Donald Trump's First Day Brings No Immediate Tariffs, but Warnings of Major Actions to Come
On his first day back in office, President Donald Trump refrained from implementing significant new tariffs under his flagship economic initiative. However, he made clear that historic new duties are imminent.
"We are considering 25% tariffs on Mexico and Canada," he stated while signing executive orders in the Oval Office, indicating that they could materialize soon.
"I think we are going to do it on February 1," Trump specified. He also suggested that comprehensive tariffs may be on the horizon but could occur further down the line, as all countries exploit the United States to varying degrees.
Regarding China, Trump declined to provide details on new tariffs, citing ongoing meetings and negotiations. Nevertheless, he emphasized that tariffs remain a viable option, even as both nations engage in discussions regarding social media app TikTok.
Trump stated that "if China were to reject [a TikTok divestiture deal], we can impose tariffs on China" as he signed an order preventing the attorney general from enforcing the law banning TikTok for 75 days. TikTok's parent company is the Chinese firm ByteDance.
During his campaign, Trump threatened tariffs as high as 60% on China and up to 20% on other trading partners. After his victory, he promised an additional 10% duty on China and 25% on Mexico and Canada.
On Monday, Trump signed an executive order establishing an "America First Trade Policy" that directed administration officials, including the United States Trade Representative, to "review and identify unfair trade practices by other countries and recommend appropriate remedial actions."
The initial delay in enacting tariffs on Trump's first day may have been intended to prevent market volatility, although experts cautioned that it does not dispel the possibility of major trade actions in the future.
The market reaction to Trump's initial move was mixed. While US stock markets were closed on Monday, S&P 500 futures rose, and the US dollar index initially dipped from a nearly two-year high amid signals of delayed tariffs, only to rebound following Trump's evening remarks.
Trump hinted at his broader plans in his inaugural address, vowing to "begin the overhaul of our trade system to protect American workers and families immediately."
"Instead of taxing our citizens to benefit other countries, we will impose tariffs and taxes on foreign countries to benefit our citizens," he added.
"What he's doing today is kicking that can down the road," said Jon Hilsenrath, founder of Serpa Pinto Advisory, in a Yahoo Finance interview prior to Trump's evening comments. "I think the markets are going to appreciate not seeing him come out swinging right away on tariffs."
However, numerous experts on Monday noted that this move may be temporary.
"A fight is coming," Eurasia Group founder and president Ian Bremmer told Yahoo Finance in an interview at the World Economic Forum in Davos, Switzerland. He highlighted China as the most formidable challenge, while deals may be possible regarding open disputes with nations such as Mexico.
Others concurred that an agreement with China is unlikely to avert a potential trade war between the world's two largest economies over the next four years.
"While we are certainly not taken by surprise by Trump's restraint today, we would nonetheless emphasize that we remain skeptical that the US and China will reach any meaningful 'Phase 2,'" wrote Andrew D. Bishop, a senior partner at Signum Global.
In November, Trump promised specific day one tariff action against Canada and Mexico, stating that on January 20, he would "sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States" due to his concerns about drugs and crime.
However, this did not materialize, at least not in the immediate hours following Trump's second inauguration. Trump has yet to outline the legal parameters of his likely future actions.
One controversial option is a move that would bring the 1977 International Emergency Economic Powers Act – and its sweeping powers – into play.
Trump and his team have examined this law, which empowers a president to invoke its authority "to deal with any unusual and extraordinary threat [to US national security or its economy] if the President declares a national emergency with respect to such a threat." The act then grants the president extensive authority and has long been seen as Trump's most aggressive opening move.
It is also one of Trump's least legally tested options, potentially exposing it to legal challenges.
Trump could also utilize other authorities such as Section 301 and Section 232 tariffs. These routes are more legally sound but may require Trump to proceed more cautiously and perhaps less aggressively.
An analysis from Capitol Economics on Monday suggested that Trump's tariffs are approaching and that market volatility may follow, even if his first hours back in office concluded without major incident.
"We believe that a significant degree of volatility will persist for some time yet," the analysts wrote. "Ultimately, we anticipate his first year in office to coincide with a continued rally in the US dollar and US equities."
On Monday, the new president also promoted his plans to establish an External Revenue Service because the substantial tariffs to come will, in his view, generate "huge amounts of money flowing into our Treasury."