(Not So) Fun Fact: A South Korean national security adviser has stated that the country cannot pay $350 billion to the United States as part of the trade deal touted by President Trump. The investment deal – which has yet to be formalized – would send the country into an economic crisis, according to the South Korean president.

Tariffs on Trucks, Furniture, Wood, and Pharmaceuticals

What’s Happening: On October 1, a wave of new sectoral tariffs hit after President Trump’s announcements last week on Truth Social (some tariffs currently lack an executive order (EO) or factsheet.) These measures include a 25-percent tariff on heavy trucks, a 30-percent tariff on upholstered furniture, a 50-percent tariff on kitchen cabinets, bathroom vanities, and related products, and finally a 100-percent tariff on branded or patented pharmaceutical products. Companies that currently have a manufacturing presence within the United States or have broken ground on a new plant are said to be exempt from pharma tariffs. The flurry of new tariffs casts uncertainty on the administration’s recent trade deals as countries within the European Union expect a 15-percent tariff cap to be honored for heavy trucks and pharma products. The White House has clarified that all 15-percent tariff caps for pharma products will be upheld, but no such agreement had been discussed regarding trucks and furniture. On September 29, the administration issued an EO on wood products that clarified tariffs for upholstered furniture and cabinets. It establishes a 10-percent tariff on softwood/timber, a 25-percent tariff on furniture, and a 25-percent tariff on kitchen cabinets/vanities, as well as confirms tariff caps for the European Union, Japan, and the United Kingdom.

Why It Matters: In total, this round of sectoral-based tariffs will impact $233 billion in pharma and medicinal products, $20 billion in medium and heavy trucks, and $17.7 billion in wood products, totaling roughly $270 billion worth of U.S. imports. Although $270 billion is the total import value on paper, the actualized amount subject to tariffs may be far lower, as companies with a manufacturing presence in the United States may be exempt from tariffs and generics are not included, at least according to the relevant Truth Social post. For instance, out of the 20 largest pharmaceutical companies, 18 have a current or planned U.S. manufacturing footprint. Together, these companies represent nearly 60 percent of the entire global pharma sector. Assuming these companies face no tariffs on their imports, the $233 billion figure drops significantly. It is also worth mentioning that 43 percent of brand drugs come from the European Union, which will have a tariff-rate cap of 15 percent rather than 100 percent. Regardless, this tariff will be a hard pill for U.S. firms and consumers to swallow given the tens of billions in added costs.

Setting aside the economic implications, the tariff authority used for these tariffs and the administration’s continued emphasis on national security are striking. Each of these tariffs is reliant on Section 232 of the Trade Expansion Act of 1962 rather than the International Emergency Economic Powers Act (IEEPA). The administration’s shift to Section 232 probably results from the IEEPA tariffs’ legal limbo in the courts. As the Shipment previously covered, the Supreme Court is set to hear the IEEPA tariff case in early November and may rule that the president’s use of this authority is unconstitutional and an overreach of executive authority. This would still leave the administration with a few tested pathways for imposing tariffs, although these require a more in-depth process and more time than simply signing an EO. The Trump Administration’s decision to back off from imposing new IEEPA tariffs, and re-up Section 232 tariffs, may indicate a lack of confidence in its ability to win its case at the Supreme Court.

Looking Ahead: No matter what happens with IEEPA tariffs, President Trump and his trade team have made it clear they will not stop imposing tariffs any time soon. In under one week, there are now six or seven new Section 232 tariffs on furniture, lumber, kitchen cabinets, vanities, pharmaceuticals, and trucks – and soon movies will be hit, too (read more here). The tariff on upholstered wooden products will increase to 30 percent on January 1, 2026, while the tariff on kitchen cabinets will increase to 50 percent. The EO imposing tariffs on wood products also states that there will be an “inclusion process” that allows tariffs to hit derivative products, which are products made, at least in part, from the targeted import. This was most recently used in mid-August with the addition of more than 400 steel and aluminum derivatives based on their metal content.

Can’t Stop, Won’t Stop Tariffs

What’s Happening: The federal government shut down at midnight on October 1 after Congress failed to pass a funding bill that would keep the government fully operational. Although the House passed a seven-week funding bill (217-212 votes) to avoid a shutdown, the Senate failed to reach the 60 votes (55 votes) needed to pass the bill. The Congressional Budget Office estimates that roughly 750,000 government employees will be furloughed every day of the shutdown. The daily compensation for these employees is $400 million. Despite the shutdown, essential employees will continue to work, including most of Customs and Border Protection (CBP), which oversees tariff collection at U.S. ports of entry.

Why It Matters: According to the Department of Homeland Security’s contingency plans, 63,242 out of the 67,792 CBP employees will be retained during a government shutdown. While this might cause operational delays, tariff revenue collection will not be shut down, and importers can expect to continue paying tariffs and filling out forms. The December 2018 shutdown may be instructive: CBP delays grew by between 15 and 20 percent at the Ports of Los Angeles and Long Beach, two of the busiest U.S. ports. The shutdown will certainly have a direct impact on U.S. companies that do not hold significant inventory as both imports and domestic shipments slow down. As for other agencies, the United States Trade Representative (USTR) does not plan to reduce any of its 237 full-time employees. This is a major reversal from past contingency plans that saw only 40 to 60 percent of its workforce retained, including the 2023 plan to keep just 14 employees. USTR will continue to work on the Trump Administration’s trade agenda, showing just how high a priority U.S. tariff policy has become and indicating that there are still active trade deal discussions taking place. Meanwhile, the Department of Commerce will maintain just 8,273 of its 42,984 employees and the Department of Treasury will keep 1,855 of its 2,714 workers. Tariff investigations, export control licensing, and sanctioning operations will all continue.

Looking Ahead: It is unclear how long this government shutdown will last, as history shows it could range anywhere from a single day to over a month in length. The highest odds on PredictIt – a prediction market – suggest the shutdown may end as soon as October 4 or last as long as October 25. Another prediction market – Kalshi – puts the odds the shutdown lasts more than 5 days at 79 percent and more than 10 days at 59 percent. Regardless of the shutdown length, it is clear the administration is continuing to prioritize its trade policies, and any ongoing trade negotiations should not be significantly disrupted.