US-EU trade: Finding a path back from tariffs

With Italian prime minister Giorgia Meloni’s visit to the White House mid-April to talk about a tariff deal between the European Union and the United States, it is worth considering how this or similar deals with other countries might be accomplished. The EU has offered going to reciprocal tariff-free trade with the US. Assume that the White House reaction is that this is too much tariff elimination. Suppose they compromise and agree on a joint duty-free list of goods, starting with automobiles. Such an agreement could be attractive to the US as the EU tariff on American cars is much higher than the US tariff—10 percent versus 2.5 percent. Can the president cut this deal by issuing an executive order and put it into effect immediately?

The answer is no.

Anyone on the planet seeing President Donald Trump’s announcement of “reciprocal” tariffs in the White House Rose Garden on April 2, 2025, can be forgiven for thinking that an American president has complete authority to set tariffs on anything from anywhere at any rate and any time that he chooses. But it is more complicated than that. There would have been authority for a president to do exactly what is needed with the EU with respect to cutting tariffs, but the authority expired in 2021.

Brief history of tariff authority in the US

Under the US Constitution, it is the Congress that has complete power to set tariffs. James Madison, working on that document 250 years ago, would have been surprised to think otherwise. The president can only impose, maintain, or modify a tariff under a clear delegation from Congress to do so. The reason President Trump has been able to issue executive orders on tariffs almost every other day since taking office this year is that these were all additional duties said to be imposed under defined delegations. They were not duty reductions pursuant to an agreement with a trading partner. Why does this matter?

Over the years, Congress has given the president a series of specific authorities to impose additional tariffs—for national security (Section 232), to retaliate against unreasonable or unjustifiable foreign trade measures (Section 301), to deal with a balance of payments crisis (Section 122), to limit harm to an industry from imports (Section 201), and to counter discrimination against US products (Section 338). He also has been given authority to restrict trade to deal with short-term emergencies (under the International Emergency Economic Powers Act, IEEPA), although the use of this last statute as a basis for imposing tariffs is currently being challenged in court in several states. The economic emergency statute does not mention its use to set tariffs.

Historically, Congress used to do all the tariff setting, leaving for the president just the role of signing the result of its deliberations. President William McKinley, when he was a Congressman, famously pushed through legislation that bears his name—the McKinley Tariff of 1890—which provided what was for his time a very high tariff. So did Senator Reed Smoot and Representative Willis C. Hawley just over a generation later. But that 1930 Smoot-Hawley tariff was imposed in the midst of the Great Depression, making it much worse. Reacting to harm the high tariff was causing, President Franklin D. Roosevelt asked Congress to grant authority to implement tariff-reducing agreements. Congress provided this authority in the Reciprocal Trade Agreements Act of 1934.

The trade agreement tariff authority was renewed repeatedly, including through major Trade Acts passed in 1962, 1974 (signed in 1975), 1988, 2002, and finally, in 2015. The authority permitted the president to reduce US duties by 50 percent (60 percent in the 1974 Act) and most recently to eliminate duties under 5 percent, as part of a trade agreement. (A historical exception, interesting in light of Meloni’s visit, was that under the 1962 Act the president could eliminate tariffs altogether for any product for which the countries of the European Economic Community (predecessor to the EU) and the US accounted for 80 percent of world exports. (History did not favor a deal with Europe of that magnitude in the late 1960s and early 1970s, so that authority was not used during the period it existed.)

Many presidents have used the congressional grants of tariff authority: Roosevelt in 19 bilateral agreements; Jimmy Carter in about another dozen (I signed one of them for the US with Hungary); Ronald Reagan in a free trade agreement with Canada, signed in 1988 and implemented on January 1, 1989; and Bill Clinton with the addition of Mexico and Canada in what became the North American Free Trade Agreement (NAFTA) in 1993.

After World War II, a lot of the tariff negotiations were multilateral. The General Agreement on Tariffs and Trade (GATT) was concluded in 1948, under which eight increasingly large rounds of multilateral trade agreements took place and in which the US was a key participant. The world’s omnibus set of multilateral trade agreements is now administered by the World Trade Organization (WTO) and covers a total of 166 trading economies.

President Trump, during his first term (2017-2021), is the most recent president to conclude tariff negotiations implemented under a grant of authority from Congress, reaching an agreement with Japan in 2019 and a more limited deal with the EU in 2020. The largest and most recent trade agreement of all was the revision of NAFTA in 2020, renamed the US-Mexico-Canada Agreement (USMCA), also negotiated and implemented during the first Trump administration, under authority from Congress.

The last trade (including tariff) negotiating authority expired on July 1, 2021. In its absence, the Biden administration could make no binding trade commitments, including regarding tariffs, and conducted its Indo-Pacific Economic Framework (IPEF) talks on other trade-related subjects without involving Congress. As a result, none of the IPEF negotiated texts are legally binding, and most have an uncertain future.

Current tariff negotiations

President Trump has paused his “reciprocal tariffs,” the ones he famously displayed on tablets in the Rose Garden on April 2. It was the most complete demonstration of a tailored, country-by-country setting of tariffs in American history. It was greater in its sweep than anything any prior president had ever contemplated. The pause, now in effect, the president has said, is to enable negotiations to take place. What then are the legal means by which President Trump can proceed to implement any agreement that he concludes that includes setting US tariff rates any lower than those in effect before his or President Biden’s additional tariffs.

The president can ask Congress for tariff authority. This can be done before concluding an agreement as presidents have done since Franklin D. Roosevelt. Or, alternatively, Congress can ratify an agreement after it has been concluded. This second path is the way President Lyndon B. Johnson in 1965 agreed with Prime Minister Lester B. Pearson to remove tariffs on US-Canada automobile trade. The president might not wish to ask Congress for broad new authority because trade legislation can be a slow and uncertain process. One might judge that it was for this reason that President Joseph R. Biden ignored Congress on trade negotiation matters during his time in office, and President Trump has given no indication that he would welcome a congressional trade initiative. To some extent this is understandable. It can be difficult to control trade legislation, as commercial interests are not uniform across the country and Congress. Some legislators will want to protect some industrial interests (like steel) while others will want to make sure their local industries and farmers have needed imported inputs. Legislators may also be divided over restraining the president’s ability to set tariffs, while others may wish to defer to the president.

Alternatively, the president could just suspend his threatened tariffs in return for others’ trade concessions, providing no additional US trade concessions in return. This would be harder for other countries to accept, including the 27 EU economies, due to their own domestic politics. It would also just be the equivalent of a handshake deal. The US “concession” of no further tariffs would not be binding under US law.

An arguable benefit of involving Congress, and providing reciprocal US trade benefits, would be greater assurance that an agreement has stability. Otherwise, for example, if the Supreme Court finds that the April 2 tariffs were not within the president’s authority, the basis for the agreement (the threat of additional tariffs) would largely disappear. The durability of any agreement will be greater if the implementation of the agreement conforms to the constitutional roles of the president and Congress.