CHPS Podcast Episode 4: Tariffs and Trade Impact

Join Chris White on the latest episode of CHPS of Insight as he chats with Kelsey J. Christensen, an attorney with Clark Hill's International Trade group and a Director of Clark Hill Public Strategies. This episode delves into the intricacies of tariffs, exploring their history, legal foundation, and the impact of recent changes introduced by the current administration. Learn about the role of national security, the International Emergency Economic Powers Act, and the ripple effects on products like steel, aluminum, and oil. Discover how foreign trade zones function within this framework and get insights into the strategies companies can use to manage their import duties amidst evolving policies. This discussion provides essential information for businesses to navigate the nuances of tariffs effectively.

Read the Clark Hill International Trade group’s news alert on FTZ, Death of foreign trade zones?  (published May 5, 2025) 

This podcast is intended for general informational purposes only and does not constitute legal or financial advice or a solicitation to provide legal services. The information in this podcast is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Listeners should not act upon this information without seeking professional legal counsel. The views and opinions expressed in the podcast represent those of the individual speaker only and are not necessarily the views of Clark Hill PLC.

Transcript

 This podcast is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this podcast is not intended to create and receipt of it does not constitute a lawyer client relationship. Listeners should not act upon this information without seeking professional legal counsel.

The views and opinions expressed in the podcast represent those of the individual.

speaker only and are not necessarily the views of Clark Hill PLC.  Hello everyone and welcome to CHPS of Insight, where we try to bring policy to practice. I'm your host, Chris White. I'm an attorney in our government contracts practice group, as well as a lobbyist with Clark Hill Public Strategies and Economist with Clark Hill Economics. And it's my pleasure today to welcome on Kelsey Christensen, who is an attorney in our international trade group.

Kelsey, why don't you give your a little bit of background about yourself and what we're here to talk about. Hi everyone. Thanks Chris for the, for the introduction. Happy to be here today to talk about tariffs and trade. There've been so many changes this year. I'm looking forward to getting into our conversation, but a little bit

about me. As you mentioned, I work in the Clark Hills International Trade Practice. I'm based here in Washington, DC and I also get to work closely with the public strategies folks, and we've been having very interesting conversations recently about tariffs, so there's a lot to dive into. No doubt, tariffs have been all over the news lately.

I feel like many people may think they know know tariffs and probably know just enough to be dangerous. But what, what is a tariffs where, or tariff? Where is a tariff? Where did it come from? How these things come about and why are they popping into the news so boldly right now? Sure. So tariffs are basically a tax that's paid by a US importer when they bring product into the United States Customs Territory, so into the US, basically, and they pay money at whatever the specific rate is.

There's usually a percentage rate a percentage tax rate when you bring in a product. And that rate can be different based on what type of product it is or which country it's coming from. Got it. So it's actually the whatever entity is, is I guess, receiving that product into the us. They're the ones who pay the tariff, not the, not the producer or not the company that's shipping it to the us.

Is that how it works? That's correct. Yep. The US importer of record is responsible for paying tariffs. And so where does the legal authority come from to do that? Is that from the executive branch or is that where does that, where does that fall out? The authority goes way back in our country's history to the Constitution.

The Constitution actually gives the power to Congress to regulate commerce with foreign nations. But over the last 80 years or so, Congress has delegated a decent amount of that authority to the executive branch. So what we're seeing in the news. Frequently right now is this executive branch President Trump, leveraging authorities that have been delegated to him by Congress.

Interesting. So that's why, I guess now turning into somewhat executive orders or executive action that's triggering some of these tariffs yeah. Take effect immediately upon an executive order, or is that more of a guidance and then someone else has to do something for that tariff to happen? Most of these executive orders include language in it directing the executive branch agencies, so like Department of Commerce or Customs and Border Patrol to, take their own action.

So a lot of the executive orders direct other agencies to act. Got it. And what products have you seen copy in the list for at least new tariffs or changes in tariffs you know, since, I guess since January we'll start there with the new administration, right? Sure. Yeah. So I, I guess as, as far as products that we've seen specifically have some changes since January steel and aluminum has been an interesting.

Area. So there were ex already existing tariffs in place under what's called Section 2 32 on imports of steel and aluminum products. So section 2 32 tariffs are basically tariffs that have a foundation in national security saying for some reason we need these tariffs on imports of steel and aluminum for national security purposes.

And we've had those tariffs in place on steel and aluminum since. 2018. But what we've seen recently this year was those tariffs were just expanded through executive order by President Trump to include a lot of what we call like downstream products or derivative products is another term you might have heard.

So those products are imports that are maybe a little bit more complex. You know, it's not just a simple raw piece of steel or aluminum. Maybe it's maybe it's a car part or an another product that you're buying that contains steel or aluminum within it. That's interesting. So it's so it's not just the product itself, it's what the product's transformed into.

Is that, are those tariffs then generally applied based on a specific country of origin for, say, steel and aluminum or just is that writ large? Across the globe. So it is, it's writ large across the globe. There are some possible, you know, exemptions for U-S-M-C-A content, so that's, that's content coming from Mexico and Canada.

That's a whole complex issue that we can get into another day if needed. But for the most part, the way that the section 2 32 tariffs on steel and aluminum apply, it's really globally.  Okay. And so that one those section two 30 twos that's as you said national security focused.

Mm-hmm. What other situations have you seen tariffs get triggered by? Is there, is there, you know, a, a list of list of the why or the how? Yeah. So, you know, earlier I mentioned that over the last 80 years, Congress has delegated a fair amount of its. Tariff making authorities to the executive branch.

And a lot of those delegations of power are really rooted in national security or emergency concerns. So another act that was passed by Congress is called the International Emergency Economic Powers Act. You might hear of that, talked about, being called a epa. And so this was a law that was passed in 1977 that gives the president broad authority to regulate commerce in response to national emergencies that have a foreign source, not contained within the US, but a foreign source.

And so early in this current administration, president Trump used IEPA authority to impose new tariffs on. Canada, Mexico, and China related to fentanyl as the source of the national emergency, having a foreign source. So there were new tariffs imposed on those three countries using this, this authority, the Emergency Economic Powers Act, IEPA authority.

And those tariffs were country specific tariffs, not product specific tariffs. Got it. That's interesting. I guess, so when your mind hears an emergency, you, you think generally probably, you know, typhoon or tsunami or earthquake but fentanyl presumably brought in based on the, you know, the increase in deaths caused by the drug being brought in.

So is that the first time it's been used to your knowledge for a, for a drug rather than a natural disaster? So, I mean, I, I will say it also the executive orders for Mexico also mentioned immigration, illegal immigration as part of the reasoning. So drugs and immigration are both definitely of concern to this administration.

But to your question, is this the first time that a EPA is being used in this type of way? I think so, to the best of my knowledge, it is. The, a EPA act used to, it came from a predecessor law that was called, oh, what was it called? I think it might've been the Trading with the Enemies Act. But there was a similar law that president Nixon was looking into use. In relation to currency manipulation. But this is really a novel use right now of IEPA and I do expect to see some challenges in the courts as to how President Trump is using this law.

I mean, that's something that we're starting to see come from the states. I, I did Google real quick and yes, it is the Trading, trading with the Enemies Act of 1917. So you, so you nailed it. Excellent. Thanks for checking. Yeah, well, not real time checked. So so now we've covered, obviously steel and national security looking at these natural disasters drugs and immigration falling under these emergencies I know I've seen in, in the news a lot about oil.

How do, how do tariffs  affect oil? What, where does that come from? What about oil are you seeing in the news? So I think Venezuela specifically was one that had popped up. But I know, you know, in, in different oil wars especially, whether when their price changes and, and battling back with some of the other countries that that's been talked about tariffs in a way to try to I guess level the playing field as far as cost, produce, or cost to get to the US to support US oil companies.

Yeah, sure. So there is, there is a new executive order that the Trump administration released in March of this year on Venezuelan oil. Exactly. And so this executive order, my understanding of this executive order is that it actually gives the Secretary of State. So Marco Rubio, it gives the Secretary of the State the authority to impose a 25% tariff on any product, not just oil, any product that's being imported into the United States from a country, from another country that is buying Venezuelan oil.

So in other words, this, the Venezuelan oil tariff means that the Secretary of State could decide to put a 25% tariff on. iPhones from China because China is buying, or if China is buying oil from Venezuela. So my understanding is right now this Venezuelan oil tariff has not actually created new tariff obligation so far, but it could, it's like a tool in the box that this administration has.

Maybe to engage in negotiations with some of those other countries that are buying oil from Venezuela. That's interesting. So it's it wouldn't be an, a tariff on the Venezuelan oil itself. It would be a tariff on other countries that are importers of Venezuela and oil to discourage the purchase of that oil.

 Right, right. No, that. A new tactic. And so I guess, you know, we'll have to see where that one, where that one pans out and we can certainly do a follow up once once or if it's used because that would, I can only imagine that would create a whole new perspective on tariffs in a way to discourage trade with other countries.

And that's quite the quite the tool to be used if you're trying to influence a country into some negotiations or in action. It's definitely something to watch. I was also surprised to see that authority was given to the Secretary of State. I often, when we talk about tariffs, we think more of Department of Commerce and the CBP for customs.

Absolutely. Yeah. No, and that, and that, that, I think that speaks to the perception that it is being used as a, a method of diplomacy rather than necessarily just a method of trade. Sure. Yes. And so with Terrace in general, pop across the, all the time. Various numbers are tossed out there, various values, new tariffs all that.

How do, how do new tariffs quote unquote new tariffs or, you know, follow on tariffs, interact with each other? Is this just setting a set value for the tariffs, or can there be multiple tariffs on the same commodity or the same country? Chris, I am happy to get into that. Before we do, I think there's one more tariff that we should cover, right?

Oh, yeah. I, yes. So another tariff that you're hearing in the news a lot is the term reciprocal tariffs. Oh, what are these, what are reciprocal tariffs? So, the Trump administration has decided to impose reciprocal tariffs on all, all, pretty much all imports from all countries in a way to make trade.

They have they described to be more fair, right? They want to treat other countries how? They think those countries are treating us so reciprocal. Right now those reciprocal tariffs are generally on a 90 day pause except for China. And so this is one where we've been hearing reciprocal tariffs in the news a lot is.

The back and forth with the US and China trade negotiations, the Trump administration imposed these reciprocal tariffs on China that were initially announced at a 34% reciprocal tariff rate, and then they were increased to 84% and are now at 125% rate for any imports coming in from China as the reciprocal tariff. And China has also retaliated against the US products being exported from our country over to China.

Hopefully this high 125% rate, or maybe this high 125% rate will come down. It seems like the current sense that I'm getting, the current atmosphere around trade is that this administration is signaling now that it may be engaging in talks with China. So I expect tariffs to stay, but.

Maybe we see some reduction in that reciprocal tariff rate for China. But Chris, you asked about how tariffs interact with one another, and that's a good question, and one that we're seeing a lot, a lot of companies have questions on. Because as, as you're gathering, you know, there's a lot of different tariffs, a lot of new changes that have been happening recently, and for the most part.

These tariffs are cumulative. So for the most part, these tariffs get added, stacked one on top of an another which mean that you can end up having a fairly high tariff rate for a single item that you imported.

Right? So it's not that just one of these tariffs applies if you are a company, if you're an importer here in the United States. You have to be thinking about all of the different tariffs that might apply. It's not just one. So usually a product is subject to just a general tariff rate. We talked about this at the very beginning of our conversation, right?

About what is a tariff? It's a tax that a company pays to import product into the us and there's usually a small tax to do that. Now you also have to add for many of these countries, you know, the fentanyl tariffs that we talked about, that gets added on to the general tariff rate. And for China, that has current, a currently active reciprocal tariff that also gets added on.

Now, there is an exception here with the steel and aluminum tariffs, generally tariffs are cumulative exception being, if your product is a section 2 32 steel and aluminum product, you are not paying a reciprocal tariff. Right now. You're paying instead of reciprocal Steeler aluminum in addition to the regular tariffs. It's complicated.

Let me draw you a picture. Simple. Lemme draw you a picture. It'll help. Yeah, yeah. No, that keeps it very simple. But that's, I guess. The the, the importance of having an expert to help explain it to someone and navigate, as you know, much like you want an accountant in the business finance world, you want someone who's an expert in national trade to make sure you know, you're, know what you're getting into and know how to navigate the system, right?

I think of it sometimes these tariffs like a sandwich, right? It's how many different things are you gonna add on to build your sandwich up? You're staffing one tariff on top of one another. But. Steel and aluminum tariffs and reciprocal tariffs. You can't put both those on the sandwich at the same time.

It's gotta be one or the other. That's kind of how I think of it in my head. Mm-hmm. I like that it's around lunchtime and so that's a Yeah. Perfect time to be thinking about building a good sandwich. Yep. And I guess there are probably some other exceptions to to both reciprocal tariffs or other you know stacking tariffs or section 2 32, so.

I think I saw that you all recently published an alert about FTZs and how FTZs interact now with these, with these tariffs. Do you wanna give a brief summary of that and, and we'll make sure to link it for people to, to read the article when it's full? Absolutely. I'm so glad that you asked about FTZs, so.

FTZs are foreign trade zones and it's, it's a system that the United States established a long time ago. I think dating back to the Great Depression and what these are, are zones essentially that the US decided to use as a tool to promote, manufacturing here in the United States, but still to allow certain customs and tariff benefits.

So when companies would choose to, they could import a product from abroad to a foreign trade zone. And historically, that product, at that time when it enters the foreign trade zone they didn't have to pay a duty . And companies could establish manufacturing facilities within these FTZs.

And so they could take, you know, raw materials, they'd import it to an FTZ, they didn't pay duties at that time, and could manufacture more complex products here, close to our borders. And so companies, built a lot of strategy around how to defer, reduce. Their customs and tariff liability through use of these FTZs.

And it also creates a lot of jobs here as well. But with the executive orders have come out recently. It changes how these FTZs are used and how effective they'll be for companies going forward. In short. When a company imports a product into an FTZ, now the tariff that applies when that product comes into the FTZ will remain binding even if that raw material or that product undergoes further manufacturing.

So. The duty rate that would apply when that product gets imported into an F-D-F-T-Z will remain binding. And it in effect makes it much more difficult for companies that are manufacturing in FTZs to kind of strategically.

Reduce their custom liability. Interesting.

So on the way to see topic and look into the horizon, I'd imagine there's quite a few things on your radar that you're, you're watching to see what'll happen. What's, what, what's your short term top three items that you think we gotta keep an careful eye on for, for tariffs?

Top three items. I think first we should keep our eye out for reciprocal tariffs many of which are on that 90 day pause. So we've gotta keep our eye out to see if the pause on reciprocal tariffs for countries other than China will expire and. Raise the tariff rates on pretty much all of our global trading partners.

So that's, do you know which date that 90 day lands on? Let's see, 90 days from April 9th. So 90 days, I think ends in early to mid-July. Yeah. July 8th. I think it'll. So yeah, shortly after the the, the long weekend. We'll we exactly what happens there, right? Yeah, exactly. So we'll see how that goes. So reciprocal tariffs, that's something I'm keeping my eye on. And then you asked for top three, but this other one is multi-part, so I'm gonna give you my top two here.

No worries. The other, the other thing that I am keeping my eye on right now overall is a handful of section 2 32 investigations that the president has ordered through executive actions. So Trump has issued a handful of executive orders. Directing agencies like the Department of Commerce, for example, to investigate certain products to figure out if imports of those products have some sort of national security implication under section 2 32, and if those products should be subject to additional duties.

Products that I am monitoring right now for possible additional tariffs are copper lumber. Pharmaceuticals, semiconductors, other critical minerals, and even some trucks or truck parts. So all of those different products have active section 2 32 investigations and we'll see how they play out. I am sure that I don't know which one would be probably more concerning to people, whether the pause to hit or these new investigations and, and people find themselves falling into that section 2 32 column.

Right, right. Exactly. We don't, yeah. The, the interaction between reciprocal tariffs in the section 2 32 is, is complex and something that is important for companies that are sourcing from abroad to consider what, how that could affect their industries. Sure. And then I guess from there, the, probably the industries or the, the companies that may be.

Indirectly affected, but most alert to it. I would think it was supply chain. And we've seen a lot of different events affecting supply chains, affecting pricing, delaying, you know shipments, et cetera. And I can only imagine and maybe you, maybe, you know, but how supply chains are either currently being affected or likely to be affected as this continues to go forward.

Absolutely. So one thing that we have seen a lot of honestly right now is companies hitting pause, right? There's been a lot of changes quickly over the last couple months, and a lot of companies, from what I have seen in my conversations, are taking a minute to assess the situation before making. Big decisions.

So some companies may be looking at moving their supply chain. You know, that's one of the goals of these tariffs is to do that, right? The administration is wanting to get supply chains out of, for example, China and bring them back home. But companies from what I've seen for the most part, are taking a pause, not making huge groundbreaking changes right now, given just the rapid changes that we've seen.

We're also seeing, you know, folks try to figure out how to, how to navigate the changing costs of doing business in this tariff environment. So folks that are kind of in the mid level of these supply chains if they are negotiating to get better prices from their upstream suppliers, they can help minimize their cost that way, and then also coordinate with their downstream purchasers.

Honestly price increases on that end of the scale. So these moving pieces on both sides, you know, everybody in the supply chain needs to figure out what works for them. 'cause if any of the supply chain isn't, if it's not working, then that chain breaks. You are not having a product move through the whole, manufacturing to shipment to final delivery.

Successfully. Absolutely. And that sounds like a lot of what you've been discussing and what you're discussing there falls into a, a category that is generally what, where we live advising your clients and advising clients and businesses on, you know, common pitfalls, legal risks, and the best way to minimize both.

So what advice do you have for people that you can give without giving legal advice now, or what should they be considering when they're talking to, you know, whatever expert they seek out? Absolutely. That's a good question. I, I do just want to, you know, briefly caution without, this is not legal advice, but there are a lot of pitfalls to consider if you are a company that's trying to avoid or minimize your, duty liability.

There are strategies that you can look at and discuss with your, legal counsel. But if strategies aren't done correctly and aren't done lawfully the companies could really put themselves at risk of severe penalties. The CBP is, you know, they are highly skilled at what they do and tracking imports into this country and changes in the supply chain.

And. You can't pull a fast one on 'em. You've gotta do things above board. I think to have the best chance of being a successful business. Sure. So presumably, like many things the, the risk of working until you get caught versus upfront compliance is probably not, not worth it here, it just isn't worth asking.

Right.

That makes, that makes a lot of sense. I guess before we, we call it a day here, any, any parting words of wisdom for people or, or any other thoughts you, you want to express about tariffs in, in the current state of trade?

There's a lot of moving parts to consider with tariffs with trade right now and how it's going to impact our economy. And I often get questions about what's next, and it's so hard to say. None of us really know what's next. What I can say is I think from conversations that I've had, everybody's doing their best to to comply to have their supply chains be successful.

And I generally think that whether you fall on the side of being a, a manufacturer here at home primarily, or importing, but not manufacturing or a mix of both. Everybody wants the same thing of having their. Businesses here be successful. And so I, I hope that whatever we see over the next few months can help a lot of folks achieve that.

That makes sense. And kelsey may be a little too humble to put it out there, but I know she's digging into and we're gonna do a part two where she can discuss a bit more on the interaction of tariff executive orders and the U-S-M-C-A and what people should expect based on that, whether there's a renegotiation or whether there's modification, or whether they find a way for the two to to live happily ever after.

So stay tuned for that and we'll make sure to update all of you when that happens. Absolutely. Thanks Chris. Thanks Kelsey. Appreciate it.    This podcast is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this podcast is not intended to create and receipt of it does not constitute a lawyer client relationship. Listeners should not act upon this information without seeking professional legal counsel.

The views and opinions expressed in the podcast represent those of the individual.

speaker only and are not necessarily the views of Clark Hill PLC.