A nervous energy permeated the Apparel Importers Trade & Transportation Conference at the Fashion Institute of Technology in New York City on Wednesday. It was just over a week after Donald Trump handily trounced Kamala Harris in the polls to become the 47th president of the United States. News of political appointees—both rumored and confirmed—had already been trickling in, including ones that would most impact the textile and apparel industry: Former U.S. trade representative Bob Lighthizer for trade czar, South Dakota governor Kristi Noem for homeland security, former WWE exec Linda McMahon for commerce and Florida congressman Mike Waltz for national security.
Trump has also tapped Florida senator Marco Rubio, one of the architects of the Uyghur Forced Labor Prevention Act (UFLPA) and as hawkish a China hawk as you can get, as his secretary of State. Translation: Prepare to see a lot more people added to the UFLPA Entity List—the so-called “bad guys’ list” of companies with cited ties to the persecution of Turkic Muslim minorities—and increased enforcement of the rebuttable presumption that all goods made in whole or in part from the Xinjiang Uyghur Autonomous Region are the product of forced labor and therefore barred from entry, said David Spooner, partner at Barnes & Thornburg and Washington counsel at the United States Fashion Industry Association (USFIA), the trade group behind the event.
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But there are other ways Rubio could reshape the landscape of American diplomacy. The State Department, as Spooner pointed out, plays an outsized role in negotiations with and over Taiwan. Rubio, the virulently anti-Communist son of Cuban immigrants, could move to jettison Nicaragua from the Dominican Republic-Central America Free Trade Agreement known as CAFTA-DR to stem the flow of money to Daniel Ortega’s government—even though it might violate the treaty.
Then again, CAFTA-DR might be not long for the world. Despite the Biden administration “working quite hard” to see what it could do, economically or trade-wise, to curtail the tide of migrants crossing over from Central America—something that resulted in the Commerce Department’s Office of Textiles and Apparel becoming more nimble in its consideration of so-called short-supply petitions that seek more liberal treatment of apparel made in the region—the previous Trump regime has “not been a fan of trade concessions,” Spooner said. “I think trade initiatives are going to pass away.”
That could include the Generalized System of Preferences (GSP), which provided duty-free entry for certain products imported from developing countries until it expired at the close of 2020. One reason GSP has been expired for so long is that the Trump administration derailed efforts to renew it right before the Republican leader’s tenure because “they don’t like trade preferences,” Spooner said. Same with the Haitian Hemisphere Opportunity through Partnership Encouragement (HOPE), the Haitian Economic Lift Program (HELP) and the African Growth and Opportunity Act (AGOA), all of which are set to expire in 2025. “Renewing those can be a big, big deal,” Spooner said. On the flip side, it was Rubio who introduced legislation in 2021 to renew HOPE and HELP until 2035, so it’s still anyone’s guess how things will ultimately shake out.
Equally murky is what will become of the United States-Mexico-Canada Agreement (USMCA), colloquially known as the “new NAFTA,” that is set for a joint review in 2026.
“I honestly don’t know what a Trump administration would do,” Spooner said. “On the one hand, the Trump administration crowed about how great the new USMCA was, but we could also see the Trump administration going in and saying, ‘It’s not good enough, we need to change.’”
‘Tariff armageddon’ ahoy
Peals of laughter—albeit some that were pointedly strangled—rang out when Spooner clicked over to a slide that bore just one phrase: Tariff armageddon. “We’re downplaying it, right?” quipped Julia K. Hughes, president of the UFIA. Trump’s proposed tariffs—60 percent on Chinese imports, as much as 100 percent on Mexico’s and 10-20 percent for any other nation that’s been, in his words, “ripping off” America—are a topic that’s been on everyone’s mind. Already, Mexico’s economy minister said this week that his country could retaliate with tit-for-tat restrictions of its own, auguring one if not several tariff wars.
There are five “vehicles” that the incoming regime could use to implement these tariffs. The first is legislatively through offsets in a tax extenders bill that must pass in 2025. Because the U.S. Constitution explicitly gives Congress the power to control trade with foreign nations, this would be the “traditional and less controversial” way of doing things, Spooner said.
“I’ll be surprised if this is what Trump does, but a huge tax bill has to move this year,” he said. “And there’s some talk about when you have tax cuts or tax extenders, you need to ‘pay’ for those that decrease in government revenue. And there’s some talk that the Trump administration might actually do things the traditional way and urge Congress to have tariff increases in the tax bill that moves this year to ‘pay for the tax cuts.’”
Short of going to Congress? Here’s what else Trump 2.0 could do. He could leverage the International Emergency Economic Powers Act, or IEEPA (pronounced “yeepa”), which gives the president a “ton of discretion” to impose tariffs or other trade restrictions during a national emergency. (Trump 1.0 threatened to use IEEPA to impose tariffs on Mexico, for instance, if it didn’t halt the “caravan” of migrants traveling across the border.) More familiar to importers would be Section 301 of the 1974 Trade Act, which allows the president to impose tariffs or quotas on imports from countries that either are not living up to their trade agreements with the United States or that discriminate against American commerce. “That’s what President Trump used to impose the Chinese tariffs in the first term,” which Biden then chose to maintain and even expand upon, Spooner said.
The 47th president could also wield Section 232 of the 1962 Trade Expansion Act, another tool that provides great executive latitude if there’s a threat to national security. The Trump administration used it to impose steel and aluminum tariffs in his first term. Finally, there’s Section 201 of the 1974 Trade Act, which lets the president impose tariffs or quotas on imports if they’re surging or injuring American industry. It was most recently employed by the Biden administration in May to impose a 5-gigawatt tariff-rate quota for imported solar cells to expand solar manufacturing in the United States.
“Sections 301, 232, and 201 are all of questionable legality with the WTO,” Spooner said, using an acronym for the World Trade Organisation, which manages the global rules of trade. “The U.S. in prior years lost every single 201 case that went to the WTO. But the WTO recently has not been functioning very well, and we’ve had a couple of administrations who sort of say, ‘We don’t care about the WTO.’”
When the office of the U.S. trade representative concluded a “sunset review” on Section 301 tariffs on China a few months ago, it resulted in a new exclusion process for certain products and increased tariffs on certain products. Spooner said it’d be interesting to see if the 47th administration maintains these tariff increases and production exclusions.
Another hot topic is that of de minimis, a law and some say loophole that lets importers sidestep U.S. taxes and tariffs if the shipments don’t exceed $800 in value. It’s also one of the rare issues that both sides of a very divided aisle can agree is a legislative priority to grapple with the billion-or-so low-value packages that wend their way past the border without more than a cursory glance each year.
In April, the House Committee on Ways and Means O.K.ed a bill to limit the de minimis exception, declaring that goods subject to the aforementioned special tariffs cannot be eligible. A few months later, Senate Finance Committee chairman Ron Wyden, a Democrat from Oregon, introduced legislation that would deny “import-sensitive” goods such as textiles and apparel from being imported through de minimis.
“White will no longer be the chairman of the Finance Committee because the Republicans are taking over,” Spooner said. “So a lot to see what the new chairman Mike Crapo might run things.” He noted, however, that Finance is run in a more bipartisan way than Ways and Means, and that White and Crapo have worked closely together in the past.
President Biden also announced in September that his administration would undertake rulemaking that would exclude from de minimis any goods that are subject to Sections 201, 301 and 232, though those regulations have yet to manifest despite promises that they will.
Hughes said that a lot of what will happen is hard to predict. Much also hinges on Trump’s nominees and how much shock and awe the administration will want to elicit out of the gate.
“My gut right now says it looks like the administration is looking for how much can we do this big splash on Day 1,” she said. “So that makes me anxious about what might be, what will be on the table. But I think we need to see who are going to be the people in the positions as well, so that we might understand better what the recommendations would be. We don’t have all the answers yet.”