Squire Patton: Trump Will Carve Out Firms From Tariff Hikes

Everett Eissenstat, former deputy director of the National Economic Council of the United States and a partner in Squire Patton Boggs' public policy group, was asked by a viewer of the law firm's webinar on the elections and "Preparing for an Uncertain Trade and Tariff Landscape" if the 10% tariff would apply to USMCA or Central America Free Trade Agreement member countries. "We candidly don’t know," he said.

Earlier in the week, Trump acknowledged that he provided exceptions to the Section 301 tariffs, for instance, when Apple told him that if they had to pay tariffs on smart watches, Samsung would take their market share, because they built their smart watches in Korea. He said he did so in exchange for a promise from Apple to open a factory in Texas.

International Trade Today asked the panelists if they believed Trump would be swayed by lobbying on tariffs from firms with significant manufacturing in the U.S., such as General Motors, Whirlpool or VW.

Eissenstat said, "More likely than not, Trump would look at things transactionally. He’s talked about using tariffs to drive manufacturing back into the United States."

David Stewart, a former majority staff director to the House Ways and Means Committee when Republicans controlled the committee, agreed that Trump is transactional with firms. "I think that also lends itself to approaching the Trump administration for carve-outs, exemptions, reductions through the lens of not necessarily the pure economics of what tariffs are doing, but really, kind of the transactional effects of those tariffs on U.S. business activity." He said he thinks the Trump administration will be open to hearing business-specific effects of the tariffs.

Eissenstat, who earlier served as chief trade counsel for both a Democratic and Republican chairman of the Senate Finance Committee, said he thinks the most likely avenue for imposing global tariffs would be the International Emergency Economic Powers Act, and legal challenges would follow. He doesn't know if the courts would give the White House deference on the decision. "The court case would take a long time, create a lot of unpredictability," he said.

While the scope of tariff action will vary wildly depending on who wins the White House, the demands for supply chain tracing are expected to be the same with either Kamala Harris or Donald Trump leading the executive branch, the experts said.

Ludmilla Kasulke, a lawyer with the firm who gives advice on trade policy to multinational corporations and foreign governments, told the webinar audience that compliance and supply chain awareness continues to get more important, whether due to Inflation Reduction Act benefits only available to supply chains avoiding China, the EU deforestation regulations, or the Uyghur Forced Labor Prevention Act.

"You are going to see strict implementation of UFLPA no matter who wins," Kasulke said. "The rebuttable presumption is challenging for anybody exporting from China now."

Kasulke said that between the critical minerals rules for the IRA and the new proposed rule on connected vehicles, autos have been at the forefront of higher supply chain tracing expectations. (She didn't mention forced labor in auto supply chains, but the Senate Finance Committee has shone a light on that issue, as well.)

"Autos being the point of the spear here, there’s no question," Eissenstat agreed. He said it's been such a globally interconnected industry for decades, so getting visibility across so many borders and parts is going to be a struggle.

Autos are also expected to be central in the conversations around renewing USMCA, which will begin next year but formally kick off in 2026. He said both Harris and Trump have used the term "renegotiation."

The rule of origin for autos traded under USMCA is still unsettled, he said, after a dispute panel siding with Mexico and Canada on how North American content is calculated.

He said the U.S. may push to change the ROO again in the renegotiation, so that it's not just where substantial transformation happens, but also, who owns the company where the parts or cars were made. He said that would be a "wholly new way to approach rules of origin."

He said it's critical for companies with North American trade interests to be engaged, but the significance of the renegotiation goes beyond just the region. "This will set a template," he said, adding that the USMCA is an incubator of new trade ideas for America. Existing trade agreements could be revised to manage geopolitical competition between China and the U.S. in the way the USMCA changes to manage that competition.

"It could affect you down the road," he warned. "I would watch this space very, very carefully."

The panelists noted that the Generalized System of Preferences benefits program has never been expired for this long. When asked by International Trade Today if they thought the tariff breaks would ever return, they expressed confidence they would.

Kasulke said, "It seems like it's going to come back. The question is, when, and on what vehicle. Is there a vehicle this year? Is there a vehicle next year? It sounds like they have a pay-for."

She added that although it seemed for a while like the Miscellaneous Tariff Bill would travel in tandem with GSP, lawmakers now feel the list of goods that qualify has become stale, and the data that was used to decide which goods to include or not "is just kind of outdated."

Scott Stewart agreed that GSP is not gone forever, but thinks it's more likely to move if another trade issue also can get a vote, perhaps the African Growth and Opportunity Act and Haitian trade preferences. "They're not expired yet, there's still some urgency to try to act before they expire."