Former U.S. Trade Representative Katherine Tai signals a period of increased trade policy uncertainty, with the potential for more tariffs and significant supply chain ramifications from the upcoming USMCA renewal.
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Former US trade chief warns of supply chain risks with 1 key deadline approaching
A more aggressive and experimental U.S. trade policy is on the horizon, bringing with it the risk of new tariffs and significant supply chain disruptions, former U.S. Trade Representative Katherine Tai said in a recent interview.
"People should be expecting more tariffs than were in place Jan. 20, 2025. For as long as Donald Trump is president, there will be an active tariff agenda," Tai, now the executive director of the Coalition for New Trade, said.
The warning comes as the Trump administration initiated two new Section 301 investigations in March, targeting excess capacity and forced labor with 16 and 60 targets respectively. These investigations follow the Supreme Court's rejection of the administration's previous tariff justifications, a move that has led to ongoing tariff refunds by Customs and Border Protection. The current average U.S. tariff on Chinese goods stands at approximately 19 percent, a legacy of the initial Section 301 actions.
The most significant near-term risk centers on the July 1, 2026, deadline to renew the U.S.-Mexico-Canada Agreement (USMCA), a pact that governs over $1.5 trillion in annual trilateral trade. Tai warned that a failure to renew the agreement would be "messy" and could unravel tightly integrated North American supply chains, particularly in the automotive sector.
USMCA Renewal and Supply Chain Risks
The USMCA, which replaced NAFTA in 2020, is subject to a joint review and renewal decision by all three member countries. Tai emphasized the importance of maintaining the trilateral structure, arguing that a shift to bilateral deals would be far more complex to administer. "Just think about all the questions for Customs and Border Protection to figure out about tariff refunds," she noted, highlighting the administrative nightmare that could ensue.
A key provision within the USMCA could also come into play, which requires any member to inform the others if it enters into a trade agreement with a non-market economy, widely interpreted as a clause targeting China. This could create conflict if any of the three nations pursue separate deals with Beijing, potentially jeopardizing the entire North American trade pact. The integrated automotive supply chain is particularly vulnerable, with complex rules of origin that could be thrown into disarray.
New Tariffs on the Horizon
Tai views the new Section 301 investigations as a credible threat, targeting issues with longstanding bipartisan support. However, she questioned the timing, suggesting it "makes it feel like tariffs seeking justifications, not justifications employing tariffs." This approach, she concedes, will almost certainly face legal challenges.
The investigations signal a pivot back to the Trade Act of 1974 as the primary tool for tariff actions. This follows a period of improvisation that saw the administration use other legal justifications that were ultimately struck down. For businesses, this means preparing for a new wave of potential tariffs and the associated costs and supply chain adjustments. Tai suggests that the era of stable, predictable trade policy is over, and companies must now adapt to a period of "experimentation" where trade agreements may become more targeted and less comprehensive.
This article is for informational purposes only and does not constitute investment advice.
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