03 April 2025

The US National Emergency on Trade: Legal Foundations and Strategic Justification

Rebalancing Global Commerce to Strengthen US Economic Security

In response to the growing US trade deficit and the economic and national security risks posed by structural imbalances in global trade, the United States formally declared a national emergency on 2 April 2025. This executive order outlines the legal foundations, strategic justification, and specific trade measures being implemented to address these imbalances. The order sets out a comprehensive approach, including the introduction of new tariffs, modifications to existing trade policies, and a commitment to strengthening domestic manufacturing and national security. The following highlights summarise the key components of this policy shift and the steps being taken to restore fairness in global trade relations.

Key highlights:

• The US declared a national emergency in response to its trade deficit, which reached $1.2 trillion in 2024. An Executive Order "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits" invokes powers under the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), and the Trade Act of 1974 to address trade imbalances.

• Persistent trade deficits, tariff asymmetries, and non-tariff barriers are seen as threats to US economic stability and national security. These conditions have weakened US manufacturing and made the country vulnerable to supply chain disruptions and foreign adversaries.

• Section 232 of the Trade Expansion Act of 1962 was invoked to impose a 25% tariff on imported automobiles and key auto parts. The tariffs apply to passenger vehicles (including sedans, SUVs, minivans, and light trucks) and components such as engines, transmissions, and electrical systems. If needed, additional parts may be targeted. To uphold USMCA commitments, importers may certify the portion of a vehicle or part made in the United States. The 25% tariff will apply only to the non-U.S. content. Until a verification system is fully implemented, parts that meet USMCA rules of origin will be exempt from the tariff. This action exercises presidential authority to adjust imports that threaten national security and aims to restore domestic capacity in a vital sector.

• A 10% tariff will be applied to all imports, with higher tariffs for certain countries to address non-reciprocal trading conditions and encourage more balanced trade relations. The 10% tariff will be implemented on 5 April 2025, with higher, country-specific tariffs taking effect from 9 April 2025. However, certain commodities are exempt from these tariffs.

• Exemptions include specific metals such as steel, aluminium, and copper, as well as strategic goods like semiconductors, energy and other minerals not available domestically, pharmaceuticals, humanitarian goods, and lumber. Precious metals, including gold and gold bullion, are also exempt. These exemptions are designed to prevent disruptions to essential supply chains and support critical industries.

• PGMs, rare earths, and critical minerals are exempt from the tariffs. The White House's list of exemptions includes energy and other certain minerals that are not available in the US ensuring that imports of these materials are not subject to the newly imposed reciprocal tariffs. These exemptions aim to prevent disruptions in vital supply chains and support industries reliant on these critical resources.

• Certain battery metals, however, remain subject to tariffs, such as nickel sulphate, manganese sulphate, phosphoric acid, iron phosphate, and synthetic graphite, with specific tariff regimes applied to countries such as Belgium (20% tariff) and Australia (10% tariff). These tariffs are intended to encourage domestic production and reduce reliance on foreign sources for these critical materials.

• The President can adjust tariffs based on shifting economic conditions, the behaviour of trading partners, and national security considerations. Based on these factors, tariffs may be increased, decreased, or targeted.

• The Secretary of Commerce and the US Trade Representative (USTR) are responsible for enforcing the order, with the authority to use the full scope of emergency powers under IEEPA. Other government departments are required to support the enforcement process.

• The USTR must report regularly to Congress on the national emergency and the actions taken under the executive order, in line with the National Emergencies Act and the IEEPA.

• The order does not override existing legal powers or affect the Office of Management and Budget’s role. It must be implemented within existing laws and budgets, and it does not create legal rights for private parties to sue the government. The action stays within the legal and budgetary limits of existing agencies and does not create new enforceable rights for individuals or businesses.

Jamie Underwood

Principal Consultant

Impact of America’s Reciprocal Tariffs

 

Central America

1. Nicaragua – 19%

 

South America

1. Guyana – 38%

2. Falkland Islands – 42%

3. Venezuela – 15%

 

Europe

1. Serbia – 38%

2. Liechtenstein – 37%

3. Bosnia and Herzegovina – 36%

4. North Macedonia – 33%

5. Switzerland – 32%

6. Moldova – 31%

7. European Union – 20% (as a bloc)

8. Norway – 16%

 

Oceania

1. Fiji – 32%

2. Nauru – 30%

3. Vanuatu – 23%

 

Middle East

1. Syria – 41%

2. Iraq – 39%

3. Jordan – 20%

4. Israel – 17%

 

Africa

1. Lesotho – 50%

2. Madagascar – 47%

3. Mauritius – 40%

4. Botswana – 38%

5. Angola – 32%

6. South Africa – 31%

7. Libya – 31%

8. Algeria – 30%

9. Tunisia – 28%

10. Côte d'Ivoire – 21%

11. Namibia – 21%

12. Malawi – 18%

13. Zimbabwe – 18%

14. Mozambique – 16%

15. Nigeria – 14%

16. Chad – 13%

17. Equatorial Guinea – 13%

18. Cameroon – 12%

19. Democratic Republic of the Congo – 11%

 

Asia

1. Sri Lanka – 44%

2. Bangladesh – 37%

3. China – 34%

4. Taiwan – 32%

5. Pakistan – 30%

6. India – 27%

7. Kazakhstan – 27%

8. Japan – 24%

 

Southeast Asia

1. Cambodia – 49%

2. Laos – 48%

3. Vietnam – 46%

4. Myanmar (Burma) – 45%

5. Thailand – 37%

6. Indonesia – 32%

7. South Korea – 26%

8. Brunei – 24%

9. Malaysia – 24%

10. Philippines – 18%

 

The following section outlines key details and arguments for implementing stronger tariffs to protect and grow the U.S. economy under the Executive Order.

US Trade Deficits and Emergency Powers: A Policy Shift

In April 2025, the US formally declared a national emergency in response to longstanding structural imbalances in international trade. Citing a surge in the US goods trade deficit, reaching $1.2 trillion in 2024, the executive order sets out a far-reaching policy shift aimed at restoring balance to trade relationships, strengthening domestic manufacturing, and reducing strategic dependencies on foreign producers. The action is grounded in a legal framework that includes the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), and provisions of the Trade Act of 1974. By invoking these authorities, the federal government aims to address what it characterises as an unusual and extraordinary threat to the nation’s economic and national security, driven by non-reciprocal tariffs, non-tariff barriers, and foreign economic policies that undermine US industrial competitiveness. The national emergency aims to address these issues through corrective trade measures, enhancing economic resilience and national preparedness in an unstable global environment.

The legal foundations outlined in the order serve to explain the economic rationale behind the use of extraordinary trade measures, such as new tariffs, invoked under emergency powers.
The declaration is based on longstanding statutory authorities, including the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), Section 604 of the Trade Act of 1974, and 3 USC § 301. These laws empower the executive branch to respond to external threats that jeopardize the nation's economic stability and security. The declaration argues that the current global trade structure has created exactly such a threat.

The central argument is that the United States’ large and persistent annual goods trade deficits, surging over 40% in the past five years to $1.2 trillion in 2024, reflect deep, structural imbalances in the global trading system that disproportionately harm American industry. These deficits stem not only from non-reciprocal tariff regimes but also from entrenched non-tariff barriers abroad, including opaque technical standards, discriminatory regulations, and inadequate intellectual property protections. Compounding the issue, foreign economic policies that deliberately suppress wages and domestic consumption further distort trade, leaving US producers at a sustained disadvantage at home and in global markets.

It is argued that US trade policy since 1934 has been guided by the principle of reciprocity, mutual tariff reductions negotiated bilaterally and multilaterally. However, this framework has failed to ensure balanced treatment. For example, the US imposes a 2.5% tariff on imported passenger vehicles, while other economies apply significantly higher rates, 10% in the European Union, 15% in China, and 70% in India. These disparities are compounded by non-tariff barriers that distort trade flows and limit opportunities for US exports.

The resulting trade deficits are not merely economic concerns; they have contributed to the long-term decline of domestic manufacturing capacity. Since 1997, the US has lost approximately five million manufacturing jobs, weakening industrial communities and leading to broader social challenges. The erosion of the manufacturing base has undermined the country’s ability to produce critical goods, leaving it vulnerable to supply chain shocks, as witnessed during the COVID-19 pandemic and recent geopolitical disruptions in global shipping lanes.

This vulnerability extends to national defence. An under-resourced defence-industrial base diminishes the country’s ability to supply its own military and support allies. The risk is particularly acute in advanced industrial sectors such as microelectronics, shipbuilding, and battery production, where foreign dominance could permanently displace domestic capacity. The loss of food security, evidenced by a projected $49 billion agricultural trade deficit, also raises concerns about the resilience of critical infrastructure.

Given these structural weaknesses, the order calls for immediate corrective action. The objective is to rebalance trade relationships, strengthen domestic industry, and reduce dependence on foreign adversaries. Manufacturing, although comprising only 11% of GDP, contributes disproportionately to productivity, innovation, and exports. Revitalising this sector is seen as essential not only for economic competitiveness but also for preserving strategic autonomy and ensuring national preparedness in an increasingly unstable global environment.

By declaring a national emergency, the order establishes the legal and policy basis for sweeping trade interventions. These are framed as necessary steps to restore fairness in global commerce, secure domestic production capabilities, and safeguard both economic and national security interests.

The US Trade Deficit is a National Emergency

The executive order formally declares a national emergency in response to the economic and national security risks posed by the US goods trade deficit. It outlines the reasoning behind this declaration and frames the issue as one requiring immediate and extraordinary policy intervention. The President emphasises that his highest responsibility is to safeguard the country's national and economic security and that current trade conditions present a direct threat to both.

The order sets out the rationale for invoking emergency powers under laws such as the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act (NEA). It argues that persistent trade imbalances have severely undermined US manufacturing, exposed the country to supply chain vulnerabilities, and compromised national security. These conditions, it contends, require swift corrective trade measures, such as the imposition of new tariffs, as a matter of both economic urgency and strategic necessity.

The declaration is grounded in the fact that the US goods trade deficit reached $1.2 trillion in 2024, an increase of 40% over the past five years. This figure is presented not merely as an economic indicator but as evidence of deep and persistent structural imbalances in international trade relationships. These imbalances are attributed to two main sources: tariff asymmetries and non-tariff barriers. In the first case, many foreign trading partners impose significantly higher tariffs on US exports than the US imposes on their goods. In the second, a range of non-tariff barriers, including arbitrary technical regulations, restrictive health and safety rules, weak protections for intellectual property, suppressed wages, poor labour and environmental standards, and corruption, further disadvantage US producers.
The effects of these imbalances are far-reaching. US manufacturers face declining competitiveness, leading to job losses, factory closures, and reduced investment in innovation. Critical industrial sectors, particularly those linked to national defence and advanced technology, have seen capacity shrink. At the same time, foreign competitors are better positioned to scale their production and reinvest in strategic industries, reinforcing their global advantages at the expense of the US economy.

These dynamics also have significant implications for national security. The US’ ability to produce key defence equipment and supplies is increasingly constrained by its reliance on foreign sources for essential inputs. This vulnerability is particularly concerning in the current geopolitical environment, marked by growing instability and armed conflict. A weakened manufacturing base not only affects economic resilience but also threatens military readiness in times of crisis.

In light of these challenges, it is urged both public and private sector actors to take urgent steps to strengthen the domestic economy, rebuild industrial capacity, and rebalance international trade relationships. The goal is to enhance self-sufficiency, reduce strategic dependencies, and ensure the long-term sustainability of US economic and defence capabilities.

Reciprocal Tariff Policy

The US has introduced a central set of trade actions as part of its national emergency response, which includes new tariffs aimed at rebalancing global trade flows and addressing long-standing structural imbalances in the country’s trade relationships. A blanket 10% tariff on all imports has been implemented, with further increases for selected trading partners. These measures form part of a broader strategy designed to exert pressure on foreign governments to offer more equitable market access, while simultaneously strengthening the resilience of the US domestic economy. Although intended as temporary, the tariffs will remain in place as long as necessary to address the core trade concerns, including reciprocity or other structural trade barriers, until they are sufficiently resolved or mitigated.

The policy objective is to establish a framework based on reciprocity. In essence, the US seeks to correct what it considers unfair and non-reciprocal trading conditions, particularly where other countries maintain higher tariffs or impose significant non-tariff barriers on American exports. To that end, additional tariffs have been introduced on a broad scale.

A new ad valorem duty, calculated as a percentage of the value of imported goods, will apply to all imports from trading partners, unless explicitly exempted. This duty will initially be set at a uniform rate of 10%.

Moreover, imports from specific countries listed in Annex I will face higher, country-specific tariff rates, to take effect shortly after the 10% baseline. The exact rates and affected countries are detailed in the annex.

The duration of these tariffs is indefinite and will remain in force until the President determines that the underlying conditions, such as persistent trade deficits, non-reciprocal market access, and structural trade imbalances, have been addressed.

Implementation of US Tariff Measures Under the National Emergency Order

A 10% ad valorem tariff will apply to all imports into the US, beginning at 12:01 a.m. EDT on 5 April 2025. This blanket measure will cover goods from all trading partners, unless specific exemptions are outlined elsewhere. Goods already en route—those loaded and in transit prior to the implementation time—will not be subject to the additional duty. On 9 April 2025, higher country-specific tariffs will be introduced for imports from nations listed in Annex I, with the same exemption for goods already in transit.

Several critical exemptions are included. Humanitarian goods protected under US statute, along with steel, aluminium, and automotive products already subject to tariffs under earlier Section 232 actions, are excluded. Other exemptions apply to strategic goods, such as copper, semiconductors, pharmaceuticals, critical minerals, lumber, and energy products, as specified in Annex II. Goods from countries listed under Column 2 of the Harmonised Tariff Schedule of the US (HTSUS), and items that may be subject to future Section 232 determinations, are also exempt.

These new tariffs are cumulative, meaning they apply in addition to any existing import duties, fees, or taxes, except where explicitly excluded. Special provisions apply to Canada and Mexico due to existing national emergency tariff regimes. Imports from these countries that qualify under the US-Mexico-Canada Agreement (USMCA) retain preferential access. Non-originating goods, however, will face additional duties, currently set at 25%, while Canadian energy and potash will be subject to a lower 10% rate.

If these separate emergency tariffs are lifted, USMCA-originating goods will remain exempt, while non-originating goods from Canada and Mexico will face a 12% tariff. Energy, potash, and US-finished components will continue to be excluded. For goods with mixed origin, if at least 20% of the value comes from US-made content, the additional tariff will only apply to the non-US portion. Customs authorities are authorised to request documentation to verify domestic content claims.

Goods entering US Foreign Trade Zones after 9 April 2025 must be classified as “privileged foreign status,” meaning they will be subject to the same tariffs, unless exempted. Items valued under the $800 threshold will remain free of duties for now. However, once the Commerce Secretary confirms that the necessary enforcement systems are in place, this exemption will be removed for most items eligible under 1321(a)(2)(C).

A separate order issued on 2 April 2025 regarding low-value imports from China remains in force and is unaffected. Tariffs applied to Chinese goods will also extend to goods from Hong Kong and Macau to prevent transhipment and tariff avoidance. The Harmonised Tariff Schedule will be updated to reflect the new tariff structure as detailed in the annexes, and any earlier presidential directives conflicting with these measures will be suspended, amended, or repealed to ensure full implementation.

Presidential Powers to Modify US Tariff Measures

The President is granted the authority to adjust the tariff measures outlined in response to changing circumstances. This ensures the policy remains adaptable to evolving economic, strategic, and diplomatic developments, both domestically and internationally. 

He also has the flexibility to raise or lower tariff levels depending on the conduct of trading partners, shifts in domestic economic conditions, and national security considerations. This enables a dynamic and responsive approach to trade enforcement, allowing for either escalation or easing of measures depending on how effectively the policy is meeting its objectives.

If the current tariff regime fails to resolve the underlying challenges, such as persistent trade deficits or unfair trade practices by foreign governments, the Secretary of Commerce and the US Trade Representative must consult with senior advisers on national security, economic, and trade matters. Following these consultations, they are required to recommend further action to the President, which may include the introduction of additional tariffs or the expansion of existing restrictions.

In the event that a foreign trading partner retaliates, by imposing tariffs on US exports or implementing other restrictive trade measures, the President may choose to respond by increasing current tariff rates or broadening the range of products affected. This mechanism is intended to safeguard US economic interests and ensure the continued effectiveness of the policy framework.

Conversely, if a trading partner takes significant steps to address its non-reciprocal trade practices, such as improving access to its markets for US goods or aligning its trade policies with broader US economic and security interests, the President may reduce or scale back the tariffs imposed under the order. This aspect of the policy provides an incentive for cooperation and constructive reform.

Should domestic manufacturing capacity or industrial output continue to decline, the President is also authorised to raise tariffs further in order to protect and support US-based industry. This provision reinforces the overarching goal of the executive order: to restore industrial strength, rebalance trade, and safeguard long-term national economic security.

Delegating Authority to Implement the Executive Order

The Executive Order outlines who is responsible for enforcing its measures and specifies the powers they are authorised to use. It delegates legal authority to designated senior officials and establishes a coordinated approach across the executive branch to ensure effective implementation.

Primary responsibility for executing the order rests with the Secretary of Commerce and the US Trade Representative (USTR). These officials are required to act in consultation with a range of senior figures in the administration, including the Secretary of State, Secretary of the Treasury, Secretary of Homeland Security, the Assistant to the President for Economic Policy, the Senior Counsellor for Trade and Manufacturing, the Assistant to the President for National Security Affairs, and the Chair of the US International Trade Commission (ITC).

To support implementation, the Secretary of Commerce and the USTR are empowered to use any of the President’s legal authorities under the International Emergency Economic Powers Act (IEEPA), as necessary. IEEPA is a major legislative tool that allows the President to regulate trade, freeze assets, and impose economic restrictions in response to declared national emergencies.

In addition to these designated officials, all executive departments and federal agencies are directed to take appropriate legal steps within their respective areas of authority to support enforcement of the order. This ensures a unified, whole-of-government response to the introduction of the new trade and tariff measures.

Taken together, these provisions establish the legal and institutional framework required to operationalise the policy, fully utilising the emergency powers available under US law while mobilising the broader executive branch to enforce and sustain the strategy effectively.

Maintaining Congressional Oversight

The Executive Order includes provisions requiring that Congress be kept informed about the national emergency and the measures undertaken in response. It establishes a formal reporting mechanism to ensure transparency and enable legislative oversight as emergency powers are exercised.

The USTR is responsible for preparing and submitting these reports. In carrying out this task, the USTR must consult with several senior officials, including the Secretary of State, Secretary of the Treasury, Secretary of Commerce, and Secretary of Homeland Security, as well as the President’s key economic and national security advisers and the Senior Counsellor for Trade and Manufacturing.

The USTR is required to submit both recurring reports, providing regular updates, and a final report to Congress. These must outline the scope and nature of the national emergency declared in the order, the actions taken under emergency authorities such as the imposition of tariffs, and the status of the emergency, including whether it is extended, modified, or terminated.

This reporting requirement is grounded in US law, specifically in two key statutes. Section 401(c) of the National Emergencies Act (NEA) mandates that the President report to Congress every six months on any national emergency that remains in effect. Meanwhile, section 204(c) of the International Emergency Economic Powers Act (IEEPA) requires detailed reporting on actions taken under IEEPA, particularly those involving trade or economic restrictions.

Safeguarding Legal and Institutional Boundaries

The Executive Order sets out legal provisions to guide its interpretation and enforcement, ensuring that its actions remain consistent with existing legal authorities and administrative frameworks. These provisions function as legal safeguards, ensuring that the order operates within the established authority of government agencies, adheres to current laws and funding limitations, and does not create new legal rights or claims for private parties.

Firstly, it makes it clear that it does not override or interfere with any legal authorities already held by government departments or agency heads. It also does not affect the responsibilities of the Office of Management and Budget (OMB) in relation to budgetary management, administrative oversight, or legislative proposals. In other words, the order respects the existing powers and functions of government bodies and does not alter their established roles.

Secondly, it must be implemented in accordance with current law and is subject to the availability of appropriated funds. This means it cannot be carried out in a manner that contravenes existing legal requirements, nor can it proceed without proper funding authorised by Parliament. This provision serves as a safeguard, ensuring that any actions taken under the Executive Order are both lawful and financially supported.

Finally, it specifies that it does not create any private legal rights. Individuals, organisations, or businesses cannot use this order as a basis to sue the government or demand enforcement of its provisions. It is intended solely as a directive for the executive branch, not as a source of legally enforceable rights.