(UBS)
Tariff Uncertainty.
The administration pivoted to imposing 10% tariffs under an authority that has never been used before. These tariffs, while global and broad-based, are legally limited by both time (only 150 days) and tariff level (15% cap). Administration officials have talked about potentially increasing the tariff from 10% to 15%. An act of Congress could extend the time period, but President Trump has indicated that he does not need any action by Congress. Instead, it appears that the administration sees this tariff as providing time for the administration to apply tariffs using other authorities on a more longstanding basis. One authority allows the administration to impose retaliatory tariffs in response to unfair trade practices (applied against China in the first Trump administration). Another allows for tariffs that can apply to specific sectors and products on national security grounds (it already has some of these tariffs in place). These tariffs can only be imposed after lengthy investigative and administrative processes. These tariff authorities are less flexible and broad-based than the emergency authority the Trump administration had used, so the composition of the tariff regime (and the industries and trading partners it would impact) likely will be different and take time to implement.
DHS Shutdown Continues.
The Department of Homeland Security (DHS) has been without funding for two weeks and counting. The Senate held a vote this week on a bill to fund the DHS through the remainder of the fiscal year, but Senate Democrats objected given the bill lacked any of the immigration enforcement changes that they are seeking. These include judicial warrant requirements, use-of-force standards, mandatory use of body cameras, and a ban on masks. The Trump administration had drawn down federal immigration operations in Minnesota, and this week sent a letter to lawmakers outlining changes to ICE operations. However, the administration otherwise has largely rebuffed Democrats on their demands. So, negotiations have been ongoing since the shutdown, but little progress has been made. Despite having no nexus with immigration enforcement, agencies like FEMA, TSA, CISA, and the Coast Guard are affected and are currently working without pay since they are deemed essential. When the public begins to feel more of the impact from the shutdown (e.g. TSA PreCheck, Global Entry, and disaster relief), lawmakers will be under greater pressure to come to a deal. While a deal to fund DHS will eventually occur, the current state of affairs is bleak.
For more, see the latest Washington Weekly .
