Policy Risk Monitor – February 6, 2025
A weekly news scan of key policy areas to help firms identify and monitor policy risks.
Trade
Trump Imposes Tariffs on China
On February 1, 2025, President Donald Trump ordered 10% tariffs on imports from China. The tariffs are in addition to any current trade measures. The order also suspended the $800 “de minimis” exemption for small packages from China. The tariffs took effect February 4, 2025, and China announced retaliatory tariffs on the same day, effective February 10, 2025. See U.S.-China Tariffs Accelerate Changes in Global Economy.
Trump Threatens Tariffs against Mexico and Canada
On February 1, 2025, President Donald Trump ordered tariffs on products from Mexico and Canada to induce those countries into taking action to reduce illegal migration and the flow of fentanyl into the United States. Mexico and Canada quickly struck individual border-security agreements with the United States, and the Trump administration agreed to delay the implementation of the tariffs by at least 30 days beyond the February 4, 2025 effective date. The delay will provide time for further negotiations. See Trump Tariff Threats Signal Shift Toward Geoeconomics and Executive Power.
Trump Says He Will Impose Wide Ranging Tariffs on February 18
President Donald Trump said he would impose tariffs on a wide range of imports in February. “We’ll be doing pharmaceuticals and drugs, medicines, etc, all forms of medicine and pharmaceuticals. And we’ll be doing very importantly steel and we’ll also be doing chips and things associated with chips,” Trump said. “We’re going to put tariffs on chips. We’re going to put tariffs on oil and gas. That will happen very soon, I think about the 18th of February. And we’re going to put a lot of tariffs on steel,” he said.
Trump Threatens 100% Tariffs on BRIC Countries that Replace U.S. Dollar
President Donald Trump again warned that he will impose 100% tariffs on BRIC countries if they attempt to replace the U.S. dollar as a reserve currency. “The idea that the BRICS Countries are trying to move away from the Dollar, while we stand by and watch, is OVER,” Trump said in a statement on Truth Social. “We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy.” The nine-country alliance of Brazil, China, Egypt, Ethiopia, India, Iran, Russia, South Africa, and the United Arab Emirates have been reducing their reliance on the U.S. dollar.
EU Resuspends WTO Case Against China
The EU has re-suspended its case against China at the World Trade Organization over allegations of economic coercion against Lithuania. The EU filed the complaint against China in 2022 in response to trade restrictions from China on Lithuania after that country opened a Taiwanese representative office in its capital. The EU had to resume the complaint last week to prevent it from lapsing.
Europe Proposes Tariffs on Agricultural and Fertilizers from Russia and Belarus
The European Commission adopted a proposal to impose tariffs on a number of agricultural products and certain nitrogen-based fertilizers on Russia and Belarus. The newly targeted agricultural products constitute the remaining 15% of agricultural imports from Russia in 2023 that had not yet been subject to increased tariffs.
EU Will Retaliate if U.S. Imposes Tariffs, Could Target Tech Firms
The EU has said it will “respond firmly” if the United States imposes tariffs on it. French President Emmanuel Macron said, “[i]f we were attacked on trade issues, Europe, as a power that considers itself as such, will have to make itself respected and therefore react,” according to the Financial Times. Trump said that he “absolutely” will impose tariffs on the EU but that a deal could be reached with the UK. The EU has the largest trade deficit with the United States. The EU might target tech firms with its “anti-coercion instrument” (ACI), which allows it to impose restrictions on trade in services if another country uses tariffs on goods as a tool of political coercion, the Financial Times reported.
EU to Make E-Commerce Platforms Liable for “Unsafe” Goods
The EU will make e-commerce platforms like Temu, Shein, and Amazon liable for “unsafe” goods, according to the Financial Times. EU customs reforms will require online platforms to provide data before goods arrive in the EU, allowing officials to better control and inspect packages. There are growing concerns about an increase in unsafe and counterfeit goods shipped from Asia directly to EU customers.
EC May Exempt Most EU Companies from Carbon Border Tax
The European Commission may reduce coverage of its carbon border tax to 20% of eligible EU companies in a move to reduce the regulatory burden. The remaining 20% of companies account for nearly all of the product emissions.
Brazil Says it Will Reciprocate with Tariffs against United States
Brazilian President Luiz Inacio Lula da Silva said his country would respond with tariffs against the United States if Trump imposes tariffs on Brazilian imports.
Tax
Senate Tax Strategy Would Move TCJA to Second Bill
Senate Budget Committee Chair Lindsey Graham presented a legislative plan to move first on a budget reconciliation package focused on border security, energy, and defense. The plan would extend the expiring Tax Cuts and Jobs Act provisions in a second budget reconciliation package later in the year.
United States Withdraws from UN Tax Negotiations
The United States withdrew from the UN Framework Convention on International Tax Cooperation during negotiations on a global tax agreement. The U.S. representative to the committee said “the goals of a future UN Framework Convention on International Tax Cooperation are inconsistent with U.S. priorities and represent unwelcome overreach.” The delegate said the United States rejects “the very nature of these discussions. The process that has been adopted will lead to a Convention that would unacceptably hamper nations’ ability to enact tax policies that serve the interests of their citizens, businesses, and workers.”
India Assessing Whether OECD Global Tax Deal after U.S. Withdrawal
India is assessing whether the Global Tax Deal, known officially as the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), can work following the U.S. withdrawal.
Economic Policy
Trump Begins 10-1 Deregulation
On January 31, 2025, President Trump issued an executive order on “Unleashing Prosperity Through Deregulation,” which requires that whenever an agency promulgates a new rule, regulation, or guidance, it must identify at least 10 existing rules, regulations, or guidance documents to be repealed. The total incremental cost of all new regulations, including repealed regulations, must be significantly less than zero for fiscal year 2025. Notably, the order reinstates Office of Information and Regulatory Affairs (OIRA) review of tax regulations. The Biden administration exempted tax regulations from this review.
U.S. Domestic Policy
Trump Reportedly Will Invoke 1798 Alien Enemies Act for Mass Deportations
President Donald Trump will reportedly invoke authority under the Alien Enemies Act of 1798 to deport immigrants alleged to be gang members without court hearings. The move would be a claim to broad authority that could enable mass deportation without due process rights. It would likely face legal challenges.
Federal Judge Blocks Trump Effort to Restrict Birthright Citizenship
A Maryland federal district court blocked President Donald Trump’s executive order to restrict automatic birthright citizenship. The court ruled that there is a “very strong” likelihood that the executive order was unconstitutional. The nationwide order expands on an earlier pause from a federal judge in Washington state.
Foreign Investment
Nippon Accuses U.S. of “Sham” Review of Proposed U.S. Steel Merger
Nippon Steel Corp. and United States Steel Corp. claimed that the Committee on Foreign Investment in the United States (CFIUS) allowed “virtually no substantive engagement” with the companies and violated their due process rights. The companies claimed that President Joe Biden did not give the companies an opportunity for feedback on a “sham” national security review.
U.S.-China
China Revives Antitrust Investigations against U.S. Tech Firms
China has revived antitrust investigations into Google and Nvidia and is considering a new probe against Intel, the Financial Times reported. The nature of the probe into Intel is unclear. The investigations could be part of China’s retaliation against the United States for Trump’s new tariffs. China’s antitrust agency is reportedly preparing for a potential probe into Apple Inc.’s policies and the fees it charges app developers, Bloomberg reported.
Energy
Iran Pushes OPEC To Unite Against U.S. Sanctions
Iranian President Masoud Pezeshkian urged OPEC members to unite against any new U.S. sanctions in response to President Donald Trump campaign statements that he reduce Iran’s oil exports to zero.
Indonesia Questions Paris Climate Agreement After U.S. Exit
Indonesia’s climate and energy envoy said targets for reductions in greenhouse gas emissions were unfair for certain countries with the U.S. withdrawal from the agreement. With doubts about the U.S. commitment, Indonesia could turn to China for climate funding.
Geopolitics
Panama Won’t Renew China’s BRI After U.S. Meeting
Panama will withdraw from China’s Belt and Road Initiative (BRI) after meeting with U.S. Secretary of State Marco Rubio. Rubio visited Panama to address China’s influence in the Panama Canal zone. The Trump administration is concerned about Chinese investments in two port facilities on both sides of the canal. The United States claimed that Panama also promised free passage through the Panama Canal for U.S. warships, but Panama disputes the claim of such an agreement. Panama, reportedly, is assessing whether to cancel its contract with the Hong Kong-based company that operates ports near the Panama Canal, according to Bloomberg.
Rubio Says Proposal to Buy Greenland “Not a Joke”
Secretary of State Marco Rubio said President Donald Trump’s proposal to buy Greenland “is not a joke” because China may deploy Chinese companies to establish operations on the island that could be used for military purposes.
Trump to Present Plan to End Russia-Ukraine War
The Trump administration will reportedly present a plan to end the Russia-Ukraine war at the Munich Security Conference in Germany on February 14-16, Bloomberg reported. The plan could include a ceasefire and security guarantees for Ukraine.
Trump Orders Creation of US Sovereign Wealth Fund
President Donald Trump ordered the creation of a sovereign wealth fund within the next year. Trump said the fund could potentially buy TikTok. It is unclear how it will be funded. Other countries have created sovereign wealth funds to invest government dollars.
Trump Says He Wants New Nuclear Deal with Iran
President Donald Trump said he is willing to negotiate a new nuclear deal with Iran that allows the country to “peacefully grow and prosper.”
Trump Proposes U.S. Control of the Gaza Strip
President Trump again proposed U.S. control of the Gaza Strip, arguing it would not require American troops. He posted on Truth Social: “The Gaza Strip would be turned over to the United States by Israel at the conclusion of fighting. The Palestinians, people like Chuck Schumer, would have already been resettled in far safer and more beautiful communities, with new and modern homes, in the region. They would actually have a chance to be happy, safe, and free. The U.S., working with great development teams from all over the World, would slowly and carefully begin the construction of what would become one of the greatest and most spectacular developments of its kind on Earth. No soldiers by the U.S. would be needed! Stability for the region would reign!!!”
Argentina Withdraws from World Health Organization (WHO) over COVID-19 Response
Argentina announced that it is withdrawing from the World Health Organization (WHO). In announcing the withdrawal, Argentine President Javier Milei said in a statement that the COVID-19 “quarantines caused one of the largest economic catastrophes in world history.”