Trade & Tariff Update #16 - India Deal Reached, Oil Sales to Cuba and More

Taking Aim at Oil Sales to Cuba 

After a busy last week, the Administration continued its tariff activities this week by issuing an executive order imposing tariffs on countries selling oil to Cuba.  This order could likely impact Mexico, one of Cuba’s oil suppliers.  Meanwhile, there has yet to be official confirmation through executive orders of last week’s threatened secondary tariffs against countries doing business with Iran and against Canada in response to a prospective trade deal with China.  The wait also continues for a formal announcement on the trade deal with Taiwan. 

Deal Reached With India 

On Monday President Trump announced on Truth Social that the United States had reached a trade deal with India after that country agreed to “stop buying Russian oil, and to buy much more from the United States and, potentially, Venezuela.”  Both countries agreed to immediately lower tariffs on each other’s goods.  While nothing has been announced formally via executive order, customs message or federal register, the President stated that the United States will reduce the tariff on imports from India from 25% to 18% and India will reduce any tariffs on American goods to zero.  At this time current tariffs with India are still in effect. 

No Word Yet From the Supreme Court

It now appears that the next date for a potential Supreme Court decision on the IEEPA tariffs might not be until February 26.  While the wait continues, expectations mount that the Administration will implement an alternative tariff regime based on Sections 301 and 232 tariffs augmented by novel authority under Sections 122 and 338.  One source predicts the following:  

• If the Court rules against use of the IEEPA tariffs, the Administration may rely on new and existing alternative tariff authorities to achieve its trade agenda, albeit in some cases subject to greater procedural requirements;

• Regardless of the Court’s pending decision, the Administration likely will continue to enter into trade negotiations, including pressing for changes to the United States Mexico Canada Agreement (USMCA); and

• As in the past year, the number of Section 232 investigations likely will continue to sharply increase, resulting in new tariffs on many of the target industries and covering significant segments of the economy.  

Data Undercuts the Case for Tariffs’ Effectiveness  

Data released last week undermines any support for the effectiveness of tariffs.  The trade deficit – a key goal for the Administration’s tariff policy -- increased dramatically in November, up 94.6% from October.  Additionally, consumer confidence was reported last week to have sharply declined in January to its lowest level since 2014.  While all of this seemingly chips away at the political viability of the tariff policy as the mid-term elections approach, the data might also be viewed as an unintended consequence of a public relations campaign against tariffs asserting that consumers have shouldered the burden.   

One analysis released last week indicated that American businesses and exporters are bearing the brunt of tariff costs, with the impact on inflation amounting to just 0.2% in 2025.  While a reversal of tariff policies would certainly benefit businesses relying on imports, the question arises as to whether damage to consumer confidence also is harming on the other side of the equation through depressed sales. 

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