PALM BEACH, Fla. (AP) — With a trio of executive orders, President Donald Trump has almost instantly thrown the world economy and his own goal of cutting inflation into turmoil.
His tariffs against Canada and Mexico in order to stop illegal immigration and the illicit fentanyl trade led to retaliatory taxes by both countries on U.S. imports. He placed an additional 10% tariff on imports from China with the stated goal of stopping the production of fentanyl.
But on a deeper level, Trump suddenly hit the U.S. economy with tax increases that, if sustained, could total more than $1 trillion in 10 years. He did so without congressional approval and by his own acknowledgement at the perilous chance of “some pain” in the form of higher inflation, job losses and worse growth.
Here's an explanation of what Trump's executive orders say and how they work:
What is the International Emergency Economic Powers Act?
This is the 1977 law that helped enable Trump to declare an economic emergency in the executive orders and implement his tariffs. There are more than three dozen active emergencies, including measures taken to respond to the 1979 Iran hostage crisis, human rights violations in Venezuela, nuclear weapon development in North Korea and multiple actions taken by China and Russia.
The law enables a president to freeze and block transactions in response to “unusual and extraordinary” threats outside the United States.
What are the tariffs on Canada, Mexico and China?
The tariffs would start at the beginning of Tuesday.
There would be an additional 25% tariff on imports from Canada, with a lower 10% charge on the oil, natural gas, electricity and other energy products. Energy products were taxed at a lower level to prevent U.S. consumers and businesses from paying higher prices for gasoline and utilities. Mexican imports would face an additional 25% tax. China would face an additional 10% tariff.
While Trump has said that foreigners pay these taxes, the tariffs would be paid by the individuals and companies bringing in the goods — which means this would be a domestic tax increase.
Why were the tariffs imposed?
Trump's orders say the tariffs are a consequence of illegal immigration and drug smuggling. Not everyone will agree with his reasoning, as U.S. government reports show that unauthorized border crossings from Mexico have fallen over the past year and seizures of fentanyl along the northern border are relatively low.
But Trump's order on Mexico says that drug traffickers and the country's government “have an intolerable alliance” that “endangers the national security of the United States, and we must eradicate the influence of these dangerous cartels.” His order on Canada says that Mexican cartels are operating in that country and claims despite the modest amount of fentanyl intercepted that it would be enough to kill “9.5 million Americans.” The order on China says that country's government provides a “safe haven” for criminal organizations to “launder the revenues from the production, shipment, and sale of illicit synthetic opioids.”