What Is Next for U.S. Trade Policy

Machine Operated Script:

Andy Shiles (00:04)
Everybody and their dog is probably kicked around the, the, the tariff talks, the repercussions thereof. They’re going to get refunds. They’re not going to get refunds. The court’s going to go one way or the other. This is going to be a good discussion. We have somebody on hand that’s been on the show before, and he always has some great,

you know, stimulating discussion, I guess, Eric Hargraves, it’s like you, it’s one of those things that you definitely are one of the sharper tools in the shed. And I love getting to talk with you, but Lalo and I enjoy our conversation. So this is going to be more of a kind of a round table discussion and give people something to think about, right?

Eric Hargraves (00:45)
Andy, every time you do an introduction for me, you make me blush. So I’m glad not all of this is always on video. ⁓ But yeah, I’m excited to talk about it today. It’s always a fun time with you guys. So thanks for having me on.

Lalo (00:51)
Ha

Andy Shiles (00:58)
you bet. Lalo, I’ll tell you, why don’t you, you can kick us off with some of this, but I mean, there’s been some interesting things even, I mean, there’s been so, so many things in the courts

let me throw it to you to let you kind of start us off with, kind of where we want to take the conversation today.

Lalo (01:15)
Yeah, well, I had a conversation with Eric and decided let’s go ahead and record this for the podcast, but it’s pretty much again, the Supreme Court hearings were a couple of weeks ago. So obviously nothing has been handed down as of today.

There have been, and like you said, Andy, there have been several folks that make comments or that are speculating, let’s do this, this may happen, this may happen, which is pretty good. And last week we had a few folks on our show who did the same,

so we had the discussion with Eric and he’s like, well, I’m starting to see some frameworks being shaped here, an anticipation of maybe IEEPA getting revoked. And not that IEEPA will be revoked, but the IEEPA tariffs that were imposed will get

will always be around or should be around anyway, because the president does need that power to be able to do that in an emergency. anyway, so Eric brought up quite a few other interesting items. So I said, Eric, let’s get on the podcast. So here we are. Eric, thanks for joining us again. You’re always a trooper and you always come on and enlighten us with the information that you have from.

your business, well, the business that you do through your firm.

Eric Hargraves (02:40)
Thanks for having me. I just I found it really interesting listening to the oral arguments earlier this month. you know, it’s clearly the tone was skeptical, right? Skeptical of how far we went with tariff and positions using the IEEPA statute. You said it well, IEEPA is not going away. International Emergency Economic Powers Act is on the books. It’s going to remain on the books. The question is,

How much authority does that give the president to impose tariffs that are this broad and sweeping? Are the tariffs actually a tax on consumers? We’re really kind of trying to refine the definitions and the, you know, the…

outcome of this got me trying to read tea leaves, to be honest. And I’m trying to read between the lines on what’s being said, what was said in the oral arguments, the actions of the administration. And I went back and looked at quite a few leading indicators from this past year. And we’ve had

An increase in Section 232 investigations and tariff impositions, right? Let’s recount some of them. We’ve got steel, aluminum, copper. We’ve had lumber and derivative products. We’ve had the list of derivative products being imposed for steel and aluminum tariffs. We’ve had heavy duty vehicles, automotive tariffs.

We’ve had investigations into pharma, medical devices and robotics all under Section 232. The difference here is that when you look at the IEEPA tariffs and how they were imposed going back to Liberation Day, those were country specific, country of origin specific, right? And they were broad sweeping based on an emergency that was declared related to our trade deficit with global trade deficit. But Section 232

deals with national security interests and therefore is enforced by a list of tariff codes that are impacted. know, chapter 73 and 76 deal in aluminum, then all the derivative HTS codes that were listed. essentially get these executive orders followed by federal registered notices and then customs guidance, CSMS messages about a list.

of tariff codes impacted by an imposition. So it’s almost like industry sectors that are being impacted versus origin nations that are being impacted. And I thought, wow, this is interesting. Section 301, going back to 2018, is really the same thing. You have four lists of tariff codes to which these apply, right? Anywhere from seven and a half all the way up to 100 % tariffs on Section 301 goods originating in China.

Lalo (05:11)
Thank

Eric Hargraves (05:26)
Again, that’s kind of the blend of country of origin and industry sectors or product sectors that are impacted by the tariff impositions. And so as we fast forward to where we are today, are we seeing, and this is a question, I’m not saying this is what’s happening. I’m just recklessly speculating on your podcast that we’re seeing a from country of origin.

Lalo (05:46)
Yeah.

Eric Hargraves (05:51)
targeted tariffs to sectoral tariffs, meaning product sectors, industry sectors being influenced by the tariff and positions going forward. Then this idea was reinforced even after the oral arguments were heard, where we now saw a few announcements by the administration and the Commerce Department of certain exclusions that are available. We just heard this past weekend, right on the 14th last Friday that

certain agriculture products are now exempt from the reciprocal tariffs, coffee and so forth. We heard quite a few ag products that, quite frankly, when you look at consumer price inflation in the index, you’ve got pretty moderate inflation. But in some of the core CPI, like when you go to the grocery store, things are certainly more expensive. And so

Andy Shiles (06:23)
coffee and some meats and things of that nature.

Eric Hargraves (06:41)
getting these exemptions now from the reciprocal tariffs on these core agriculture products is going to sort of flatten out some of that inflationary pressure we all feel in our wallets when we go shopping every day. Then I started thinking about, there’s also this sort of weird rumor that the president put out that he was going to give tariff dividends, like $2,000 dividends, because we took in all this money from the tariff impositions.

and we’re going to give it back to consumers to kind of stem or stimulate the economy, stem inflation or stimulate the economy. And while no law has actually been placed, it was interesting to me that we’re starting to see sort of a more targeted approach to how we’re going to deal with both tariff revenue and products being impacted by the tariffs. Another example would be that when we look

more closely at the bilateral trade deals that are being struck or trade frameworks, really. They’re not full-fledged free trade agreements or reciprocal tariff agreements. They’re not preferential trade agreements, as we would historically think about them, but they are frameworks. There are specific carve-outs for specific industry sectors and lists of tariff codes that are going to be impacted. So if IEEPA gets rescinded, the tariffs get rescinded.

then we’re gonna see a pivot to another statute that gives the president authority and autonomy to impose tariffs that he clearly has the right to use to impose tariffs. But those are generally speaking more product specific or sectoral in nature where there’s a list of tariffs to which the, there’s a list of tariff codes to which these impositions apply. And on.

Lalo (08:10)
We are the first country in the world to

you

Eric Hargraves (08:25)
on the reciprocal end of that or the facilitation end, exports are also getting preferential treatment into foreign markets. And that requires us to sort of list out the product sectors that are gonna receive preferential treatment into destination markets overseas. And so I’m seeing this sort of narrowing of the spear, right, towards certain product sectors that are being impacted more than others. And that might be the path forward.

Andy Shiles (08:53)
All right. Hey, Eric, let me, let’s jump in here and kind of read level set with everybody just to remind us like they hear of IEEPA and all that. So IEEPA is, and I’m sitting there Googling it so I can read it correctly here. International Emergency Economic Powers Act. And it was a law that was enacted in 1977 that grants the president broad authority to regulate international commerce and financial transactions.

Lalo (09:03)
Thank

Andy Shiles (09:20)
after declaring a national emergency in response to an unusual and extraordinary threat to the national security foreign policy or, or economy of the United States. Okay. So there’s that. And traditionally. Tariffs have not been part of that, enacting tariffs on some of those things. Now we’ve also had a scenario here. You’ve mentioned two things where.

Lalo (09:32)
Thank

Andy Shiles (09:46)
The 301s and 232s. All right. The 301 tariffs were put in predominantly to deal with China

The two 32s were done in an effort to try and revive the U S still steel industry, know, steel and aluminum and those kinds of things. Now, whether you agree with them or not, that’s, that’s my understanding is like, well, that was what was implemented. And now the question is to even in today’s world.

Well, do we still need the two 32s on the steel and aluminum? China’s still doubling down on the, on that. So I can see that, but there there’s that now the other part of this though, that is in Trump’s issue now, and this is where I’ve always said this is that us goods have not been treated fairly around the world. And I say that from a standpoint that there has either been higher tariffs on us goods.

or additional bureaucracy and permits and everything else that have gone on for us goes to go into countries.

We import millions of pounds and millions of dollars, coming back. So the point being is out of all that, what does that, all of those things say there’s an imbalance here. It’s not equal trading. And that’s where I think Trump is trying to take it on. every here’s what I find interesting. So I’d love to get your perspective on this is there’s been huge criticism of Trump.

And the way he’s using the tariffs to negotiate, he’s using the provision that what he feels he has under IEEPA and the courts will decide whether he does or doesn’t. But the whole thing is all he can’t do that. He shouldn’t do that. Well, status quo hasn’t done jack but that’s where it is. I’m, I’m sick and tired of hearing, well, you got to do it this way or that way. The thing that gets me is we’ve not seen results.

There’s been talk, talk, talk, talk. And then now all of a sudden there’s action. So these countries have been coming to the table and negotiating some things to at least now we’re looking at a more fair economic trade with these, some of these countries. We still have to compete on price cycle times, quality transit, you know, all that kind of stuff. But to that point, what do you think as far as trying to get results to level the playing field?

Because US exports have taken it in the shorts at the expense of the export expense, but to get cheaper imports, I guess.

Lalo (12:19)
guess that’s what you meant about sectoral, like creating tariffs by sector versus by country. Because I mean, quite frankly, imposing a high tariff on the whole country is counterproductive in that we need some of their stuff, like rare earths. We need things that we just can’t produce here, or we don’t have the natural resources for.

Eric Hargraves (12:22)
and I’ll you

Correct.

Lalo (12:48)
So what you’re saying was that it’s obvious that that obviously is not working, because I mean, now he’s making exemptions for some products, like you said, like coffee. Like you can’t put a, you know, a, ⁓ yeah, exactly. So you can’t put a super high tariff on coffee coming from Colombia because you’re pissed off at Colombia.

Eric Hargraves (13:01)
Thank God.

Andy Shiles (13:04)
Yes, never.

Lalo (13:08)
I’m sorry, not coffee on everything globally coming from Columbia. If you’re being selective, I guess that makes sense. That’s what you were heading towards on your theory anyway. It’s a theory. Remember everyone, this is Eric’s theory and not necessarily that that’s what’s happening.

Eric Hargraves (13:27)
saying that the administration is definitively moving away from broad country of origin based trade deficit rebalancing. That’s going to happen. I’m saying that if the tariff impositions that were imposed using the IEEPA statute go away and the Supreme Court agrees with the two lower courts,

Tariffs are going to remain a key economic policy driver for this administration. They are going to pick another statute that clearly authorizes him to impose tariffs like 232, 301, 122, perhaps 338. And they are

Lalo (14:11)
122, yeah.

Eric Hargraves (14:17)
Those often require a bit more targeted approach, and there are certain requirements that keep Congress in the mix. As in, with Section 232, an investigation has to be conducted by the Commerce Department that shows Congress the risk to national security. With 301, an investigation has to be administered by the USTR.

that gives Congress insight into the unfair trade practices of another nation, right? That is causing us a struggle that’s creating a trade imbalance. So, Andy, you said a lot, and I’m going to try to maybe give some historical context into why the imbalances exist, the focus on China in the first Trump administration, and now what we’re seeing more broadly in the second

Trump administration. So the trade imbalances have existed for a very long time. That’s well documented and really dates back to post World War II. And you go back to 1947, the meeting in Geneva, I think it was for the general agreements on tariffs and trade, where the United States agreed to an

asymmetrical reciprocity and lowering of tariffs. Because at the time, the United States had very high tariffs, right? And we agreed to lower them and we lowered ours more than Europe lowered theirs under the General Agreement of Tariffs and Trade because we understood that having a healthy Europe post World War II gives us the ability to export more. So we needed a healthy Europe.

post-World War II. We wanted to be able to give them the ability to export goods into the United States and rebuild their economy because that would enable us to sell more to them once their economy stabilized again. And when you put that in conjunction with the Marshall Plan to help rebuild Europe, it is one of the reasons that we both grew together post-World War II in the rebuilding effort and the economies of Europe and the United States were able to

Andy Shiles (16:28)
Mm-hmm.

Eric Hargraves (16:32)
thrive. And then in post Cold War, where globalization really took off, helped, know, rising tide lifts all boats, and everybody did really well for a long period of time. Introduce China being admitted to the World Trade Organization, I think 2001. And we thought that bringing them in, into this inclusive environment would fix

Andy Shiles (16:42)
Right.

Eric Hargraves (16:58)
for lack of a better term, some of their imperialistic efforts worldwide. And that didn’t really happen, right? You mentioned forced labor. That’s the new, it’s not new, it’s been around for very long time, but it’s a popular issue to discuss in global trade right now is the UFLPA, the Uyghur Forced Labor Prevention Act. And it is highlighting a very real need and an ethical and moral need and a noble cause in global society.

And I think.

Andy Shiles (17:25)
To your point,

and let me just say this and jumping in there, as we were going through, were hoping at the time, I remember when China became part of the WTO, hence the World Trade Organization, it was with the idea that it was a communist country and it was hoping to, if you will, help provide more capitalist type

methodologies and the economy into their country and whatnot is one thing. But the thing that I think that over those years, the thing that has not happened, there’s two major entities that have not held them China accountable. One is the world trade organization itself, because to become a member, this is one of the things way back, Larry Hanson and I had a good discussion on.

Is to become a member of the world trade organization. You were to look at it from a standpoint where you were to open up your markets and you were trying to look at, uh, lowering your tariffs, uh, hopefully into a free traded, uh, arrangement. China did not do either. Um, if they opened them up, they kept these, you know, extraordinarily high tariffs and all that. So to do business in China has not been easy. That’s one.

So the WTO is one entity that should have said, Hey, wait a minute. You’re not adhering to the rules. Second is, the, United nations and the use of forced labor and all that. there’s all been this talk, talk, talk, talk, talk, and yet absolutely no action, you know, so that’s where I have the issues that where we’re at today is somebody’s finally standing up trying to do something.

But the point being is it’s not just the U S China’s played hardball with the entire world. And that’s where I’m, I’m, I’m still struggling when people are trying to wrestle with this. and then here the U S and to your point, healthy Europe back in the day. Yes, you can exchange things back and forth and that’s great. Well, I have to say then a healthy U S because our manufacturing has been decimated and trying to rebuild that.

with a healthy economy, then you have more parties to exchange raw goods, finished goods, semi-finished, you know.

Eric Hargraves (19:46)
Yeah, I think you’re on to something there, Andy, that’s really interesting to think about. With China getting market access across the world, they built a very robust manufacturing industrial complex for all types of goods, industrial, consumer, everything. And China, by and large, over the last several decades, has proven to be somewhat imperialistic. And I think we can all agree that

empires are generally bad for the world, right? It leads to more forced labor, more imprisonment, more… It’s generally bad, right? So I think somebody had to do something about the manipulation of trade and intentionally undervaluing goods to gain market share in the rest of the world, which was what China has been doing for a while.

using forced labor to artificially lower the cost of goods for exports, making a non-competitive environment, a non-market driven economy, pushing goods westward. And then they kind of built their whole Belt and Road initiative to further their influence in the world and making countries completely dependent upon their industrial complex. I think what has happened in recent years is that’s been called out.

And it’s a bipartisan issue. is not Republican or Democrat. mean, we saw the UFLPA, the Weaker Force Labor Prevention Act had wide bipartisan support. And I think we’re trying to do some good in the world. And I think going back to the first Trump administration, when the Section 301 tariffs that were imposed on China and those four lists of tariff codes came out, it also had bipartisan support. But that was the first like

Andy Shiles (21:06)
Yeah, you’re right.

Eric Hargraves (21:28)
Hey, we’re going to do something about this imperialistic westward push for dominance by China’s economic policy and kind of manipulating currency values and using forced labor and having unfair subsidies to lower the value of goods being exported. think that that goes all the way back to the first Trump administration. Now where we’re at is we basically looked at the entire world and said,

We’ve all become slightly dependent upon one another, but at what level are we going to be able to put enough pressure on China to fix some of these issues? And that’s where we’ve seen this.

made perhaps excessive use of AIIPA. The Supreme Court is not determining whether or not the president can negotiate deals or impose trade policy. They’re saying to what extent is this authority? And if you listened to the oral arguments, there was a lot of time spent on the quote unquote regulate importation, which is under AIIPA. The president has the authority to regulate importation.

Lalo (22:07)
Thank

Eric Hargraves (22:31)
in an emergency. And the emergency that was declared was a persistent trade deficit. And what does regulate importation mean? Certainly, tariffs are a way we can regulate importation. It is a clearly defined trade remedy. We’ve used it in the past. We haven’t used IEEPA in the past for this, but we’ve used tariffs to regulate importation. And I think to what extent

Andy Shiles (22:32)
Mm-hmm.

Mm-hmm.

Eric Hargraves (22:57)
Are there limits to that? How far does that go? Is, I think, the question that’s being asked of the Supreme Court to decide. And if they say all of these have to be revoked and he’s going to have to pivot to another statute, then he will. What I’m seeing is, I think,

they took a step back and looked at the forest through the trees and they saw that they might need to introduce additional investigations. And those started way earlier this year. mean, there are open section 232 investigations on pharmaceuticals, medical devices, robotics, lots of different product sectors, industry sectors. And so I’m thinking to myself, yeah.

Andy Shiles (23:33)
Well, there’s an increase in exams too. It appears from customs

on a lot of fronts is what I’m hearing in the industry.

Eric Hargraves (23:42)
And if you look at the trade deals, they kind of support this idea as well that we’re kind of narrowing the tip of the spear. We’re sharpening the tip of the spear on certain product sectors and certain lists. If you look at the annexes that are published with some of these executive orders and federal registered notices, it’s very clear some of the product sectors that are being impacted the most. perhaps that’s the path forward. we’re going to get, which I would welcome as a sort of

somebody who wants more clarity because then we’re sort of getting back to a rules-based system where the tariffs are being applied to specific products at specific rates, perhaps for a specific amount of time. And I think that gives compliance professionals, that gives supply chain practitioners and managers clarity on how to build networks of supply that can satisfy demand. That’s really what this is. It’s supply and demand.

and what’s the calculus of the landed cost for that supply to satisfy the demand. And we need some clarity around that. I think we’re gonna get it at some point in 2026 when the dust settles.

Andy Shiles (24:50)
Well, I will say that that to your point, it’s that as we’re going through this, there’s, you know, at this point, you know, different strategies, things have gone on. I mean, we’re, we’re not even a full year into Trump’s second administration. mean, it’s been a year since the election and there’s been so much that has gone on. mean, aside from the

the tariff situations in the trade, then you have the trade deals. You also have some of the geopolitical issues going on. You know, obviously the stopping of some of the conflicts out there, what Trump had used was using the economic carrot, if you will, of trade deals to try and it’s like, look, I stopped this and we can, you know, help improve life in both of your countries.

and with the U S and all that, think all that’s fine. Well, good. It just seems like everybody seems to want to fight every single thing because the status quo has been destroyed. There’s not yet. Go ahead.

Eric Hargraves (25:50)
Yeah, think, yeah,

the status quo under the World Trade Organization and for the past several decades has been sort of free market access, right? Globalization, that’s the status quo. And what we’re seeing now, here’s a helpful way to think of it. As I was thinking about this today and I was presenting on a panel earlier this morning as well, think of…

the recent tariff impositions, whether that’s section 301, 232, AIIPA, as a wall of restriction, right? Think of it as closing the border a little bit on certain countries and certain products. Now what we’re kind of, you know, not quite a year into this administration is that we are now opening corridors of trade facilitation in that wall.

We put up a big wall called AIIPA, reciprocal tariffs. And now we’re opening corridors of trade facilitation in that wall where you can access the markets both ways. They can access the United States and we can access their markets through things like.

Andy Shiles (27:01)
And see that right there, that

second part is so that that’s what people have not seen yet. It takes time to get those exports, if you will, and those markets, opening up those markets and all that to get going.

Eric Hargraves (27:15)
We’re seeing

those corridors be opened in the form of exemptions, exclusions. We’re seeing other opportunities, carve-outs in the bilateral trade deals for certain product sectors to be facilitated more. And I think that’s logical and reasonable. I when you look at another country and what their industrial base can supply the United States and you look at what our industrial base can supply them,

Lalo (27:37)
Thank you.

Eric Hargraves (27:40)
Going back to Lalo’s point earlier, we’re going to have some trade facilitation corridors with China. We just saw them have a healthy conversation. we cannot, in our soil, mine a lot of the rare earth minerals that we need. We have to trade. And so we’re going to open up some corridors for trade facilitation in this big wall that we put up for a restriction of certain goods and market access.

And I think, you know, Andy, to go back to your point of why was this wall built? And we’ve got section 301 and 232. You were talking a lot about steel and aluminum and all these things. The reality is section 232 is directly relatable to national security. So when we see these high tariff in positions on steel, aluminum, copper, pharmaceuticals, and so forth, that wall is being put up because if we find ourselves in a military conflict,

where our national security is at risk, we don’t want to have to be reliant on a third country to supply our steel or aluminum for our defense industrial base to be able to protect itself or for our citizens to be able to get the medication they need. And so putting up some barriers with tariffs so that we don’t completely hollow out our domestic industry of these key product sectors.

is important, I think somewhat reasonable, as long as we can still create an environment where companies can thrive and jobs can be created.

Lalo (29:08)
Thank you.

Andy Shiles (29:15)
And Lala, you were talking about earlier, you mentioned the rare earth minerals. I know there was an agreement recently with Australia. The prime minister of Australia had come over and the interesting thing is that China has strategically, you know, China does not have a whole lot of rare minerals in their country, but

They process about 90 % of all rare earth minerals that have been mined around the world. And so they have control of that. I didn’t realize that, but one of the things, what that does is, that then China has this stronghold of the rare earth minerals. And so Australia, we just got a trade agreement there. One of the things that I see as an opportunity.

is Australia has not been mining those rare earth minerals. It’s the country has a lot of them. Well, mining companies right now are going to be getting set up and, know, getting things going in Australia.

I think, believe it or not, Japan has some that there was a trade agreement and part of that was with being able to get some of those minerals out of Japan. So what I see is this dependency on China as being broken or the foundation of things that China had built their economy on being so dominant is now has cracks in it, but we still have to go through and say, okay, let’s open up these markets in a fair.

trade type thing. That’s where I see some of this coming back and forth. The one thing that I’ll say though, be it the 301s, the 232s, be it the reciprocal tariffs, tariffs generally are used to modify the behavior of a country from a trade perspective. And with that, the question also comes into play is, you know, what

How long are you looking? Do you have an exit strategy on some of this or what are the key elements of what you need to try and negotiate in it? Excuse me. What you’re trying to accomplish in your negotiations to then say, okay, now we can lower them or go duty free or whatever the case may be. And so I find it interesting on some of that to say that, you know,

Obviously we’re not privy to some of that and that’s some of the frustration in just the importing and exporting communities. Like where the heck is this? Does this end or do we go somewhere or what?

Eric Hargraves (31:42)
And I think we’re going to get some clarity in 26. I think we’re going to we’re already starting to see a bit of clarity with the bilateral trade deals and some of the oral arguments that were presented to the Supreme Court. It’s starting to look more concrete. I don’t think it’s concrete enough yet for corporations to make big financial investments, like not making huge capex expenditures yet, but it’s going to come. We’ll get some clarity.

And at the end of the day, it’s likely that the effective tariff rate in the United States goes up to about 15 % versus what it used to be, which was single digits by and large. And I think our consumers can likely afford to pay that so long as they still have good paying jobs and inflation doesn’t get out of whack. And we control some of the other issues that are impacting inflation, like taxes and energy costs. We got the extension of tax credits and breaks in

the One Big Beautiful Bill Act. And we also got, you know, energy costs being lowered by and large. And I think that helps us keep more of our money. So if we have to pay a little bit more for some of the consumer products that we like to buy that are being tariffed at a higher rate, we could likely afford to do that. But let’s see what shakes out. think 26, the beginning of 26 in particular is going to be a really fun year. We also have the USMCA up for its review and renegotiation in 2026.

Andy Shiles (33:03)
Mm-hmm.

Eric Hargraves (33:05)
and we’ll see how that shakes out as well.

Andy Shiles (33:08)
Yeah, there’s been a lot on USMCA and I think we just had a show with Kiko on there talking about that.

If you look back in history and, and that’s something that I think we’re the average American citizen is looking forward to saying, you know, we’re needing a shot in the arm and things are happening. It’s just, it’s taken time to transition from past policies to the new ones.

Eric Hargraves (33:33)
in thinking about all this, you know, going back to the analogy of having this tariff wall that was erected and now we’re seeing sort of certain corridors open up to facilitate trade through exemptions and exclusions, bilateral trade deals. we even saw in the auto industry, you know, offset credits for component parts, right?

for the automobile manufacturers to be able to kind of reduce the burden of the tariff on that particular sector. It’s clear to me that we currently have opportunities for a sectoral-based tariff regime alongside right now country of origin-based tariffs. But if IEEPA tariffs are ruled unlawful, then we’re gonna see this pivot to another statute. I’ve got maybe three practical takeaways.

where you can take advantage of some of these corridors of facilitation that are opening. The first is map your exposure to the current tariff regime, but also to the preferential treatment that’s available to you now based on the types of products that you’re importing, because there’s some preferential treatment that removes the reciprocal tariffs, that kind of mitigates the risk of increasing the cost. So make sure you’re mapping that exposure. Prepare for

legacy frameworks to not necessarily go away, but to be altered. By that, mean, USMCA is up for renegotiation. We’re seeing some communication in the recent, trade deals that were struck with Guatemala, Ecuador, El Salvador, Argentina, that for Guatemala and El Salvador, certain CAFTA DR exemptions now exist where the reciprocal tariffs do not apply to certain products. So,

Be ready and be prepared to be able to map your risk, but also your preferential treatment in legacy trade frameworks that are going to be coming down the pike. And lastly, make sure that you are not implementing any huge supply chain shifts in your network based on tweets or truth social posts.

follow the official registered federal register notice followed by customs guidance. And in order to be prepared, you need to be modeling those scenarios ahead of time based on what’s coming out and the information that we’re getting from the administration and from foreign nations on trade deals that are occurring. Make sure you’re modeling different scenarios in the calculus on your landed cost so that when we do have something official, when the federal register notice is published,

and we get customs guidance on enforcement that we can quickly pivot to the best cross-country sourcing scenarios for your organization.

Andy Shiles (36:15)
Excellent. Excellent. Well, Eric, thank you so much for the discussion. mean, again, this is one of those folks that’s just kind of a round table, you know, having a cup of coffee or whatever and having a good discussion. What do you think? And whatnot. So it’s good to, you know, just throw some ideas out. Hopefully it sparks my ideas and, and to go from there. The key thing though is get involved with your trade associations.

so as things come across, can make your company’s position known and, in lobby to, to affect change, whether it’s an offensive position to try and push forward regulations or, or statutes, or if it’s a defensive one to block it. So with

Lalo (36:42)
So.

Eric Hargraves (36:57)
Yeah. One

other thing that I’ll say in closing as you’re trying to prepare your supply chain for what might happen is be conscious of the fact that you may have gone back to your supply partners and negotiated a lower FOB cost at origin.

And if these tariffs, the IEEPA tariffs in particular, get rescinded, or you now have an exclusion or an exemption of a particular type of product that’s going to be imported into the United States, they are going to be aware of that. And they may attempt to claw back some of the discounts they gave you upfront. Have a conversation with them so that you can be prepared. Because if this

burden is being alleviated, they didn’t want to give away margin points to you at the beginning. So they’re going to have a conversation with you of potentially clawing back some of the discounts they offered to help us mitigate the inflationary impact of some of these tariffs. So be prepared in that regard as well.

Andy Shiles (37:58)
Eric, thanks bud. You just outstanding folks. Like us, share us. I hope, uh, give us some feedback. Uh, Lala and I are open to it and send us emails, send us comments, whatever. Um, and, uh, also if you don’t agree with some of that, reach out to us, maybe we’re going to bring it on the show. We’ll have a good discussion.

Eric Hargraves (38:00)
Thank you.

Andy Shiles (38:18)
With I guess we need to sign off and tell everybody have a good day.