Legal Alerts/24 Feb 2025

Update on Navigating the New Tariff Landscape

The global trade environment is becoming increasingly unpredictable amid rising geopolitical tensions and shifting alliances. Markets are grappling with heightened uncertainty as the United States appears to be distancing itself from traditional European partners while signaling a surprising openness toward Russia. Adding to the volatility are the recent elections in Germany, which could further reshape the EU's political and economic landscape. Against this backdrop, the Trump Administration continues to advance aggressive trade policies that are reverberating across industries worldwide. This update highlights the latest tariff measures introduced in February 2025 and their potential implications for businesses navigating this complex and evolving landscape.

In February 2025, the Trump Administration has continued to implement significant changes to U.S. trade policy. In addition to the tariffs imposed or scheduled to be imposed on China, Canada and Mexico that Borenius described in a legal alert dated February 6, 2025, the Trump Administration announced the following new measures:

Expansion of Section 232 Tariffs: On February 10, 2025, President Trump signed Executive Orders modifying existing tariffs on steel and aluminum imports. Effective March 12, 2025, a 25% tariff will apply to all steel and aluminum imports. Previous country-specific exemptions and quota agreements will be eliminated. Certain derivative products not previously covered are now subject to these tariffs.

Introduction of Reciprocal Trade Measures: On February 13, 2025, President Trump issued a memorandum outlining plans to impose “reciprocal” tariffs and other trade actions against countries with perceived unfair trade practices or significant trade imbalances with the U.S. The goal is to develop a “Fair and Reciprocal Plan” aimed at reducing the U.S. trade deficit and addressing unfair trade practices. Federal agencies are tasked with examining various trade impediments, including tariffs, subsidies, value-added taxes, and other policies that hinder American competitiveness. Reports from these agencies are due by April 1, after which the Secretary of Commerce and the U.S. Trade Representative will propose appropriate remedies to the President. This initiative underscores the administration’s commitment to recalibrating global trade relationships in favor of practices deemed fair to the U.S.

Fast Tack Review for Allies: On February 21, 2025, President Trump announced plans to implement a “fast-track” review process to expedite investments from allies and partners, with strict conditions to prevent ties to “foreign adversaries” like China, Russia, and others. While the specifics remain unclear, the process may include expedited reviews for investments over USD 1 billion and will ease access to U.S. assets based on an investor’s verifiable distance from foreign adversaries, requiring investors to carefully assess their connections to restricted countries.

The European Commission has stated that its response to announced U.S. tariffs on European steel and aluminum exports will trigger firm and proportionate countermeasures. However, the EU’s negotiation strategy remains to be seen. The EU has both sticks and carrots in its available toolbox:

De-escalation: As a first step, the EU will most likely seek the U.S. to abandon its plans to impose the tariffs by offering concessions. In this approach, the EU could commit to increasing U.S. liquefied natural gas imports and defense spending. The EU could offer to lower certain asymmetric tariffs and to foster a level playing field for both parties, such as the EU’s 10% tariff on cars compared to the U.S.’s 2.5% tariff.
Hard line: Were the negotiations to fail, the EU may resort to retaliatory tariffs, or use conventional trade defense instruments, or restrict U.S. access to EU markets by using the EU International Procurement Instrument. In addition, the EU has a new and powerful tool at its disposal, the Anti-Coercion Instrument (Regulation (EU) 2023/2675). The instrument, which has not been used to date, offers the broadest arsenal of measures to protect from economic coercion. The possible measures applied under the Anti-Coercion Instrument include, for example, import and export restrictions, restrictions on the provision of services, restrictions in the field of public procurement, or restrictions on intellectual property rights.

If you have any questions about this Legal Alert, please feel free to contact the undersigned or your regular Borenius contact.