The US government has released its official “America First” Trade Policy, and the changes listed represent a significant shift in focus for the US and its relationship to the international marketplace. With these changes on the horizon, it is worth examining and understanding some of the subject matter discussed in this policy, as knowing what is proposed in this document could be incredibly important for importers, exports, and international businesses of all kinds. 

To that end, we have gone through and highlighted a few of the key terms, institutions, and mechanisms referenced in this text, examining what they are and the possible benefits and challenges they pose to importers. If you are looking for some indication of what could be coming in the months and years to come, consider this a place to begin.

What Are Tariffs? 

The most immediate effect that this policy could have is the implementation of significant ‘tariffs’ on established trade partners. Tariffs are taxes placed on the imports or exports of goods from other nations in an effort to protect domestic industries. Sometimes referred to as protective tariffs, the goal is ultimately to slow the importation of external goods, with the reasoning being that if imported goods are more expensive, local goods will become more attractive to domestic buyers. Tariffs are historically at their most effective when protecting nascent industries, allowing these industries time and leeway to grow into their full potential.

One of the policy’s primary stated aims is to balance the perceived trade inequality between the US and its trading partners, primarily those with which the US maintains a notable ‘trade deficit,’ or put simply, countries in which the US has more imports than exports. 

What is De Minimus, and Could Its Revision Affect You?

Section 321, 19 USC 1321 is the statute that describes de minimis. De minimis is the threshold below which imported goods can be considered exempt from duties and taxes. With the exception of the newly resided de minimis allowance on Chinese goods, the current de minimis threshold applies to most goods valued under $800.. What this means is that, in most cases, an import of less than $800 could enter the country without paying the duty and import tax. There are, of course, exceptions institutionalized in current policies that will force a formal entry complete with proper filings, but generally speaking, de minimis applies. 

The America First Policy takes aim at this rule due to the perceived “loss of tariff revenues and the risks from importing counterfeit products and contraband drugs, e.g., fentanyl.” While the policy does not go into explicit detail about what kind of modifications could ultimately occur, it is clear that this is an early priority for the US government as some new regulations surrounding de minimus are already coming into effect. Namely, the de minimus eliminations that have come into effect for goods of China. 

What is China’s PNTR, and What Would Its Removal Mean?

PNTR stands for Permanent Normal Trade Relations, or as it was once known, the ‘Most Favored Nation’ status. It is a designation that is granted by the US to other countries that essentially ensures equal tariff treatment compared to other nations. China has had this status in the US and has been a member of the World Trade Organization since May 2000. 

The goal was that extending this designation might promote more liberal and fair trade practices with China. This status has been contested fairly consistently since its inception, with several attempts at waivers and caveats being introduced and subsequently shut down every few years. The latest being the America First Policy and the recently introduced Restoring Trade Fairness Act. This act, if passed, would mark the end of China’s PNTR status and would lead to greater scrutiny and potentially higher costs for imported Chinese goods. 

The stated benefits of this policy include a move away from Chinese products and towards a greater focus on American manufactured goods, reinforcing national security and providing greater competition in the international marketplace. It is viewed as a ‘reset’ of Chinese/US trade relations that builds on the tariffs established by the previous three administrations. 

The possible challenges are largely borne by US importers and consumers, who could end up paying increased prices for the goods they currently source from China. The removal of China’s PNTR status would signal a significant increase in tariffs on that country, with some experts suggesting that the rise could be as much as 40% on imports from China, which could necessitate a shift in sourcing and supply chains in a wide range of industries. 

The USMCA Review

On July 1, 2020, the North American Free Trade Agreement (NAFTA) was renegotiated into its current form, the United States-Mexico-Canada Agreement (USMCA/CUSMA/T-MEC). This agreement set out to update and alter the original arrangement between the US, Canada, and Mexico with key changes to adjust for the modern global marketplace. Crucially, it also had renegotiation built into the agreement itself, with 2026 being the chosen year for this reassessment. The America First Policy addresses preparation for this review. 

It is impossible to know what the challenges for an importer might be in this renegotiation. The stated goal is for CUSMA/T-MEC/USCMA to benefit Canada, Mexico, and the US in a host of different ways, and it is possible its renegotiation will fundamentally improve trade relations between North American countries, but it is equally possible that it will remain functionally identical for most industries. There’s no way to know. What is worth knowing is that this is coming.

If reading this through has made you uncertain about how the future is going to unfold in the world of global trade, that makes sense. This is, undeniably, a time of significant change for US trade relations, and there are going to be necessary adjustments needed to continue to thrive in the years to come. That’s where PCB can help.

Our Trade Advisory Team offers a wide range of relevant services to help your business stay the course even through choppy waters in the international marketplace. From Customs Valuation and Supply Chain Audits to Tariff Relief and Duty Drawback services, we have the tools you need at the ready. Get in touch today, and let’s prepare for what comes - together.