Washington Weekly: Executive Order Barrage

Donald Trump was sworn in as the 47th President of the United States. The Senate confirmed two of President Trump’s nominees this week, including Florida Senator Marco Rubio to serve as Secretary of State and John Ratcliffe to serve as director of the CIA. The House passed a bill to expedite wildfire prevention projects and a bill to prohibit health care providers from limiting care if an infant survives an abortion.

The Senate will continue to confirm Trump administration nominees. House Republicans will hold their intra-party retreat in Miami to plan their policy agenda for the year.

Executive Order Barrage.

On his first day in office, President Trump set a record by issuing 26 executive orders (EOs) covering a wide range of issues. Major areas of focus were immigration and energy. In general, the EOs do not trigger immediate changes in policy. Rather, they initiate studies, investigations or reviews of existing policies that will serve as a basis for subsequent regulatory changes. New presidents often issue EOs in their first week to begin to reverse policies of their predecessors. The EOs help kick off the processes of regulatory change, but those processes won’t begin in earnest until Trump’s choices for cabinet posts and leadership positions at regulatory agencies are fully in place.

Tariffs on Deck?

We have received many questions from colleagues and clients about the timetable of new tariffs. President Trump this week signaled his intent to impose higher tariffs (between 10% and 25%) on imports from Canada, Mexico and China on or around February 1. We believe Trump is sending a message to these countries as a means of initiating negotiations to address US grievances on immigration enforcement and fentanyl imports into the US. Particularly given that the the Trump officials with primary authority over tariffs are still going through the Senate confirmation process, we don’t believe the higher tariffs will actually go into effect on February 1. The President has the authority to impose higher tariffs, but those typically need to go through a formal process that could take months. The administration is considering using an emergency authority that has never been used before to impose tariffs. While this authority would provide for a more fast-track process, the authority would be vulnerable to legal challenges that could delay and possibly block tariff increases. Going forward, every tariff threat made by the President will initiate a negotiation, which, if resolved, could alleviate or delay higher tariffs. This will be a theme throughout the year, with very few countries likely to be spared from the tariff threat.

102.

President Trump’s term is just four days old. The administration has many White House staff in place (about 100 by some reports), but Trump will need a more complete ensemble of cabinet secretaries and regulatory heads to carry out his policy priorities. As of today, as noted above, just two cabinet-level officials have been confirmed by the Senate. So, while many parts of the Trump agenda will be well articulated in the upcoming days and weeks, the staffing needed to put it in place will trail by months.

Crypto Actions:

For years, the crypto industry complained that the SEC under former Chair Gary Gensler had relied upon enforcement actions to regulate the industry. In its first week, the Trump administration signaled a major pivot in its approach relative to the Biden administration on crypto and digital assets. The SEC this week announced the launch of a new task force charged with developing a comprehensive and clear regulatory framework for crypto assets. Additionally, the White House issued an executive order that creates a new digital asset working group, which is also charged with developing a Federal regulatory framework. The SEC and the Trump administration may face challenges establishing a regulatory framework without legislation from Congress that provides a clear line between what digital assets are securities (and therefore under the SEC’s authority) and what are commodities (and therefore under the CFTC’s authority). Though there continues to be bipartisan interest in legislation on digital assets, there isn’t consensus around the details and there may continue to be challenges in forging that consensus.

Global Minimum Tax.

A “global minimum tax” was a top priority of the Biden administration in the realm of tax policy. The administration hammered out an international agreement with other nations that it then tried to work with Congress to implement. However, Congress balked at making these tax law changes. This week, the Trump administration refuted President Biden’s support for a global minimum tax and expressed a new US position in opposition to it. Trump’s opposition is largely due to the adverse impact the new tax would have on US companies operating globally. He has tasked the Treasury to report back in 60 days with options to respond to countries that have implemented the global minimum tax. House Republicans also have proposed legislation to significantly increase taxes on companies from countries that have adopted the global minimum tax. We are keeping an eye on which countries might be in Trump’s crosshairs (South Korea, Australia, Canada, France, Germany and Spain are among the countries that have put in place the tax) and how they might respond. The potential tit for tat could have a significant impact on multinational companies.

Federalizing Insurance?

As the recovery from the devastating fires in California continues, there is increasing focus among policymakers in Washington over the lack of insurance options for many homeowners in disaster-prone areas in the state. Many insurance companies have withdrawn their business from the state because of the high risks they face, and this has left many homeowners with inadequate coverage to rebuild. Some lawmakers are calling for a federal backstop of private insurance claims for fire damages in such areas vulnerable to fires or for a more direct federal insurance program that covers natural disasters (one such program already exists with floods along coastal areas). The debate is sensible given the current predicament, but further federalizing any insurance offerings would be a huge lift in Congress and within the broad insurance industry, which has substantial lobbing power in Washington.

Greenland.

President Trump this week revived a proposal he first made in 2019 for the US to purchase Greenland. While this may sound outlandish on the surface, it’s not the first, or even second, time that the US has proposed buying it. US attempts to purchase Greenland have been seriously considered in 1867, 1910, 1946 and 1955. Trump outlined the proposal as a strategic move for the US, pointing to Greenland’s untapped natural resources and the importance of its Arctic location for international trade and security. He has cited security threats from the presence of China and Russia in the area. Greenland is an autonomous territory of Denmark and is the world’s largest island. With 80% of the island covered by ice, it has a population of only 57,000 people. An increase of melting ice around Greenland is opening up more shipping routes, including a much shorter shipping route between the Pacific and Atlantic Oceans. Not surprisingly, neither Denmark nor Greenland is excited about the President’s overture. We think the President’s intent is not to acquire Greenland but rather to strengthen the US military presence on the island (the US already has a small base there used for space surveillance and missile detection). Trump’s approach is similar to how he looks at tariffs – issue a threat (often one that is unconventional), force a negotiation and get a concession that is advantageous to the US. The concession here is likely to be a stronger US military presence on an increasingly important island.

Gulf of America.

One executive order from this week called for renaming the Gulf of Mexico to the Gulf of America. The order mandates all federal agencies to update government maps and documents within 30 days. The Gulf of Mexico received its name over four centuries ago, ultimately deriving from Mexica, the Nahuatl term for the Aztecs, as it was home for ports and trade routes for the Mayan and Aztec empires, among others. The Gulf spans 600,000 square miles of sea, making it the ninth-largest body of water in the world. It stretches over 3,700 miles of coastline, bordering five US states (AL, FL, LA, MS and TX) as well as Mexico and Cuba. The executive order this week only renames the Gulf to the Gulf of America in the United States. It does not have authority to enforce what the Gulf is called internationally. It’s too early to know if this new name will stick in the US or be ignored. The US and Mexico have different names for the river that separates southwestern states from Mexico (Rio Grande River vs. Rio Bravo), and that difference doesn’t seem to adversely affect the bilateral relationship or to be a big deal.

Ratings Plunge.

According to Nielsen, an estimated 24.6 million people tuned in live to watch the swearing in of President Trump for his second term. The inaugural address is an important platform and a rare opportunity for a president to have uninterrupted focus from virtually every news source. The viewership for this inauguration was significant, but it does represent a drop compared to prior inaugurations. Traditional media viewership for both former President Biden’s inauguration (33.8 million) and Trump’s first inauguration (31 million) surpassed Monday’s numbers. It remains to be seen if the decreased viewership is merely reflective of people turning away from traditional methods for viewing media, a sign of decreased interest in politics, an adequate familiarity with Trump or foreshadowing for an unknown future trend.