Donald Trump will issue a broad trade memo on Monday that stops short of imposing new tariffs on his first day in office, but rather directs federal agencies to evaluate U.S. trade relationships with China, Canada and Mexico, an incoming Trump administration official said.
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China A50 index futures rose 1.26% on the news. U.S. stock futures also rallied. Dow E-minis were up 299 points, or 0.68%, S&P 500 E-minis were up 0.72%, and Nasdaq 100 E-minis were up 178 points, or 0.83%. U.S. Dollar Index fell 1.33% at 107.95. The offshore yuan hit 7.2777 per dollar, its highest since mid-December, up 0.86%.
The official, confirming a Wall Street Journal report, said Trump will direct agencies to investigate and remedy persistent trade deficits and address unfair trade and currency policies by other nations.
The memo will single out China, Canada and Mexico for scrutiny but will not announce new tariffs, the official said. It will direct agencies to assess Beijing's compliance with its 2020 trade deal with the U.S., as well as the status of the U.S.-Mexico-Canada Agreement, or USMCA, the official said.
Investors' attention was firmly fixed on the policies Trump will enact on his first day in office. At a rally on Sunday, Trump said he would impose severe limits on immigration.
Along with tariffs, immigration and tax cuts will be the main issues under market scrutiny.
On the fiscal front, "we will be watching to see if President Trump mentions fiscal stimulus," said Sjay Rajadhyaksha, research analyst at Barclays.
The euro EUR=EBS jumped 1.2% to $1.0398. It last week hit a two-year low at $1.0177 as tariff threats weighed.
Meanwhile softer U.S. inflation data and the prospect of multiple Federal Reserve rate cuts have recently boosted risk assets, including Bitcoin, which hit a record high on Monday at $109,071.86 and was last up 4.2% at $107,120.
China's yuan rose on Monday to its highest against the dollar since Jan. 3, buoyed by a friendly call between Trump and Chinese President Xi Jinping on Friday and better-than-expected fourth-quarter economic data.
The presidential memo directs federal agencies to investigate and remedy persistent trade deficits and address unfair trade and currency policies by other nations, two longstanding Trump irritants. And it singles out China, Canada and Mexico for scrutiny, directing agencies to assess Beijing’s compliance with its 2020 trade deal with the U.S., as well as the status of the U.S.-Mexico-Canada Agreement, or USMCA, Trump’s updated North American Free Trade Agreement, which is set for review in 2026.
But the memo doesn’t, in itself, impose any new tariffs—a momentary relief for foreign capitals bracing for Trump to immediately impose stiff levies. Instead, the trade policy memo is an indication of debates still roiling the incoming administration over how to deliver on Trump’s campaign trail promises for across-the-board tariffs on imports, and higher duties for adversaries such as China.
The Wall Street Journal reviewed a summary of the memo and spoke to Trump’s advisers about it.
A senior Trump policy adviser described the memo as an effort to lay out a vision for Trump’s trade agenda “in a measured way,” suggesting that the incoming president is, at least for now, taking a more deliberative approach to the issue that animated his political campaign. The memo provides a blueprint for further executive action that Trump may take on trade, the adviser said.
The memo is one of many executive actions Trump is expected to sign once he takes office. They include declaring a national emergency on the U.S.-Mexico border, rescinding Biden administration directives on diversity, equity and inclusion and unwinding President Biden’s limits on drilling offshore and on federal land, according to people briefed on his plans.
Federal agencies will be instructed to conduct studies, according to the adviser, that examine individual trade policies and provide Trump with recommended actions. In addition to trade deficits, unfair trade practices and currency manipulation, the adviser said the memo calls for studies on counterfeit goods and the de minimis tariff exemption, which allows goods less than $800 to be imported duty free.
Trump’s incoming administration will also be instructed to review Section 232 tariffs. In 2018, Trump imposed tariffs on certain imports of steel and aluminum, which were largely maintained by President Biden.
For weeks, some of Trump’s more traditional economic advisers such as Treasury secretary nominee Scott Bessent have argued that his tariffs should stop short of being fully universal—potentially exempting certain sectors, or phasing in duties over time. More protectionist advisers on Trump’s team, such as incoming deputy chief of staff for policy Stephen Miller, have pushed him to take a more aggressive approach, and declare a national emergency that would grant him broad authority to dramatically raise tariffs. There are also arguments over which sections of U.S. trade law to use in addition to a potential emergency declaration.
Still, the memo offers some hints at the direction of Trump’s agenda. It presages a showdown with China over its adherence to the so-called “Phase One” trade deal that Beijing signed with Trump early in 2020. Bessent last week called out China for not living up to its pledges in the deal to purchase U.S. agricultural products—a failure Beijing blames on the pandemic—and the summary of the memo states that “China’s adherence to this agreement will now be assessed, to determine whether enforcement or changes are required.”
The memo also puts Canada and Mexico on notice ahead of a scheduled 2026 review of the updated Nafta deal signed in 2020. Trump for months has pledged to reopen that deal, seeking pledges from continental neighbors that they will limit China’s involvement in their economies, particularly critical sectors such as automobiles. The summary of the memo says federal agencies will “now assess the impact of the USMCA on American workers and businesses and make recommendations regarding America’s participation in it.”
Additionally, the memo directs economic agencies to focus on a few specific trade themes, such as reducing persistent trade deficits—countries that consistently export more to the U.S. than they import from it. And it directs a focus on currency manipulation, which Trump singled out China and Vietnam for during his first term, as well as combating counterfeit products.
Finally, the memo asks agencies to evaluate the feasibility of an “External Revenue Service”—a new federal agency Trump has floated to collect tariff revenue. Exactly how that agency would differ from U.S. Customs and Border Protection, which has held that responsibility for decades, hasn’t been spelled out.