Tariffs, Trade, and Turmoil: The Legal and Social Impact of Trump’s Latest Economic Gambit

On February 1st of 2025, just over a week after taking office, President Donald Trump announced the imposition of tariffs on imported products from Canada, Mexico and China.[1] At a 25% tariff for products imported from Mexico and Canada (with a 10% tariff specifically on Canadian energy resources), and at a 10% for products imported from China.[2]

Under the subtitle “addressing an emergency situation”, the White House reported on the new tariffs.[3] The International Emergency Economic Powers Act (IEEPA) grants the President the power to exercise extraordinary powers to deal with unusual and extraordinary threats with an international source.[4] In this instance, President Trump stated that the influx of illegal drugs and immigration constituted such a threat, justifying the imposition of tariffs under the IEEPA, citing this act in an unprecedented way by exercising this power against the United States’ three major trading partners.[5]

Although supported by domestic law under the IEEP, Trump’s tariffs could be challenged at an international level. Articles I and II of the General Agreement on Tariffs and Trade (GATT) require non-discriminatory trade policies in between WTO nations and a duty to comply with agreed maximum tariff levels.[6] The violations of the GATT could lead to the member governments affected — and in the case of China[7] — filing formal complaints with the WTO and starting a process against the U.S.[8] In addition to GATT violations, the tariffs imposed by President Trump could potentially bring consequences to the U.S. under the United-Mexico-Canada Agreement (USMCA). USMCA is a trade agreement between the three North American countries designed to modernize and strengthen economic ties,[9] that allows, among other things, contracting parties to invoke dispute resolution mechanisms against each other.[10] Accordingly, Canada and Mexico could exercise this power to challenge the U.S. tariffs.

Beyond the legal implications, the tariffs risk damaging trade relationships, triggering economic countermeasures, and weakening the global trade system. If challenged in U.S. courts or the WTO, the new Trump administration may face pressure to justify these measures or risk legal defeats that could undermine the credibility of its trade policies.

In an attempt to protect the American people from drugs and immigrants crossing the border, President Trump may be inadvertently impacting the economic well-being of American families: raising consumer prices, increasing taxes, reducing salaries, and reducing employment. Raising consumer prices: when tariffs are imposed on foreign product the cost is shared among the exporter, the importer and the consumer. This means that at a higher tariff price, higher is the product price for the consumer.[11] Increasing taxes: The $79 billion in higher tariffs translate to an average annual tax increase of $625 per U.S. household before behavioral adjustments.[12] Reducing salaries: The tariffs are expected to lower after-tax incomes by an average of 1% in 2026, with the top 1% experiencing the smallest decline at 0.8%.[13] Reducing employment: Alongside the tariffs already implemented during the Biden administration, the new tariffs imposed by Trump are predicted to reduce employment by 142,000 full-time equivalent jobs.[14] While intended as a measure to safeguard national security and curb illegal immigration, Trump's tariffs may have unintended consequences that ripple through the U.S. economy. Higher consumer prices, increased tax burdens, and job losses could place significant financial strain on American households. Rather than fortifying economic stability, these policies risk undermining the very prosperity they aim to protect, leaving families to bear the weight of economic uncertainty.

In conclusion, while President Trump’s tariffs are framed as a national security measure under the IEEPA, their legal and economic ramifications raise serious concerns. The tariffs face potential legal challenges under both GATT and USMCA, risking disputes at the WTO and straining trade relations with key partners. Beyond the legal sphere, the economic fallout could be significant: raising consumer prices, increasing tax burdens, lowering wages, and reducing employment. Rather than achieving economic security, these protectionist measures may ultimately weaken U.S. prosperity, placing a financial strain on American households and undermining the very stability they seek to protect.

[1] The White House, Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico, and China (Feb. 1, 2025), https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/ (last visited Feb. 7, 2025).

[2]Id.

[3] Id.

[4] 50 U.S.C. §§ 1701–1708 (2018).

[5] Atlantic Council Experts, Experts React: Trump Just Slapped Tariffs on Mexico, Canada, and China. What's Next?, Atlantic Council (Feb. 1, 2025), https://www.atlanticcouncil.org/blogs/new-atlanticist/experts-react-trump-just-slapped-tariffs-on-mexico-canada-and-china-whats-next/.

[6] General Agreement on Tariffs and Trade, arts. I–II, Oct. 30, 1947, 55 U.N.T.S. 194.

[7] World Trade Organization, China Initiates WTO Dispute Complaint Regarding US Tariff Measures, https://www.wto.org/english/news_e/news25_e/ds633rfc_05feb25_e.htm. (last visited Feb. 5, 2025).

[8] World Trade Organization, Dispute Settlement, WTO, https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm (last visited March 17, 2025).

[9] United States-Mexico-Canada Agreement, U.S.-Mex.-Can, preamble, July 1, 2020, 134 Stat. 11.

[10] United States-Mexico-Canada Agreement, U.S.-Mex.-Can, chapter 31, July 1, 2020, 134 Stat. 11.

[11] Matthew Rooney, Tariffs Are Great – If You Like Raising Prices, Undermining Jobs, and Inhibiting Innovation, The Catalyst, https://www.bushcenter.org/catalyst/opportunity-road/rooney-tariffs-rising-prices (last visited Feb 7, 2025).

[12] Erica York & Alex Durante, Trump Tariffs: Tracking the Economic Impact of the Trump Trade War, Tax Foundation (Mar. 7, 2025), https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/.

[13] Id.

[14]Id.

This is a student blog post and in no way represents the views of the Fordham International Law Journal.