Making Sense of the Trump Trade Agenda

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Feb. 7, 2025
By: David G. Forgue

The first three weeks of the second Trump Administration have brought action on the trade front that has confused many people. Additional tariffs being applied to Chinese imports was not very surprising and restrictions on de minimis shipments have been in the wind for a while. However, trade spats with allies Colombia, Mexico, and Canada left many people unsure what to expect next.

There is some indication that different countries may become targets for tariffs for reasons unrelated to trade. For instance, at least one advisor has described the tariff actions against China, Canada, and Mexico as part of a drug war (presumably addressing fentanyl imports) rather than a trade war. This matches the emergency declarations that were the legal basis for those tariffs being issued. It is also likely that immigration concerns could drive some trade action.

However, this administration is highly focused on managing trade with countries that run consistent trade surpluses with the United States. This is clear from statements made by current advisors and the President himself. Finding policy mechanisms to lower the trade deficit was also a theme in the confirmation hearings for the United States Trade Representative position. While the size of the trade deficit has been a political concern in the past, it is not clear that there has been an administration as focused on the deficit as a metric of “good” trade in at least 80 years.

In an op-ed piece in the New York Times former United States Trade Representative Robert Lighthizer argued for a fundamental reconfiguration of the global trade world to address policies that lead to structural trade deficits for the Unted States. This is significant because Lighthizer is widely seen as remaining influential in the administration even while not having a formal role. In the op-ed Lighthizer argues that "countries with democratic governments and mostly free economies should come together and create a new trade regime. This new system, formalized by agreement, would focus on the key principle of balance for the parties involved in the exchange."

The piece itself makes a variety of arguments in support of trade that is, over time, more-or-less equal between countries. For importers and exporters in the United States the important take away is that the Trump Administration is likely to act against countries with persistent trade surpluses with the United States. As companies try to build competitive, robust, and resilient supply chains, understanding this organizing principle for the administration’s trade actions is one piece necessary to the analysis.

The presence (link downloads and Excel file from the U.S. Bureau of Economic Analysis) of trade deficits with some countries is well-publicized. For instance, the United States has large and persistent trade deficits with China, Mexico, Vietnam, South Korea, Japan, Ireland, Canada, Germany, Taiwan and other countries. Some of these countries have already started the discussion about their trade surplus with the United States. Others are likely to soon.

Less publicized in the United States is those countries and regions with which the United States runs a persistent trade surplus. These include the DR-CAFTA bloc as a whole, the United Kingdom, South and Central America as a whole, Australia, and some countries in Europe. While the EU as a whole has a very large trade surplus with the United States, the Netherlands and Belgium have a trade balance that favors the United States.

While running a trade deficit with the United States is not a guarantee of immunity from targeted trade actions (see Colombia’s experience), it does appear to lessen the odds of targeted trade action. Adding the balance of trade status with respect to the United States to part of site evaluation and planning has become necessary and appears likely to remain necessary for the foreseeable future.

As you evaluate your next steps in building competitive, stable, and resilient supply chains do not hesitate to reach out to any Barnes, Richardson & Colburn attorney. We are here to help navigate the trade landscape and potential trade changes.