effect basically immediately if he
wanted to.
Speaker 1 (17:42):
Got it. So, you mentioned that section three thirty has
never been used to impose tariffs. Why do you think
that is?
Speaker 2 (17:50):
You know, I, you know, I think there's there are
other statutes that have sort of sort of took its
place over time, you know, namely section three oh one
of the Trade Act of nineteen seventy four, which has
been used repeatedly and it's currently being used now. That one. Also,
(18:11):
there's some overlap in this idea of countries that discriminate
against the United States. So I think the conventional wisdom
is that section three three eight just was sort of
overtaken by other statutes, and that those other statutes were used.
But if you were looking for an avenue to act quickly,
(18:35):
you know, without having to go through a lot of
required process, three three eight sort of fits. The bill
got it.
Speaker 1 (18:43):
So you said you believe reciprocal terrorists are likely to
be imposed on a country and our sectoral basis first,
can you explain why that's so?
Speaker 2 (18:54):
Yeah, I mean, I you know, I think a lot
of what our view is obviously informed by what President
Trump's says he's going to do, and that has obviously
sort of evolved over time in you know, including right
up through today. But he has talked a lot, you know,
He's talked a lot about sort of unfair treatment by
(19:16):
sort of other countries. You know, he talked on the
campaign trail and early earlier in his administration about the
possibility of imposing sort of a universal tariff, so you know,
an x percent tariff on everything from everywhere. Sort of
at the other end of the spectrum are reciprocal tariffs,
(19:36):
which if you take that literally, you know, it would
be one hundred and fifty different tariff rates for every
article imported into the United States right depending on its
country of export. So you know, if you imported a
widget from France and you imported the widget from the
same widget from Japan, that those two widgets could have
(19:59):
different tariff rates depending on what France charges on US
widgets and what Japan charges on US widgets. So, taken literally,
reciprocal tariffs would be calculating it would be a herculean task,
and then you'd have questions about whether it could ever
be implemented. So I don't think we're going to see
(20:20):
true reciprocal tariffs on a one for one basis, which
then sort of brings you back to sort of country
specific or jurisdiction specific tariffs. So an additional twenty percent
tariffs on everything from the EU, or another fifteen percent
tariff on everything from South Korea, for example, I think
(20:42):
that's likely what you're going to see. President Trump has
also talked about sectoral tariffs, you know, so he's focused
on the auto industry, for example, and he did just
recently announce that there'd be a twenty five percent additional
tariff on automobiles and auto arts effective tomorrow. Actually, and
(21:04):
he's talked about the pharmaceutical industry and the semiconductor industry
and lumber. What we understand today though, based on what
the White House has said most recently, is today we're
going to see country specific tariffs, not sectoral tariffs, but
those sectoral tariffs might still be coming.
Speaker 1 (21:26):
Yeah, that makes sense. Do you anticipate lawsuit challenge challenging
these tariffs and what type of challenges do you think
maybe brought and who do you think could bring those challenges?
Speaker 2 (21:41):
Yeah, I think there's a good chance. There's a good
chance you'll see litigation, both sort of international and domestic. So,
you know, other countries have already who've been subject to
tariffs thus far, have already you know, initiated proceedings at
the World Trade Organization. So we would expect, you know,
(22:02):
depending on what happens today, we would expect that other
jurisdictions that are affected today would likely do the same
the same sort of thing. So we think there'll be
sort of challenges at the international level. Uh. You know,
of course the wt O, uh, you know, primarily based
on actions taken by the United States. Litigation at the
(22:24):
WTO can only go so far because there isn't There
aren't any appellate judges at the wt O. But but nevertheless,
we expect that will actions will be filed there and
then domestic uh litigation. Yeah, we're we're we are expecting that.
We're expecting that. I think, you know, President Trump is
(22:45):
taking a sort of unprecedented action uh against you know,
friends and allies uh, as well as competitors. Uh. And
he's using statutes that haven't been used before. So so yeah,
I think that creates anvironment for legal challenges. Again, though
those legal challenges take a long time. You know, for example,
(23:07):
there is a legal challenge going on right now from
some of the Section three oh one China tariffs President
Trump imposed during his first term, and that litigation is
still pending in US courts. So you know, here we
are sort of six years later and that litigation is
(23:27):
still pending from Trump one. So we do expect litigation,
but both at the international and domestic level, but it
will not get resolved very quickly most likely.
Speaker 1 (23:39):
I think that's really safe to say. Yeah, it'll be
interesting to see what happens. As I said, at the outset,
this area is very dynamic. I don't think it's an
exaggeration to say every day seems to bring a new tariff,
a modification, or an update to existing policy. So in
this type of dynamic climate, how best can companies deal
with the changing landscape.
Speaker 2 (23:59):
Yeah, it's really true that announcements are made almost every day,
and sometimes multiple announcements a day, and sometimes they sort
of change or amend, you know, the previous day's announcements.
So so one of the things we do with clients
is say, don't we don't want to sort of chase
(24:20):
every announcement or you know, in other words, what we
want to do is really sort of step back from
this a little bit and see if we can see
the forest for the trees that while there's a lot
of announcements and you know, every day and the details
sort of do obviously matter. Stepping back, the question is,
(24:40):
you know, directionally, do we have a sense of where
the US is going? Because I think it's important to
remember that, you know, governments don't trade. What governments do
is provide incentives to companies who trade. And the question
then for companies is you know, what are the incentives
(25:00):
the US government is giving you? And this is you know,
one of the one of the issues that that companies
and our clients sort of have is you know, companies
are economically rational actors. They can sort of deal with
any set of incentives provided those incentives are clear and
(25:22):
long term. So what lots of companies are trying to
do now is figure out, well, what are the incentives
the US government giving? Are you know? Are they are
they you know? And and are they long term? You know,
if these tariffs are all you know, if they're imposed
today and go away tomorrow, because it's all about a negotiation,
(25:44):
that's not very long term. But if you think the
US is embarking on a higher tariff rate environment that
he might talk about a twenty five percent tariff, may
engage in negotiations, but then they result in the terror
of going down to five or ten percent. You know,
you can plan around that. So trying to figure out
(26:07):
whether these these changes in tariff policy are they sort
of short term or is there a sort of more
of a long term message here is what most companies
are trying to figure out right now.
Speaker 1 (26:21):
Sort Of I wonder if there's like a recipe for figuring.
Speaker 2 (26:23):
That out, A formula, Yeah, maybe maybe if.
Speaker 1 (26:28):
You have, if you had it published it, it would
be the most widely sought after formula.
Speaker 2 (26:34):
I think, yeah, that's right.
Speaker 1 (26:37):
And just before we wrap up, I know that you
periodically publish some information to for people, you know, the
general public to see about these terroriffs. Can can you
tell listeners how they access that?
Speaker 2 (26:54):
Sure? Yeah, I call them my dear friend's emails on
trade developments that I find that I find interesting. Yeah,
folks can get added to my distribution list by dropping
me an email at Ted dot Murphy at Sidley dot com.
They're also posted on my LinkedIn page and folks can
(27:19):
reach out to me through there as well.
Speaker 1 (27:21):
Great. Thank you so much, Ted for joining us
Host
Elliott Stein
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy And Charlamagne Tha God!
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.