For businesses, the immediate tariff and preferences remains unchanged. The more significant consequence is long-term uncertainty over the future rules governing trade between the three countries. Companies with integrated regional supply chains may need to reassess investment plans, sourcing strategies, and risk management as negotiations unfold.

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The Big Picture

USMCA has governed trade among the United States, Canada, and Mexico since 2020, replacing the North American Free Trade Agreement (NAFTA). The agreement preserved tariff-free trade across most goods while modernizing provisions covering digital commerce, intellectual property, labor standards, and automotive manufacturing.

Article 34.7 requires the three countries to conduct a joint review six years after the agreement entered into force. Rather than extending the agreement for another 16 years, the United States has chosen to begin the review process. Unless all three governments ultimately agree to renew or replace the pact, annual reviews will continue through 2036, creating a prolonged period of negotiation rather than an immediate withdrawal.

Administration officials have indicated they intend to use the review to pursue changes aimed at strengthening U.S. manufacturing, increasing North American production, reducing dependence on strategic imports from China, and addressing perceived trade imbalances within the region.

Why This Matters

Unlike a traditional trade agreement expiration, this decision creates uncertainty rather than immediate disruption.

Companies may continue operating under existing USMCA rules for now, but many strategic business decisions—including manufacturing investments, supply contracts, infrastructure projects, and acquisitions—are made years before facilities become operational. A negotiation process that could extend for a decade complicates long-term planning and may encourage businesses to delay major investments until there is greater clarity about the future trade framework.

Potential Business Issues

Changes to Rules of Origin

The administration has signaled that strengthening North American manufacturing requirements will be a central negotiating objective, particularly for automobiles and advanced manufacturing.

Higher regional content thresholds or revised qualification standards could require manufacturers to:

• increase North American sourcing;

• restructure supplier relationships;

• relocate portions of production; or

• reduce reliance on imported components from outside the region.

While these changes could increase production costs for some manufacturers, they may also encourage additional investment in North American production capacity.

Capital Investment Decisions

Many multinational companies selected production locations in Mexico or Canada based on the expectation of long-term stability under USMCA.

An extended period of uncertainty may influence decisions involving:

• new manufacturing facilities;

• factory expansions;

• distribution centers;

• supplier contracts;

• cross-border infrastructure; and

• mergers and acquisitions.

Companies may seek greater flexibility in future investment decisions until negotiations produce a clearer picture of the long-term trade environment.

Customs and Trade Compliance

Trade compliance teams should anticipate the possibility of evolving requirements involving:

• rules of origin;

• customs documentation;

• regional value content calculations;

• labor certification standards; and

• import compliance procedures.

Organizations that rely heavily on USMCA preferences may need to increase monitoring of regulatory developments and prepare for adjustments to internal compliance systems.

China-Related Supply Chains

One likely objective of the negotiations will be strengthening provisions designed to prevent North American supply chains from being used to circumvent U.S. trade measures on goods originating in third countries, particularly China.

Businesses that depend heavily on Asian suppliers should evaluate whether future changes to regional value content requirements or enforcement mechanisms could affect their eligibility for USMCA benefits.

Sector Implications

Automotive

Vehicle manufacturers and suppliers are likely to face the greatest scrutiny as negotiators revisit regional content requirements, battery sourcing, labor standards, and other production rules.

Manufacturing

Industrial manufacturers with integrated North American operations may need to reassess sourcing strategies and long-term capital allocation decisions.

Agriculture

Agricultural producers should monitor negotiations involving market access, sanitary and phytosanitary standards, and longstanding bilateral disputes over specific commodities.

Energy

Cross-border investment in pipelines, electricity infrastructure, refined products, liquefied natural gas, and critical minerals could become more difficult to evaluate if broader trade negotiations introduce additional regulatory uncertainty.

Technology and Electronics

Manufacturers that rely on globally sourced components should monitor potential revisions affecting regional value calculations and treatment of imported inputs.

What Companies Should Do

Companies should use the review period to strengthen strategic planning rather than wait for negotiations to conclude.

Recommended actions include:

• Review exposure across North American supply chains.

• Model alternative tariff and sourcing scenarios.

• Evaluate dependence on production in Mexico and imported inputs from Asia.

• Monitor proposed revisions to rules of origin and customs requirements.

• Reassess long-term capital investment assumptions.

• Participate in industry consultations where appropriate.

• Maintain flexibility in supplier relationships and manufacturing strategies.

For companies, the announcement signals continued government support for domestic mining, mineral processing, recycling, and strategic supply-chain investments. Businesses operating in automotive, battery manufacturing, electronics, aerospace, defense, and energy should expect additional public financing opportunities, tighter supply-chain transparency requirements, and increasing geopolitical competition over critical mineral resources.

The Big Picture

Critical minerals—including lithium, nickel, rare earth elements, graphite, cobalt, and other strategic metals—have become central to economic security and national security.

Western governments have grown increasingly concerned about concentrated global supply chains, particularly China’s dominant position in mining, processing, and refining many of these materials. Recent export restrictions and geopolitical tensions have heightened concerns that critical minerals could become tools of economic coercion.

The G7 initiative moves beyond individual national strategies by creating coordinated mechanisms for investment, market monitoring, crisis response, and industrial cooperation.

What Happened

At the G7 Summit in France, leaders announced several new initiatives:

• Creation of a Critical Minerals Alliance to coordinate industrial development across member countries.

• Establishment of a crisis-response platform, working with the International Energy Agency (IEA), to monitor markets, share data, identify supply disruptions, and provide early warning of market distortions.

• Increased coordination among export credit agencies and development finance institutions to finance mining, processing, refining, recycling, and related infrastructure.

• Development of harmonized traceability systems beginning with lithium and nickel to improve supply-chain transparency.

• A target to reduce dependence on any single non-G7 supplier for rare earths and permanent magnets to below 60% by 2030, with a longer-term ambition of reducing that figure to 50%.

• Recognition that nearly 200 critical minerals projects representing approximately €64 billion in announced investment have already been launched during 2026. (Reuters)

Why This Matters

Economic Security

The initiative reflects a broader shift toward treating critical mineral supply chains as strategic infrastructure rather than simply commercial markets. Governments increasingly view secure access to critical minerals as essential for maintaining industrial competitiveness and reducing geopolitical vulnerabilities. (G7/G20 Documents)

Industrial Policy

Rather than relying solely on market forces, G7 governments are signaling greater willingness to coordinate investment, financing, procurement, and industrial development across allied economies.

Energy Transition

Demand for critical minerals is expected to continue rising as deployment expands for:

• Electric vehicles

• Battery storage

• Renewable energy

• Grid infrastructure

• Artificial intelligence data centers

• Advanced electronics

• Defense technologies

Building diversified supply chains has become a prerequisite for achieving both energy security and decarbonization objectives.

Business Impact

Mining and Processing

Mining companies and mineral processors could benefit from expanded government financing, loan guarantees, and export-credit support for projects located within G7 countries and trusted partner nations.

Manufacturing

Manufacturers may gain more diversified sources of supply over time, reducing exposure to geopolitical disruptions. However, additional reporting and traceability requirements could increase compliance obligations.

Automotive and Battery Companies

Automakers and battery manufacturers are likely to see increased incentives to secure long-term supply agreements, diversify suppliers, and invest in recycling capacity.

Technology and Defense

Semiconductor, electronics, aerospace, and defense firms may benefit from improved access to strategically important minerals but should expect continued scrutiny of sourcing practices.

Macro Impact

The initiative reinforces several broader trends:

• Expansion of industrial policy among advanced economies.

• Continued movement toward “friend-shoring” and allied supply chains.

• Greater public-sector involvement in strategic commodity markets.

• Increased competition with China over critical mineral production, processing, and technology.

• Higher investment in refining, recycling, and downstream manufacturing outside traditional supply centers.

While diversification will likely improve long-term resilience, developing new mines and processing facilities typically requires years of permitting and construction, meaning supply constraints could persist in the near term. (G7/G20 Documents)

What Companies Should Do

Companies with exposure to critical minerals should consider:

• Reviewing supply-chain concentration and geopolitical risk.

• Diversifying suppliers where feasible.

• Evaluating opportunities to participate in government-supported critical mineral projects.

• Monitoring evolving traceability and sourcing requirements.

• Assessing long-term procurement strategies, including recycling and secondary supply.

• Incorporating critical mineral risks into broader enterprise risk management and capital investment planning.

Speaking at the Economic Club of New York on June 23, Bessent argued that decades of globalization and growing foreign dependencies weakened the nation’s economic resilience. The administration’s approach seeks to integrate trade, tax, industrial, financial, and technology policies into a broader national strategy focused on reducing strategic vulnerabilities while supporting long-term economic growth. Together, they represent an effort to align economic policy more closely with national security objectives while encouraging domestic investment and reducing strategic dependence on foreign competitors.

Although many of the policies are already underway, the speech provides the clearest statement to date of the administration’s economic doctrine and signals how Treasury intends to evaluate future policy decisions.

The Five Principles

1. Economic Security Is National Security

The administration argues that economic policy should serve national strategic objectives rather than operate independently of them. Treasury emphasized reducing dependence on geopolitical rivals, strengthening domestic manufacturing capacity, protecting critical industries, and ensuring that supply chains can withstand disruptions caused by wars, pandemics, economic coercion, or foreign chokepoints.

Rather than requiring complete domestic production, the administration advocates diversified supply chains combined with sufficient domestic capacity to protect essential industries.

2. Reciprocal and Strategic Trade

Treasury reaffirmed support for a more reciprocal approach to international trade. According to Bessent, U.S. trade policy should:

• Seek reciprocal market access.

• Protect American firms from discriminatory treatment.

• Reduce persistent trade imbalances.

• Support domestic manufacturing investment.

• Align trade policy with broader national security objectives.

The administration argues that economic openness should not come at the expense of strategic vulnerabilities.

3. Secure and Resilient Supply Chains

A central theme of the speech was rebuilding supply-chain resilience.

Treasury identified several priorities:

• Diversifying sourcing away from concentrated foreign suppliers.

• Expanding domestic production of critical goods.

• Reducing dependence on geopolitical competitors.

• Protecting strategic industries from economic coercion.

• Maintaining sufficient domestic industrial capacity during crises.

The administration emphasized that resilience—not complete self-sufficiency—is the policy objective.

4. Financial Leadership Through Responsible Innovation

Treasury reaffirmed support for financial innovation while emphasizing that new technologies must strengthen—not undermine—the U.S. financial system.

According to the speech, innovation should:

• Reinforce the global role of the U.S. dollar.

• Improve efficiency within financial markets.

• Expand access to financial services.

• Preserve market integrity.

• Meet standards for transparency, security, consumer protection, and law enforcement access.

The administration suggested that innovation will be encouraged only when it advances U.S. strategic interests and financial stability.

5. Economic Policy Must Advance American Competitiveness

Bessent argued that tax, regulatory, industrial, and financial policies should work together to encourage private investment, capital formation, innovation, and domestic production.

Rather than viewing economic growth and national security as separate goals, Treasury framed them as mutually reinforcing objectives that support long-term prosperity and geopolitical strength.

Why It Matters

The speech signals that the administration increasingly views economic policy through a strategic competition lens. Future decisions involving tariffs, export controls, tax incentives, industrial policy, investment screening, and financial regulation are likely to be evaluated based not only on their economic effects but also on their contribution to national resilience and security.

For multinational businesses, this suggests continued emphasis on supply-chain diversification, domestic investment incentives, critical-industry protection, and closer alignment between commercial strategy and U.S. national security priorities.

Business Implications

Companies should expect continued policy attention in several areas:

• Supply-chain resilience and domestic sourcing.

• Strategic manufacturing investment.

• Critical minerals and industrial capacity.

• Trade reciprocity and tariff policy.

• Financial technology regulation.

• Sanctions enforcement and anti-illicit finance measures.

• Protection of sensitive technologies and strategic industries.

Businesses with global operations may increasingly need to assess geopolitical risk alongside traditional commercial considerations when making investment and sourcing decisions.

Despite parliamentary approval, significant uncertainty remains. Ongoing disputes over steel and aluminum tariffs, digital regulation, forced labor-related trade measures, and potential new U.S. investigations could result in additional tariffs and trade restrictions. For businesses engaged in transatlantic trade, the agreement provides short-term stability but does not eliminate the risk of future trade disruptions.

What’s in the Agreement

The vote represents the most significant effort in recent years to stabilize U.S.-EU trade relations after a period marked by escalating tariff threats and legal challenges.

Under the agreement:

• The EU will eliminate tariffs on U.S. industrial products and selected agricultural goods.

• U.S. tariffs on many European goods will remain in place.

• Duty-free access for U.S. lobster exports to Europe is extended for five years.

• EU concessions are scheduled to expire on December 31, 2029, unless renewed.

The agreement was driven in part by concerns that failure to ratify the deal could trigger higher U.S. tariffs on European automobiles and other exports.

What Happened

The European Parliament approved the agreement by a vote of 440-151 after multiple delays.

The original framework negotiated between President Donald Trump and European Commission President Ursula von der Leyen established a 15 percent tariff rate on EU exports to the United States. However, subsequent legal challenges complicated implementation after the U.S. Supreme Court ruled portions of the tariff framework unlawful.

In response, the Trump administration relied on emergency authorities to impose temporary tariffs, resulting in effective tariff rates that exceed 15 percent on some European products, including certain food exports.

The agreement now proceeds to EU member states for final approval.

Key Outstanding Issues

Steel and Aluminum Tariffs

Although the agreement was intended to cap tariffs on steel, aluminum, and derivative products at 15 percent, some products continue to face duties as high as 50 percent. European officials have indicated that failure to resolve these tariffs could trigger retaliation or suspension of concessions provided under the agreement.

Forced Labor Tariffs

The United States has imposed separate 10 percent tariffs on EU goods tied to concerns regarding forced labor enforcement standards. These tariffs are expected to remain in place even if temporary emergency tariffs expire later this year.

Digital Regulation Disputes

European officials continue to face pressure from Washington regarding EU digital market and technology regulations. Future disagreements in this area could become a basis for additional trade actions.

Business Impact

Manufacturers

European manufacturers gain greater certainty regarding market access but continue to face elevated tariff exposure in key sectors, including metals and certain consumer goods.

U.S. manufacturers benefit from expanded access to the European market as EU tariffs on industrial goods are eliminated.

Agriculture and Food Producers

Selected U.S. agricultural exporters gain improved access to European markets. The extension of duty-free treatment for U.S. lobster exports provides a notable benefit for the Maine seafood industry.

However, European food exporters continue to face tariff costs in the U.S. market, reducing competitiveness relative to domestic producers.

Supply Chains

Companies with integrated U.S.-EU supply chains should expect continued compliance and tariff-management challenges. The agreement reduces the likelihood of an immediate trade escalation but does not eliminate the possibility of future tariff increases tied to separate investigations or policy disputes.

Macro Impact

The agreement helps avoid a significant deterioration in transatlantic trade relations at a time of broader global economic uncertainty.

The EU and United States remain each other’s largest trading partners, with trade flows exceeding $1 trillion annually. Preventing a new tariff escalation reduces risks to investment, manufacturing, and cross-border supply chains.

Nevertheless, the deal highlights a broader shift toward managed trade arrangements, where market access increasingly depends on negotiations over industrial policy, labor standards, digital regulation, and national security considerations rather than traditional tariff reduction alone.

What Companies Should Do

• Review U.S.-EU supply chains for products potentially affected by unresolved steel, aluminum, and derivative tariffs.

• Monitor developments related to U.S. forced labor enforcement and industrial overcapacity investigations.

• Evaluate opportunities created by reduced EU tariffs on U.S. industrial and agricultural products.

• Consider tariff contingency planning for sectors exposed to future trade disputes involving digital regulation or industrial policy.

• Track final approval by EU member states and any subsequent implementing regulations.

UCLA economists project that the U.S. economy will avoid recession but face a period of slower growth, higher inflation, and limited monetary policy flexibility as rising energy costs work through the economy.

The Big Picture

Throughout 2025, tariffs were viewed as the primary source of inflationary pressure and economic uncertainty. UCLA now argues that the closure of the Strait of Hormuz and resulting oil market disruption have become the dominant macroeconomic risk. Approximately 20 million barrels per day of oil flows have been disrupted, representing roughly 20% of global daily consumption.

The forecast draws parallels to the 1970s, when repeated energy shocks produced periods of elevated inflation and slower economic growth. While UCLA does not forecast a return to 1970s-style stagflation, it warns that the economy is confronting another significant supply shock after already absorbing disruptions from the pandemic, the Ukraine conflict, and tariff policies.

What Happened

According to the forecast:

• Headline inflation has risen from 2.4% to 3.8% over two months and is expected to reach 4.5% by year-end 2026.

• Core inflation is projected to rise more gradually, peaking at approximately 3.5% in 2027 as energy costs flow through supply chains.

• U.S. unemployment is expected to increase modestly from 4.3% to 4.5%.

• Real GDP growth is forecast to remain at approximately 2.1% in 2026 before slowing to 1.8% in 2027.

• The Federal Reserve is expected to keep interest rates unchanged for the remainder of 2026 rather than continue cutting rates.

UCLA argues that any disinflationary effects from tariff reductions are likely to be overshadowed by higher energy and transportation costs resulting from the oil disruption. Similar conclusions have been reached by other economists examining the inflationary effects of the Hormuz disruption.

Why This Matters for Companies

Energy and Transportation Costs

Businesses should expect sustained pressure on fuel, freight, shipping, and logistics expenses. Sectors with energy-intensive operations—including manufacturing, chemicals, transportation, airlines, construction materials, and agriculture—are likely to face margin compression unless costs can be passed through to customers.

Consumer Demand Risks

Higher gasoline and utility costs function as a tax on household spending. Lower- and middle-income consumers are particularly exposed, which may weaken discretionary spending and increase pressure on consumer-facing sectors including retail, travel, hospitality, and housing.

Interest Rate Outlook

The forecast suggests the Federal Reserve has limited room to support growth through additional rate cuts. Companies should plan for a higher-for-longer interest-rate environment than many expected earlier in 2026, affecting borrowing costs, investment decisions, and refinancing strategies.

Supply Chain Exposure

The Hormuz disruption affects not only oil markets but also global shipping costs and trade routes. Businesses dependent on imported inputs or global supply chains may face renewed cost pressures and delivery disruptions.

Offsetting Factors

Despite the oil shock, UCLA does not forecast a recession under its baseline scenario. The forecast identifies three major economic supports:

1. Continued AI infrastructure investment, projected to approach $700 billion in 2026.

2. Federal tax reductions and fiscal stimulus measures.

3. Strong investment activity in technology, aerospace, defense, and related sectors.

These factors are expected to help offset some of the negative effects of higher energy prices and weaker consumer purchasing power.

California Implications

California faces greater exposure than many states because of its specialized fuel requirements, higher baseline gasoline prices, and dependence on international trade through its port system. UCLA expects California to continue outperforming the nation in output and income growth due to strong technology, aerospace, and AI investment, but the state’s labor market remains weak. Employment growth is expected to remain sluggish through at least the third quarter of 2026.

The forecast characterizes California’s economy as increasingly bifurcated, with AI, technology, aerospace, and defense sectors generating growth while many traditional industries continue to experience employment weakness.

Recommended Actions

• Review fuel, transportation, and logistics exposure across supply chains.

• Stress-test budgets under scenarios of sustained elevated energy prices.

• Evaluate pricing strategies and customer pass-through capabilities.

• Consider hedging strategies for energy-intensive operations.

• Reassess capital expenditure plans in light of higher-for-longer interest rates.

• Monitor consumer demand indicators, particularly in discretionary spending categories.

• Track developments in the Strait of Hormuz and Middle East energy markets, as the duration of the disruption remains the largest variable affecting the outlook.

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Issues and Background

USTR initiated the investigations in March 2026 and found that all 60 economies failed either to impose or effectively enforce forced-labor import prohibitions. The agency proposed a 10% additional duty for economies with some forced-labor import regime, relevant trade commitments, or partial controls, and a 12.5% duty for others.

The proposal includes a public comment process, with written comments due July 6, 2026, and public hearings beginning July 7, 2026. The administration is framing the action as a response to unfair trade practices that burden U.S. commerce by allowing goods produced with forced labor to compete at artificially low costs.

Policy Impact

The proposal marks a significant escalation in U.S. tariff strategy. Rather than targeting specific products, companies, or high-risk supply chains, the action would impose broad duties based on each economy’s forced-labor enforcement framework.

That approach may strengthen U.S. leverage in trade negotiations, but it also creates legal, diplomatic, and business uncertainty. Major trading partners, including U.S. allies, are likely to challenge the premise that their forced-labor regimes are inadequate. The European Union, Canada, Mexico, the United Kingdom, Japan, South Korea, and others could seek exemptions, modifications, or reciprocal measures.

The action also signals that forced-labor compliance is becoming a core trade-policy issue, not only an ESG or customs matter.

Human rights groups and trade experts have questioned whether broad tariffs will meaningfully reduce forced labor, especially if the duties are tied to trade status rather than demonstrated labor-abuse risk.

Company Impact

Companies importing from affected economies should expect higher landed costs, more complex customs planning, and increased pressure to document supply-chain due diligence. Apparel, textiles, consumer goods, electronics, industrial inputs, and manufacturing supply chains could face particular exposure.

Businesses also should prepare for uneven implementation. Some goods may be excluded, some countries may negotiate relief, and USMCA-compliant trade may receive different treatment. This creates planning risk for pricing, sourcing, contracts, and inventory strategy.

Recommended Actions

Companies should treat labor-risk documentation as part of tariff mitigation and market-access strategy.

Companies should immediately map exposure to the 60 affected economies and identify covered import categories, supplier dependencies, contract pass-through provisions, and pricing impacts.

Importers should review forced-labor due diligence files, supplier certifications, traceability systems, and customs documentation. Businesses with material exposure should consider filing comments with USTR before the July deadline and evaluate whether exclusions or country-specific negotiations may affect their products.

Executives should also scenario-plan for three outcomes: tariffs finalized substantially as proposed, tariffs narrowed through exclusions or trade negotiations, or tariffs delayed by legal and diplomatic challenges.

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Note - A June 1 follow-on proclamation extended the framework to industrial and agricultural equipment.

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Bottom line for executives: The April 2 proclamation is not a routine tariff adjustment. It changes how duties are calculated — from the metal content of a product to its full customs value — and more than doubles effective rates for many derivative goods. Middle-market companies across manufacturing, construction, energy, and distribution face materially higher import costs. The compliance burden is also expanding: customs declarations must now identify smelt and cast origin to qualify for reduced rates.

Issues and Background

Section 232 of the Trade Expansion Act of 1962 permits the President to restrict imports that threaten national security. The Trump Administration first invoked Section 232 for steel and aluminum in 2018 and extended the regime to copper in July 2025. The April 2, 2026 proclamation (Proclamation 11021) is the most sweeping modification to that framework in its eight-year history.

The central change is how duties are calculated. Prior to April 6, 2026, the Section 232 duty applied to the metal content of an import — meaning a steel component embedded in a finished product was taxed only on the value attributable to the steel, not the value of the whole product. The new regime applies the duty to the full customs value of the imported product, regardless of metal content. For highly engineered or finished goods with significant value-added processing, the effective duty increase is substantial.

The proclamation was effective for all goods entered for consumption on or after 12:01 a.m. Eastern on April 6, 2026.

Policy Impact

This proclamation consolidates and escalates a decade-long trend toward using Section 232 as a broad-based industrial policy instrument rather than a narrowly targeted trade remedy. Several features of the new structure are particularly significant for business planning.

No formal product-inclusion process. Prior proclamations established a public rulemaking mechanism through which companies could petition for inclusion or exclusion of specific derivative products. Proclamation 11021 terminates that process and replaces it with a joint administrative determination by the Secretary of Commerce and the U.S. Trade Representative — a faster, less transparent mechanism. Companies can no longer rely on a predictable exclusion pathway if their products are swept into the derivative category.

Trade-agreement partners and future negotiations. The proclamation creates a new category — “Trade Agreement Partners” — that currently includes the UK, EU, Japan, South Korea, Mexico, Canada, and any future bilateral agreement partners. Drawback eligibility and certain reduced rates depend on this status. This structure is designed to give the administration leverage in ongoing trade talks, but it also means rate exposure can shift based on diplomatic developments outside a company’s control.

Canada and Mexico USMCA treatment. The June 1 proclamation introduced a special provision for USMCA-qualifying imports from Canada and Mexico: the 25 percent Annex III rate applies only to non-U.S. content, subject to a 15 percent floor. This is a meaningful carve-out for manufacturers with cross-border supply chains, but its benefit depends on accurate and defensible U.S.-content accounting. CBP is authorized to assess penalties for misrepresentation.

June 2028 cliff. The reduced rates on Annex III products (industrial machinery, agricultural equipment, HVAC systems) are explicitly temporary, expiring December 31, 2027. Companies planning capital equipment acquisitions should account for the rate reverting to 25 percent in 2028 when modeling multi-year procurement timelines.

Company Impact

The industries with the most direct exposure are those that import finished or semi-finished goods with significant aluminum, steel, or copper content — broadly: manufacturing, construction, energy infrastructure, industrial distribution, and agricultural equipment dealers.

For middle-market companies in these sectors, the practical consequences run across several dimensions. Landed costs increase immediately on covered imports, and because the duty now applies to full customs value rather than metal content, cost modeling built on prior tariff assumptions is no longer valid. Companies with contracts that include tariff pass-through provisions should review those clauses now: the change in calculation methodology may not be captured by language written under the prior regime.

Procurement teams that source from multiple countries may find new arbitrage opportunities — particularly if UK or EU sourcing qualifies for lower rates — but realizing those savings requires documentation systems capable of certifying metal origin at the smelt and cast level, not just country of manufacture.

Energy-sector companies are broadly affected. Pipeline components, electrical infrastructure, compressors, heat exchangers, and other capital goods used in oil and gas, renewables, and utilities commonly contain substantial aluminum, steel, and copper content. Given that these goods often carry significant value-added manufacturing costs over and above their raw material content, the shift to full-value tariffs is particularly impactful in this sector.

Regulatory Compliance Note

CBP now requires importers of copper articles to identify the countries where copper was smelted and cast, and to provide that information at the time of entry. Similar documentation requirements apply to aluminum and steel for companies claiming reduced rates based on U.S.-origin metal content. Companies without robust traceability systems should treat this as an immediate operational priority — the enforcement mechanism is in place and CBP is authorized to impose penalties for misrepresentation, not just to deny reduced-rate eligibility.

Key Dates

• April 2, 2026 - Proclamation 11021 signed. Full-value tariff structure announced; derivative product scope revised.

• April 6, 2026 - Proclamation 11021 effective. 50% / 25% rates on covered goods begin. All new entries subject to full-value calculation.

• June 1, 2026 - Follow-on proclamation signed. Agricultural equipment and residential HVAC added to 15% temporary category; USMCA U.S.-content rules added; U.S.-origin metal threshold lowered from 95% to 85%.

• June 8, 2026 - June 1 proclamation effective. Annex I-C products now carry 25% standard rate with country-specific blended rates for key allied trading partners.

• July 2026 - 90-day update due. Commerce and USTR must report to the President on import status, domestic production levels, and any recommended further action.

• Dec. 31, 2027 - Annex III temporary rates expire. Industrial and agricultural equipment rates revert from 15% to 25% standard rate on January 1, 2028.

Recommended Actions

• Audit your import portfolio immediately. Identify all products that contain aluminum, steel, or copper — including finished goods and components classified as derivative articles — and map them against the Annex I-A, I-B, and III product lists. Update your landed-cost models to reflect full-value tariff calculations.

• Review contracts with tariff pass-through provisions. The change from metal-content to full-value calculation is not a simple rate change — it is a methodological change. Confirm whether your contract language captures it, and negotiate updates where it does not.

• Build or upgrade supply-chain documentation systems. Qualifying for the 10% U.S.-origin rate, or for any reduced allied-country rate, requires smelt-and-cast origin certification at the supplier level. This is now a customs compliance requirement, not merely a strategic option.

• Evaluate UK and EU sourcing for rate arbitrage. Where feasible, sourcing from Trade Agreement Partner countries can reduce duty exposure materially. Model this against total cost of switching, including lead times and supplier qualification costs.

• Scenario-plan capital equipment acquisitions with the Dec. 31, 2027 cliff in mind. If your company imports industrial machinery, agricultural equipment, or HVAC systems, the temporary 15% rate provides a window. Factor the 2028 rate reversion into multi-year procurement and capital planning.

• Engage CBP proactively on compliance posture. CBP has explicit enforcement authority for misrepresentation of U.S. content and smelt/cast origin. Companies that establish documented compliance programs are better positioned in the event of audits or disputes.

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The decision in Learning Resources, Inc. v. Trump significantly narrows the scope of emergency economic powers and reaffirms that Congress — not the president — controls tariff policy under the Constitution.

The ruling reduces the likelihood that companies will face sudden tariff shocks triggered by emergency declarations.

What Companies Should Do

1. Monitor other executive trade tools. The ruling does not limit other executive trade authorities, including:

• Section 232 tariffs

• Section 301 trade actions

• Section 122 of the 1974 Trade Act

• Export controls

• Economic sanctions

2. Reassess tariff risk models. Companies should revisit supply-chain risk scenarios that assumed emergency tariff authority.

3. Strengthen policy monitoring. Trade policy risk is shifting toward legislative negotiations and formal trade investigations, which require earlier engagement from companies.

Impact on Trade Policy

1. Trade policy becomes more predictable

Emergency tariffs — potentially imposed overnight — now face legal limits. Companies can expect tariff changes to occur through established legal channels rather than through emergency declarations.

2. Congress becomes more important

The decision pushes tariff policy back toward:

• Congressional legislation

• Formal trade investigations

• Statutory trade authorities

Examples of statutory trade authorities include:

• Section 232 national security tariffs

• Section 301 trade enforcement actions

• Section 122 of the 1974 Trade Act for balance-of-payments issues.

These processes typically involve investigations and notice periods.

Background: Trump Tariff Policy

In 2025, the Trump administration imposed broad tariffs after declaring national emergencies tied to drug trafficking and persistent U.S. trade deficits. Authority for the tariffs relied on IEEPA, a 1977 statute historically used for sanctions and financial restrictions.

The tariffs included:

• 25% tariffs on imports from Canada and Mexico

• 10%–20% tariffs on Chinese imports

• 10% baseline tariff on imports from most countries

Several small businesses challenged the tariffs, arguing that IEEPA authorizes regulation of economic transactions during emergencies but does not authorize taxes such as tariffs. Lower courts agreed, and the Supreme Court affirmed that interpretation.

The Court’s key finding:

Tariffs are taxes, and the Constitution assigns taxing power to Congress under Article I. The president cannot impose tariffs unless Congress clearly grants that authority.

The Court’s Reasoning

1. Tariffs are taxes: The Constitution gives Congress the power to “lay and collect Duties, Imposts and Excises.” The Court held that tariffs fall squarely within that authority.

2. IEEPA does not mention tariffs: IEEPA allows presidents to block or regulate financial transactions during national emergencies but does not refer to tariffs or duties.

3. Major questions doctrine: The Court also applied the major questions doctrine, which requires clear congressional authorization for executive actions with major economic consequences. Allowing a president to impose unlimited tariffs under emergency powers would represent a major expansion of executive authority.

Macro Impact

1. Reinforces separation of powers. The ruling strengthens congressional authority over trade and limits executive economic powers.

2. Reshapes U.S. trade strategy. Future administrations may rely more heavily on sanctions, export controls, investment restrictions, and trade investigations rather than emergency tariffs.

3. Signals stability to trading partners. Foreign governments may view U.S. tariff policy as more predictable because it now depends more on legislation and formal trade processes.

Carney’s views indicate that economic policy is now a primary tool of national se…

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The Framework Agreement is intended as a first step in a process that could expand to cover additional areas and “continue to improve market access and increase their trade and investment relationship.”

The United States and the EU reached the agreement in July 2025, avoiding President Donald Trump’s threatened 30% tariffs. The agreement raised concerns in Europe about economic damage, political fallout, and the durability of the deal. (see U.S. and EU Reach Trade Agreement)

Key Details

• Tariff Reductions:

  • The EU “intends” to eliminate tariffs on all U.S. industrial goods and expand preferential access for US agriculture and seafood.

  • The U.S. will commit to limit tariffs on EU industrial goods at 15%, with MFN-only tariffs applied to key sectors such as aircraft, pharmaceuticals, and natural resources.

  • The U.S. commits to conditional reduction of Section 232 tariffs on EU automobiles and parts upon EU legislative implementation.

• Energy & Technology:

  • The EU commits to purchase $750 billion of U.S. liquified natural gas, oil, and nuclear energy products by 2028.

  • The EU “intends” to purchase $40 billion in U.S. artificial intelligence (AI) chips for computing infrastructure.

• Investment:

  • EU firms are expected to invest $600 billion in strategic U.S. sectors through 2028.

• Defense:

  • The EU plans to substantially increase procurement of U.S. defense equipment, reinforcing NATO interoperability.

• Regulatory Cooperation:

  • The is mutual recognition of automotive standards and expanded conformity assessments across sectors.

  • The EU notes U.S. concerns related to the Carbon Border Adjustment Mechanism (CBAM), Corporate Sustainability Due Diligence Directive (CSDDD), and Corporate Sustainability Reporting Directive (CSRD).

  • The EU will ease compliance burdens for U.S. exporters, especially for small and medium-sized businesses.

• Digital Trade:

  • The EU confirms it will not impose network usage fees.

  • Both sides reaffirm the WTO moratorium on customs duties for electronic transmissions.

Key Changes

• Eliminates the “5% safe harbor” for the Section 45Y clean electricity production tax credit (PTC) and the Section 48E investment tax credit (ITC) for all wind projects and for solar projects of more than 1.5 megawatts (MW).

• Leaves in place the tougher “physical work” test, which considers the amount of work done on a project.

• Implements strict continuity rules.

Guidance Determines 2027 Deadline

OBBB repealed the PTC and ITC for wind and solar projects unless they are placed in service by the end of 2027. In July, President Trump issued an executive order titled “Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources,” which directed the Treasury to issue guidance to determine whether a project began or is subject to the December 31, 2027 deadline.

• Began construction after July 4, 2026: Wind and solar projects that have not started construction by July 4, 2026 must be in service by the end of 2027 to qualify for the tax credits.

• Began construction by July 4, 2026: Wind and solar projects that began construction before July 4, 2026 can be placed in service after 2027.

“Physical Work” Replaces 5% Safe Harbor

• Under the 5% safe harbor, a project begins construction when the taxpayer pays or incurs 5% or more of the total cost of the facility.

• Now, a developer must have performed “physical work of a significant nature,” which is determined under a “facts-and-circumstances” approach.

Types of “Physical Work”

Both off-site and onsite work can be used to demonstrate that physical work of a significant nature has begun. Qualifying work includes:

• Off-site work may include the manufacture of components, mounting equipment, support structures such as racks and rails, inverters, and transformers and other power conditioning equipment;

• On-site work for wind projects may include such activities as the excavation for the foundation, the setting of anchor bolts into the ground, or the pouring of the concrete pads of the foundation. On-site work for solar projects may include the installation of racks or other structures to affix photovoltaic (PV) panels, collectors, or solar cells to a site.

• Physical work of a significant nature does not include preliminary activities, including planning, designing, permitting, site clearing, financing, and warehousing.

September 2, 2025 Deadline

• Given that the rules apply to projects that begin construction on or after September 2, 2025, wind and solar projects can start construction before September 2, 2025 by beginning physical work of a significant nature or by incurring 5% of project costs.

Continuity Requirements

• If an applicable wind or solar facility is not placed in service within four years, the project developer will have to show continuous construction to be allowed more time to finish the project.

• Disruptions such as weather delays, permitting, supply chain shortages, and labor stoppages are allowed.

• Whether a taxpayer maintains a continuous program of construction to satisfy the Continuity Requirement will be determined by the relevant facts and circumstances.

Rooftop Solar Exclusion

The changes apply to utility-scale solar and provide a significant exclusion for smaller solar facilities, such as rooftop solar for homes and businesses. Solar projects with a maximum net output of 1.5 MWs or less can continue to claim the 5% safe harbor if they begin construction after September 2, 2025, and before July 4, 2026.

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New tariffs rates

Some countries negotiated tariff rates that are lower rates than initially threatened:

• The EU (15%), Japan (15%), South Korea (20%), Vietnam (20%), and the U.K. (10%).

Countries that have not negotiated a deal with the United States were hit with higher rates:

• Brazil (50%), Canada (35%), Switzerland (39%), Laos (40%) and Algeria (30%) saw increases.

• India and several others remain outside deals and face high default tariffs.

· The countries and rates are listed in the annex to the executive order.

Economic impact

• Commerce Secretary Howard Lutnick said the tariffs could raise $50 billion a month in revenue.

• Economists warned of the risk of rising inflation on U.S. consumers.

Geoeconomic impact

• Trump’s tariffs are reshaping global trade and using them as leverage on issues beyond trade, particularly against Brazil, which Trump has criticized for its prosecution of former Brazilian President Jair Bolsonaro.

Legal challenges remain

• The tariffs are under legal challenges for exceeding executive authority under the International Emergency Economic Powers Act of 1977. A New York trade court sided against Trump, but allowed tariffs to stay in place pending appeal.

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Key Terms

• Tariffs:

  • 15% tariff on ~70% of EU exports — covering €780 billion in trade.

  • Includes pharmaceuticals, semiconductors, and cars (down from 27.5%).

  • U.S. imports into the EU will not face new tariffs.

• Steel & aluminum: U.S. keeps 50% tariff; Europe gets a quota deal tied to past import levels.

• Zero-tariff sectors: €70B in trade spared — aircraft, some chemicals, generics, agricultural products, critical raw materials.

• Energy & weapons: EU pledges $750 billion in U.S. energy purchases and $600 billion in U.S. investments, plus undefined defense buys.

Geoeconomic impact

• Tariff leverage: Trump’s tariff threat forced the EU to make sweeping concessions.

• U.S. “win”: White House officials hailed the deal as the “biggest ever,” citing benefits for U.S. industry and security.

• A one-sided deal: The EU gains little beyond avoiding 30% tariffs.

• Not legally binding: EU officials stressed that investment and energy pledges are political commitments, not enforceable law.

• Security link: Analysts say EU leaders feared that rejecting Trump’s terms risked U.S. disengagement from NATO and Ukraine.

• WTO clash: Experts warn zero-tariff carveouts may violate global trade rules.

European Reactions

• Europe’s dilemma: Leaders say they avoided worse damage, but critics call the agreement “capitulation.”

• Germany: Economy minister Katharina Reiche admitted it was “challenging” but highlighted car and pharma relief. Chancellor Friedrich Merz warned the pact could cause “considerable damage.”

• France: PM François Bayrou called it a “dark day,” blasting agricultural concessions. Far-right leader Marine Le Pen dubbed it a “political, economic and moral fiasco.”

• Ireland: PM Micheál Martin said it brings “predictability,” but at a cost.

• Italy: Called the 15% tariff “sustainable,” emphasizing stability over conflict.

• Netherlands: “No tariffs would have been better,” said PM Dick Schoof, but he praised the Commission for damage control.

Legal challenges remain

• Legal test: U.S. courts are reviewing whether Trump exceeded his authority under the 1977 IEEPA law. A ruling against him could upend the tariff regime.

Longer Reads

• Donald Trump’s tariff blitz brings US levies to highest levels since 1930s, Financial Times, July 28, 2025

• What opponents of the EU-US trade deal get wrong, The Economist, July 30, 2025

• The trade deal with America shows the limits of the EU’s power, The Economist, July 31, 2025

• Donald Trump’s EU oil and gas deal is ‘pie in the sky’, energy experts warn, Financial Times, July 28, 2025

• Josh Lipsky, How Donald Trump remade global trade, The New Atlanticist, August 1, 2025

• Tariff roulette: inside Trump’s chaotic trade negotiations, Financial Times, August 1, 2025

• Lessons from the 1920s and 30s on tariffs and markets, Financial Times, August 3, 2025

• Trump’s tariffs leave us in the second worst of all worlds, Financial Times, August 4, 2025

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Key Facts

• Tariffs: U.S. auto tariffs lowered from 25% to 15% (still well above the original 2.5% rate). Steel and aluminum tariffs remain at 50%.

• Investment: Japan committed up to $550 billion in investment in the United States, including U.S. manufacturing, infrastructure, and supply chain projects.

• Purchases: Japan agreed to buy ~$8 billion in U.S. agricultural products, expand LNG offtake, and procure additional Boeing aircraft.

• Legal status: The deal is an executive agreement rather than a free trade agreement. Timelines for implementation are unclear.

• Trade balance: In 2024, Japan had a $70 billion surplus in trade with the United States.

Geoeconomic Impact

• The agreement demonstrates U.S. transactional trade diplomacy under which tariff relief is tied to pledges for investment and purchase.

• Japanese government officials framed the deal as avoiding harsher tariffs.

• Critics noted the lack of clarity on U.S. commitments and the lack of enforceability.

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Below are the key changes to the major energy tax provisions.

• Clean vehicle tax credits: The law accelerates the expiration of the “clean vehicle” tax credits for electric vehicles (EVs) to 2025 and 2026 from 2032.

• Residential energy efficiency credits: The law also accelerates the expiration of residential energy tax credits to 2025 and 2026.

• Technology-neutral tax credits: The OBBBA phases out the §45Y and §48E clean electricity production and investment credits beginning in 2034. The production and investment credits for wind and solar is repealed unless the project is placed in service before 2028. If the wind or solar project is placed in service after 2027, construction must begin before July 4, 2026.

• Foreign Entity of Concern (FEOC): The law expands the FEOC rules to restrict credit availability to taxpayers that are FEOC or receive material assistance from FEOCs.

• Carbon capture: The law implements the foreign entity rules for the §45Q carbon oxide sequestration credit. It also repeals transferability for facilities that begin construction two years from the bill’s enactment.

• Clean fuels: The law extends the Section 45Z clean fuel production credit through December 31, 2029, from the current expiration at the end of 2027.

• Credits transfers: The law retains the ability of entities to transfer credits but prohibits transfers to prohibited FEOCs or entities that receive material assistance from prohibited FEOCs.

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The final version of the OBBA extends the expiring individual and corporate tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA), provides new temporary tax provisions that Trump promised during the campaign, makes changes to business and international taxes, and reduces energy tax credits.

Key provisions in the OBBA include:

Individual Tax Provisions

• Makes TCJA rates permanent: The OBBA makes the TCJA rate and bracket changes permanent. The rate reductions were scheduled to expire at the end of 2025.

• Maintains limits on itemized deductions: The law maintains the limits on itemized deductions for high earners.

• Increases standard deduction: The law permanently increases the standard deduction by $750 to $15,750 for individuals, by $1,125 to $23,625 for heads of household, and by $1,500 to $31,500 for joint filers, all beginning in 2025. Amounts are then indexed for inflation.

• Eliminates personal exemption: The law makes permanent the personal exemption elimination enacted by the TCJA.

• Increases SALT deduction limit for five years: The law increases the limit on state and local tax deductions (SALT) from $10,000 to $40,000 for taxpayers earning up to $500,000. After five years, the limit returns to $10,000.

• Pass-Through Entity Tax (PTET) deduction: The OBBA did not include any changes to the PTET deduction.

• Increases and makes permanent the child tax credit: The law permanently increases the child tax credit by $200 to $2,200 per child, with the refundable portion remaining at $1,700.

• Temporarily makes overtime pay deductible: The law allows a deduction of up to $12,500 for overtime pay for taxpayers with incomes of less than $150,000 for tax years 2025 through 2028. Base pay would remain taxable.

• Temporarily makes tips deductible: The OBBA allows a deduction for tipped wages of up to $25,000 per taxpayer for tax years 2025 through 2028. An income phase out begins at $150,000. This applies to taxpayers in customarily tipped industries.

• Increases standard deduction for seniors: The law increases the standard deduction for seniors by $6,000 subject to an income limitation for tax years 2025 through 2028. An income phase out begins at $75,000.

• Temporarily makes auto loan interest deductible: The law makes the interest from auto loans fully deductible for tax years 2025 through 2028 for autos with final assembly in the United States. The deduction would be limited to $10,000 with an income phase out beginning at $75,000.

• Repeals individual energy credits: The law repeals energy tax credits for individuals, including the electric vehicle tax credit and the residential energy efficiency credits in the Inflation Reduction Act (IRA).

• Increases passthrough deduction: The law permanently extends the Section 199A passthrough deduction at 20%. It also increases the phase-in range for the limit to $75,000 for individuals and $150,000 for joint filers. There is a new $400 deduction for taxpayers with qualifying income of at least $1,000.

• Permanently extends alternative minimum tax thresholds: The law extends the TCJA exemption and phaseout threshold for the alternative minimum tax (AMT). The phaseout is set at $1 million in 2026 and adjusted for inflation thereafter with a phase out rate of 50%.

Estate Tax Provisions

• Increases estate tax exemption: The OBBA increases the estate tax exemption to $15 million beginning in 2026 and make it adjusted for inflation for subsequent years.

Business Tax Provisions

• Permanently allows immediate R&E expensing: The law permanently allows business taxpayers to fully expense Section 174 domestic research and experimental (R&E) expenditures in 2025 or later. This reverses the requirement to capitalize and amortize them over five years.

• Increases small business expensing: The law increases the Section 179 Small Business Expensing Cap from $1.25 million to $2.5 million per year. It also increases the phase-out threshold from $3.1 million to $4 million.

• Allows bonus depreciation permanently: The law permanently allows 100% bonus depreciation for short-lived investments in 2025 or later. Bonus depreciation has been subject to a phase-down since 2022.

• Reinstates EBITDA interest deduction limit: The bill would restore EBITDA-based limitation on business interest deductions under Section 163(j) for 2025 and later.

• Reduces corporate charitable deduction: The law allows deductions for corporate charitable contributions only to the extent that contributions exceed 1% of a corporation’s taxable income. This begins in 2026.

• Increases 1099-MISC reporting threshold for payments: The law increases the reporting threshold for Form 1099-MISC from $600 to $2,000 for payments in 2025 and after. The law also increases the threshold for Form 1099-K at $20,000 and 200 transactions.

• New Bonus Depreciation for Qualified Production Property: The law implements a new Section 168(n), which allows an elective 100% depreciation deduction for qualified production property (QPP) acquired between January 20, 2025 and the end of 2028 and placed in service by the end of 2030.

• Expands Qualified Small Business Stock (QSBS): The law expands Section 1202 QSBS stock acquired after July 4, 2025 through a tiered system of requirements to hold the stock.

Energy Tax Credits

• Phases out major clean energy tax credits: The law phases out clean energy tax credits.

International Tax Provisions

• Permanently increases GILTI deduction: The law increases the global intangible low taxed income (GILTI) deduction to 40%, replacing the scheduled post-2025 reduction to 37.5%. The law also modifies the GILTI calculation.

• Increases FDII deduction: The law increases the foreign-derived intangible income (FDII) deduction to 33.34%, replacing the scheduled post-2025 reduction to 21.875%. The bill would also rename the FDII “foreign-derived deduction eligible income” (FDDEI). The law also modifies the FDII calculation.

• Increases BEAT rate: The law also increases the base erosion and anti-abuse tax (BEAT) rate from the current 10% to 10.5%, avoiding the scheduled increase to 12.5% after 2025. It also makes permanent the treatment of research and other credits in calculating BEAT.

• New 1% tax on remittances: The law imposes a new 1% excise tax on certain remittance transfers, effective January 1, 2026.

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