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November 6, 2024
2024-2048

United States election outcome — potential impact on global trade

  • Implications of the United States presidential election for purposes of global trade and tariffs are now at the forefront of economic discussions around the world.
  • This Global Trade Alert highlights potential changes and some considerations for affected businesses.
 

Executive summary

The Republican candidate, Donald Trump, has secured the electoral votes needed to become the 47th President of the United States (US). Trump will officially take office on 20 January 2025.

The implications of the US presidential election for global trade and tariffs are now at the forefront of economic discussions around the world. The US plays a pivotal role in shaping international trade dynamics and the outcome of this election is set to have a significant impact on trade policies, global partnerships, tariff structures and the overall economic landscape, both domestically and abroad.

Election's influence on trade and tariffs

The Executive Branch of the US government has wide-ranging authority to modify tariff rates and impose trade remedies on the basis of national security or economic injury, including under Section 232 of the Trade Expansion Act of 1962, Section 201 and Section 301 of the Trade Act of 1974, and the International Emergency Economic Powers Act. Although legislation has previously been introduced to reassert greater congressional authority over trade policy, it is unlikely that Congress will meaningfully roll back presidential powers related to trade and tariffs. As a result, Trump is likely to have sweeping authority to implement significant trade and tariff policy priorities.

During Trump's first term as president (20 January 2017 to 20 January 2021), his administration's trade policy and use of tariffs marked a significant shift in the US approach to international trade. Trump continued to make tariffs a critical part of his presidential campaign in 2024. During his campaign, Trump stated the desire to impose tariff of at least 10% on all goods being imported into the US and to target additional tariffs on countries like China and Mexico.1 Trump also has criticized the multilateral trading system and discussed a potential withdrawal from the World Trade Organization.2

Trump's forthcoming presidential term also offers him a chance to reshape the US-Mexico-Canada Agreement (USMCA). The USMCA was signed in 2020 during Trump's first presidential term and is set to expire in 2036, unless extended through a review process beginning in 2026. The USMCA's sunset clause introduces a "doomsday clock" mechanism, mandating a review every six years to decide on an extension. If not extended, annual reviews continue until the expiration date. Trump has expressed a desire to invoke the six-year renegotiation provision.3 Ongoing disputes are likely to be discussed during the potential review process, including disagreements over automobile rules of origin, Mexico's energy policies and the treatment of genetically modified agricultural products. Moreover, Trump will likely seek to raise concerns about indirect market access for Chinese goods flowing through Mexico and benefitting from the USMCA agreement.4

Actions for businesses

Immediate actions to consider for companies that import into the US include:

  • Gain a comprehensive understanding of both financial and physical flows, as well as the import duties spent, to assess the potential duty impact in case new tariffs are implemented
  • Assess current domestic or alternative sourcing, first sale for export, duty drawback and restructuring operations
  • Develop a proactive strategy based on a thorough understanding of customs regulations to navigate the complexities of tariffs and manage their impact effectively
  • Keep up with the latest news and developments in trade policies, and stay adaptable to quickly respond to changes in trade regulations and tariff rates
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Endnotes

1 Reuters. (2024 November 4). "Trump's tariffs would reorder trade flows, raise costs, draw retaliation." Reuters. 

2 AP News. (2024 February 16). "Trump administration blocks selection of Ngozi Okonjo-Iweala as WTO leader." AP News.

3 The Wall Street Journal. (2024, November 4). "Trump's trade threat to Mexico." The Wall Street Journal. 

4 Id.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United States), Global Trade

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

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