Trump by no means forgot about tariffs, but he stopped short of imposing them on his first day in office. In the early hours of his second administration, Trump’s most headline-grabbing executive orders aimed to end birthright citizenship, crack down on illegal crossings at the southern border, and increase domestic energy production.

The president instead bought some time on how to put a new tariff regime in place. On Jan. 20, Trump signed a memorandum directing federal agencies to pursue an “America first” trade policy.

The move came less than an hour after Trump, 78, was inaugurated in the Capitol Rotunda during a deep Washington, D.C., cold spell. It was the first presidential swearing-in ceremony moved indoors in 40 years.

Trump campaigned on beefing up tariffs. His first action on the trade front directed his administration to study trade policies and examine trade relationships with allies and adversaries alike.

Trump added more meat to bare policy bones on Day Two of his administration. On the evening of Jan. 21, Trump said he was discussing, possibly by Feb. 1, “a tariff of 10% on China, based on the fact that they’re sending fentanyl to Mexico and Canada.”

Trump mentioned the United States’s northern and southern neighbors in the context of drug and human smuggling. The president explained he was considering imposing duties on Canada and Mexico unless they clamped down on the trafficking of illegal migrants and fentanyl, including precursor chemicals from China, across U.S. borders. 

It’s now up to Trump’s economic advisers to develop his administration’s tariff plans. His team includes a mix of ideological views on economic policies. Some favor a much more populist and protectionist trade stance, while others seek a lighter touch on trade and tariff policy. Some advisers have raised concerns that dramatically ramping up tariffs right out of the gate could have unintended knock-on effects, including higher inflation.

The memo is a sign that the Trump administration is watching its step in imposing tariffs. While Trump’s tariffs during his first term were targeted and largely focused on steel and aluminum, he campaigned in 2024 to implement 10% to 20% across-the-board tariffs.

Additionally, Trump announced new tariffs after his election victory. On social media, he said he would impose 25% tariffs on Mexico and Canada right after he entered office, designed to coerce the two countries into stopping the flow of narcotics and illegal immigrants into the U.S.

Trump also vowed ahead of his inauguration to establish a so-called “External Revenue Service” designed to focus on revenue capture from foreign countries through tariffs. The proposal is a contrast to the Internal Revenue Service, the government’s tax collection agency, which has faced harsh scrutiny from Republicans.

“We are establishing the External Revenue Service to collect all tariffs, duties, and revenues, it will be massive amounts of money coming into our treasury from foreign sources,” Trump reaffirmed in his inaugural address.

Business takes wait-and-see approach

Perhaps the biggest uncertainty that could cause headwinds for the broader economy is what will happen with the U.S. tariff policy.

Trump’s vow of 10% to 20% across-the-board tariffs means imports from allies and adversaries alike could become that much more costly. Many analysts fear the higher tariffs could be passed along to those in the U.S., and some economists consider them a form of tax on consumers.

The left-of-center think tank Center for American Progress found that Trump’s 10% tariffs would squeeze consumers because companies would pass the costs on to them, costing them $1,500 more annually. The Peterson Institute for International Economics found that 20% tariffs would cost a typical U.S. household more than $2,600 a year.

However, it is hard to gauge exactly what the tariff situation might end up looking like. That is because Trump’s pledge to raise tariffs might be more of a threat than a concrete plan. Tad DeHaven, a policy analyst at the libertarian Cato Institute, which generally opposes tariffs, said the tariffs could be more of a threat and a way to compel countries to acquiesce.

“At the same time, that’s not good for business investment,” he told the Washington Examiner. “It creates a lot of uncertainty. And if your goal is to grow the economy, you want to be looking at lowering barriers, not increasing barriers.”

Right now, business executives and financial markets are taking a wait-and-see approach when it comes to trade policy.

“Those are very difficult to nail down because we don’t know what the implementation of those threats looks like,” Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner.