In a bold and calculated move that could reshape international trade dynamics, President Donald Trump is reportedly considering a two-step approach to imposing a new tariff regime. Sources familiar with the discussions reveal that the administration is exploring rarely used legal provisions to deploy emergency duties immediately, while simultaneously launching in-depth investigations into its trading partners. The proposed plan, expected to be unveiled on April 2—dubbed by Trump as “liberation day”—could mark a significant escalation in the United States’ trade policy and signal a new era of reciprocal tariffs aimed at addressing long-standing trade imbalances.

A Two-Pronged Approach to Tariff Implementation

The emerging strategy centers on a phased approach to tariff imposition. According to people close to the matter, the first step would involve the immediate application of tariffs using emergency legal authorities, such as the International Emergency Economic Powers Act (IEEPA) or Section 338 of the Tariff Act of 1930. These statutes, though rarely invoked at such scale, would allow the president to hit trading partners with tariffs as steep as 50% on targeted goods. This rapid deployment of tariffs is intended to serve as a stopgap measure while the administration undertakes more formal and legally robust investigations under Section 301 of the Trade Act.

In parallel, Trump’s team is considering launching comprehensive investigations into the trade practices of foreign partners. US Trade Representative Jamieson Greer—a former aide to Bob Lighthizer during Trump’s first term—has reportedly been advocating for this investigative route. According to insiders, Greer sees this method as a way to establish a durable legal and policy framework that not only justifies the immediate tariff impositions but also lays the groundwork for a broader restructuring of US trade relations. While this investigative approach could take up to six months, it would rely on well-established legal precedents and could potentially offer a more measured, albeit delayed, response.

The Political and Economic Rationale

At the heart of these proposals lies a dual objective. On one hand, Trump has long complained about the “unfair” treatment of American industries by global trading partners. His criticism of trade imbalances—particularly those involving surplus exports by nations such as China, the European Union, and others—has been a recurring theme in his campaign rhetoric and policy proposals. On the other hand, recent comments from Trump suggest that the new tariffs may serve a dual purpose: they could also be used as a revenue-generating tool to fund planned tax cuts, offering a financial boost to domestic economic initiatives.

“Foreign countries have charged us so much that I’m embarrassed to charge them what they’ve charged us, but it’ll be substantial,” Trump stated shortly after announcing new tariffs on buyers of Venezuelan oil, a move that notably included China among its targets. This remark, reflective of his combative trade stance, underscores the administration’s intent to level the playing field while also tapping into a potential revenue source for domestic fiscal policy.

While the idea of using tariffs as a tool for raising revenue is not new, it marks a departure from previous tariff policies, which were often framed primarily as a tool of economic coercion rather than as a revenue-enhancing mechanism. By linking tariffs directly to the funding of tax cuts, the Trump administration appears to be aligning its trade policy more closely with domestic economic priorities—a move that could resonate with his base and with American industries that have long felt disadvantaged by existing trade imbalances.

Legal Tools and Options on the Table

Beyond IEEPA and Section 338, another legal avenue that has been discussed—albeit now considered a long shot—is Section 122 of the Trade Act of 1974. This provision would allow Washington to impose temporary tariffs capped at 15% for a period of up to 150 days. However, many experts suggest that this option may not be sufficiently robust to meet the administration’s objectives, given the scale and ambition of the proposed tariff changes.

Lawyers and trade experts note that the use of emergency powers to impose tariffs can be fraught with legal and diplomatic challenges. For instance, the invocation of IEEPA requires a clear demonstration of a national emergency in the economic or security realms—a justification that the administration would need to firmly establish in order to withstand potential legal challenges in US courts or at the World Trade Organization (WTO). Similarly, the use of Section 338 has rarely been seen in recent decades, and its application at such a high tariff rate could provoke significant pushback from affected trading partners.

Commerce Secretary Howard Lutnick, who has emerged as one of the administration’s chief negotiators in these discussions, has been notably vocal about the need to address trade surpluses and demand fairer practices from foreign governments. Lutnick’s rhetoric has been characterized by a mixture of economic nationalism and a call for negotiated deals—a stance that seems to be at odds with some elements within the administration that favor a more unilateral approach based on emergency legal powers.

Divergent Approaches Within the Administration

The debate over how best to implement the new tariff regime highlights a broader divergence within Trump’s inner circle. On one side is the more aggressive legal strategy favored by officials like Jamieson Greer, who stress the importance of launching thorough investigations into trading partners before taking punitive action. On the other side, figures such as Commerce Secretary Lutnick have shown a preference for a more immediate response that leverages emergency powers to impose tariffs right away, even as formal investigations are underway.

This split reflects a broader tension between those who see trade negotiations as a process that should be rooted in long-established legal norms, and those who advocate for the swift, decisive action that has come to define Trump’s approach to governance. The urgency with which the administration is pursuing these measures is evident in the rapid timeline for potential implementation. With tariffs on vehicle imports and other key sectors potentially being announced over the next few days, the international community is already mobilizing to respond.

International Reactions and Diplomatic Efforts

The prospect of immediate, steep tariffs has already sent ripples through global markets and diplomatic circles. Several nations are reported to be scrambling to offer concessions in a bid to secure exemptions or mitigate the impact of the new US measures. The United Kingdom, for instance, is weighing options to adjust its tax on US tech companies—a move that could be seen as an effort to curry favor with the Trump administration amid broader negotiations on trade and economic policy.

European Union trade commissioner Maroš Šefčovič is also scheduled to engage in talks with both Commerce Secretary Lutnick and US Trade Representative Greer. These discussions, set for Tuesday, are expected to address the potential impact of the new tariffs on transatlantic trade and explore avenues for compromise. EU officials have long been critical of the unilateral tariff measures proposed by the US in the past, and there is widespread concern that similar measures could spark retaliatory actions that would harm global trade relations.

In Asia, trading partners like China have also been closely monitoring developments. The potential imposition of tariffs—especially on high-value goods such as vehicles—could prompt China to adopt countermeasures, further escalating trade tensions between the two economic giants. Analysts warn that any significant shift in US tariff policy is likely to have far-reaching consequences, impacting global supply chains, commodity prices, and international investment flows.

Historical Context: Lessons from Previous Tariff Policies

The current debate over a two-step tariff regime is not without precedent. During his first term, President Trump’s administration faced similar challenges in its efforts to renegotiate trade deals and address perceived imbalances with key trading partners. The administration’s use of tariffs during that period was marked by a series of high-profile moves—including tariffs on steel, aluminum, and various goods from China—which generated significant controversy both domestically and internationally.

Critics of the earlier tariff policies argued that the unilateral imposition of tariffs risked triggering a trade war, disrupting global supply chains, and ultimately harming American consumers and businesses. Proponents, on the other hand, maintained that tariffs were necessary to protect American industries and to force foreign governments to engage in more equitable trade practices. The current proposals appear to be an evolution of this earlier strategy, but with a more nuanced and legally fortified approach.

By combining immediate tariff impositions with longer-term investigative measures, the Trump administration may be seeking to avoid some of the pitfalls of its earlier approach. The use of well-established legal tools—such as Section 301 investigations—could provide a stronger defense against potential challenges, both in US courts and at the international level. Furthermore, by framing the tariffs as part of a broader effort to generate revenue for tax cuts, the administration is attempting to appeal to both economic nationalists and fiscal conservatives.

Economic Implications and Market Reactions

The potential imposition of steep tariffs carries significant implications for both the US economy and global markets. In the short term, industries directly affected by the new measures—such as automotive manufacturing and technology—may face increased costs and supply chain disruptions. Companies that rely on imported components could see their profit margins squeezed, leading to higher prices for consumers and reduced competitiveness in international markets.

Conversely, proponents of the new tariff regime argue that the measures could provide a boost to domestic industries by leveling the playing field and reducing the impact of what they view as unfair trade practices. By protecting American manufacturers from foreign competition, the tariffs could encourage investment in domestic production and create jobs in sectors that have long been under pressure from global competition.

However, the broader economic impact is likely to be mixed. Economists caution that while tariffs may offer short-term protection for certain industries, they also risk undermining long-term economic growth by disrupting global supply chains and reducing international trade volumes. Moreover, any attempt to use tariffs as a revenue-generating tool carries inherent risks, as higher prices on imported goods can lead to inflationary pressures—a concern that has already been a topic of heated debate within the administration.

The financial markets have responded to the news with a mix of anticipation and caution. Investors are closely watching the developments in Washington, as any significant shift in US trade policy could have a ripple effect across global markets. While some market participants view the potential tariffs as an opportunity for US industries to regain a competitive edge, others fear that the measures could trigger a wave of retaliatory actions that would further complicate an already fragile global economic recovery.

The Diplomatic Chessboard: Navigating Global Reactions

Diplomatically, the proposed two-step tariff regime places the Trump administration in a delicate position. On one hand, the administration is determined to assert its authority and protect American interests by using every available legal tool. On the other hand, it must navigate the complex landscape of international diplomacy, where the imposition of steep tariffs could provoke significant backlash from key allies and trading partners.

Efforts to negotiate exemptions and concessions are already underway, as foreign governments scramble to mitigate the impact of the anticipated measures. The United Kingdom’s potential adjustments to its tax policies on US tech companies and the scheduled talks between EU officials and US trade representatives underscore the high stakes involved in this unfolding trade dispute. In this context, any unilateral action taken by the US could risk alienating longstanding partners and undermining efforts to forge a more cooperative global trading system.

The administration’s internal debate over the appropriate legal and policy tools to employ is also a reflection of these diplomatic challenges. While some officials argue for a swift and decisive approach based on emergency powers, others advocate for a more measured strategy that relies on thorough investigations and legal precedent. This internal tension is likely to shape not only the timing and scope of the tariffs but also the broader trajectory of US trade policy in the coming months.

Looking Ahead: Uncertain Outcomes and Strategic Risks

As the clock ticks toward the anticipated announcement on April 2, the world watches with bated breath. The potential introduction of a two-step tariff regime represents a significant escalation in US trade policy—one that could redefine the rules of international commerce and trigger a series of far-reaching economic and diplomatic repercussions.

For President Trump and his administration, the challenge lies in balancing the immediate need to protect American industries with the long-term imperative of maintaining stable and productive international relationships. The proposed approach—combining emergency tariff measures with more deliberate investigative processes—reflects an attempt to achieve this balance. However, the success of this strategy will depend on a range of factors, including the administration’s ability to justify its actions under domestic and international law, the responsiveness of foreign governments to negotiations, and the resilience of global supply chains in the face of disruptive policy shifts.

Critics warn that an aggressive tariff policy could ultimately prove counterproductive, leading to higher consumer prices, strained diplomatic ties, and potential retaliatory measures that would hurt US exports. Supporters, however, argue that decisive action is necessary to correct longstanding imbalances and to ensure that American workers and industries receive fair treatment in a global economy that has increasingly favored foreign competitors.

Conclusion: A Pivotal Moment in Global Trade Policy

The debate over the new two-step tariff regime encapsulates the broader tensions that have defined US trade policy in recent years. It is a debate over the appropriate balance between unilateral action and multilateral negotiation, between protecting domestic industries and engaging constructively with the global trading system. As President Trump and his team prepare to announce their plans on April 2, the stakes could not be higher.

The proposed measures have the potential to transform the US trade landscape—redefining relationships with key trading partners, reshaping supply chains, and setting a new precedent for how tariffs are used as both a policy tool and a revenue source. Yet they also carry significant risks, from legal challenges to diplomatic fallout, that could reverberate across the global economy.

In the coming weeks and months, all eyes will be on Washington as the administration finalizes its approach and begins the delicate process of implementing a strategy that could have lasting implications for international trade. Whether the two-step tariff regime will prove to be a masterstroke of economic policy or a catalyst for further global discord remains to be seen. What is clear, however, is that this pivotal moment in trade policy will be remembered as a defining chapter in the ongoing evolution of global economic relations.

As the world braces for the potential impact of these new measures, the interplay between domestic priorities, legal constraints, and international diplomacy will continue to shape the narrative of global trade for years to come. In this high-stakes environment, the coming announcement on April 2 is not just another policy shift—it is a clarion call to the world that the United States is ready to assert its vision of fair trade, even if it means rewriting the rules of the global economic game.

Ready to take your career to the next level? Join our dynamic courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT  , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

1st April, 2025