On April 2, 2025, President Donald Trump invoked the International Emergency Economic Powers Act (IEEPA), declaring a national emergency. According to the White House’s website, he did this to “increase our competitive edge, protect our sovereignty and strengthen our national and economic security.”
Trump declared the national emergency on the basis that “foreign trade and economic practices have created a national emergency.” More specifically, the issues at hand for the Trump administration are the trade deficits that the United States has with other countries. A trade deficit, according to the Council on Foreign Relations, occurs when a nation imports more goods than it exports. The United States has a deficit of -122.7 billion dollars as of February 2025, as reported by the U.S. Bureau of Economic Analysis. Trump argues that these deficits have “resulted in a lack of incentive to increase advanced domestic manufacturing capacity; undermined critical supply chains and rendered our defense industrial base dependent on foreign adversaries.”
To address this, Trump has imposed tariffs that will “strengthen the international economic position of the United States and protect American workers,” according to the White House website. These tariffs include a 10 percent tariff on all imported goods and additional tariffs on countries with which the United States has the largest trade deficits.
For certain imports coming from Canada and Mexico, the effect of tariffs is different. According to the White House’s website, existing IEEPA orders are unaffected by the new tariffs. These orders include tariffs that are applied based on the origin country of the product. Certain products that are certified under the United States-Mexico-Canada Agreement (USMCA) have no tariffs applied to them. For Canada and Mexico, non-USMCA-compliant goods receive a 25 percent tariff.
Certain goods are not subject to tariffs, such as (but not limited to) steel/aluminum and auto parts that already have tariffs applied to them, “copper, pharmaceuticals, semiconductors and lumber,” as well as energy/“other certain materials that are not available in the United States.”
There are varying effects predicted to occur due to the newly implemented tariffs. According to the University of Pennsylvania, Trump’s tariffs are projected to raise 4.5 trillion to 5.2 trillion dollars, depending on the economic responses and effects. The University of Pennsylvania compared this to the effects of increasing the corporate income tax, stating, “tariffs are estimated to raise about the same amount of revenue as increasing the corporate income tax from 21 to 36 percent.” They continued, “while raising the corporate tax rate is generally seen as highly economically distorting, tariffs would reduce [gross domestic product] (GDP) and wages by more than twice as much.”
The University of Pennsylvania summarizes that “many trade models fail to capture the full harm of tariffs.” They urge that “Trump’s tariffs will reduce long-run GDP by about 6 percent and wages by 5 percent,” leading to an overall loss for the economy.
