How to Manage the New Import Tariffs in the USA

Grimaldi Alliance

Knowledge Management

Jan 14 2025

Consequences and Remedies for Italian and European Companies

January 13, 2025 – Prepared by Melchionna PLLC Law Firm, New York

Is there a tangible risk for Italian and European companies exporting goods and services to the U.S., starting January 20, 2025, with the inauguration of the new Trump administration? This question concerns businesses operating in various sectors, including raw materials, manufacturing, fashion, food, beverages and alcohol, mechanics and components, and chemicals, to name just a few.

The Scenario

During his election campaign, Trump stated his intention to target China and Europe and to implement measures similar to those taken during his first administration. At that time, steel and aluminum, for example, were subject to tariffs of 25% and 10%, respectively. This time, however, Trump has pledged to impose generalized protectionist tariffs ranging from 10% to 20%. It is worth noting that Europe has already been threatened with new tariffs if it refuses to import U.S. energy products (coal, oil, and gas). Trump has also declared his intention to introduce 100% tariffs against the “BRIC” bloc (Brazil, India, China, South Africa, Egypt, Ethiopia, Iran, and UAE) if they decide to adopt a currency competing with the dollar.

1. Economic Forecasts in the Event of New Tariffs for Europe

Initially, new tariffs on goods and services imported into the U.S. would make these products more expensive for American consumers (an aspect that—according to many observers—could politically harm Trump in the long term), thus driving inflation higher.

Regarding the European economy, forecasts indicate that tariffs would further burden an already stagnant economy. According to economists at Citi Bank, undifferentiated 10% tariffs could reduce the GDP of the European area by 0.3% over two years. The value of European companies could decrease by 1% or 2% per share. Both institutional and individual investors have already shown signs of disinvesting from the European area and productive sectors most likely to be affected by tariffs, leading to a further tightening of credit availability. Occasional tariff exemptions would undoubtedly have a political justification.

Germany’s Economic Institute (IW) has calculated that Trump’s new tariffs would cost Germany approximately €180 billion over four years. For the French Center for International Economic Studies (CEPII), Italy is expected to suffer a GDP contraction of 1.20%.

These are the direct impacts. Indirect effects appear even more problematic: Trump’s promise to impose tariffs of up to 60% on Chinese goods could lead Asian companies to divert products initially destined for the U.S. market to Europe, resulting in lower prices for European end consumers and reduced profit margins for many European companies (notably, Chinese electric vehicles currently face a 100% tariff in the U.S.).

The prospect of retaliation is challenging and unlikely, as 25% of goods the EU imports from the U.S. consist of oil, coal, and natural gas—products unlikely to be subjected to new tariffs. The same applies to pharmaceutical products. Europe might consider commercial retaliation against China (as it has in the past), although some goods are already subject to high tariffs (for example, Chinese electric vehicles enter Europe with a 35.3% tariff).

2. What is the Political Scenario?

In U.S. law, only tariffs exist (unlike in Italian law, where both tariffs and duties are distinguished). According to many observers, Trump’s statements on new tariffs, both during and after his campaign, aim to force foreign companies and governments to renegotiate their positions. Tariffs, as is well known, have a political basis. Trump and his team have promoted tariffs through an extensive communication campaign via traditional and digital media, as well as social media. In doing so, they have sought to convince American consumers of the significant domestic benefits that tariffs will bring. However, most experts in economics and economic history do not agree with this prediction.

While Trump currently sees tariffs as an expression of “patriotic protectionism” and, above all, as a powerful tool for geopolitical purposes, it will ultimately be end consumers who decide on the efficacy of this policy. What matters for Italian companies exporting their products to the U.S. is to pay attention to short-term policies and recalibrate their commercial operations based on a clear understanding of the available options to maintain stability and continuity.

3. What Are the Legal Grounds?

Article I, Section 8 of the U.S. Constitution grants Congress exclusive authority to legislate on tariffs. However, over time, Congress has delegated this power to the President in certain circumstances. The President could invoke Section 301 of the Trade Act (1974) (as was done for new tariffs on Chinese goods); Section 232 of the Trade Expansion Act (1962) (as was the case for steel and aluminum imports); or Section 203 of the International Emergency Economic Powers Act (IEEPA), which is even faster since it does not require an investigation by federal agencies if the President concurrently declares a national emergency under the National Emergency Act (NEA).

The regulatory framework becomes even more complex when considering the provisions related to tariffs, including exemptions and appeals, sanctions, actions by CFIUS (the U.S. committee overseeing the admissibility of foreign investments), changes to nearshoring rules, and the renegotiation of current bi- or multilateral agreements (especially those with Canada and Mexico).

4. What Are the Impacts and Solutions to Best Prepare?

A significant number of Italian and European companies operating in the U.S. will likely need to assess whether their products and services will be subject to new tariffs. If so, they must quickly decide how to respond. Since the new Trump administration will select goods and services for new tariffs arbitrarily and unpredictably, the response time of affected companies will be crucial for competitiveness and success in the U.S. market. Companies that prepare a response plan today will be able to implement it and successfully navigate the next four years.

Diversified, well-tested, and tailor-made solutions are available.

For further information, please contact Melchionna PLLC Law Firm in New York.

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United States of America

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