Policy Week in Review - Uneasy Ceasefire, DHS Vote, and New Tariffs Announced

Key Takeaways

• The U.S. is maintaining its ceasefire with Iran before talks set for Saturday. 

• The situation is volatile and complicated by the continued military strikes between American allies in the region and Iran. 

• President Trump is incentivized to maintain the ceasefire and find a lasting deal.

• President Trump’s incentives dissipate if the Strait of Hormuz is not open. 

• If the ceasefire fails it will likely be due to a failure to open the Strait of Hormuz. 

• Congress returns to D.C. next week with a tentative deal to open DHS.

• The plan includes using reconciliation to provide funding for ICE and CBP.

• Conservatives could still delay the vote, but funding is expected this week.

• President Trump announced new pharmaceutical tariffs, effective in three months.

• Fed Chair Kevin Warsh’s Senate hearing has been delayed until at least April 21.

Iran Update – Maintaining a Fragile Ceasefire

President Trump initially gave Iran until 8 p.m. ET on the evening of Tuesday, April 7 to reopen the Strait of Hormuz and agree to a ceasefire. Tuesday evening, the President announced that due to significant strides toward an agreement, including an agreement to reopen the Strait of Hormuz, he would agree to a two-week ceasefire.

Since that time, an uneasy ceasefire between the U.S. and Iran has held and the President has continued to work toward a larger peace deal. Israel has also begun direct talks with Lebanon to disarm Hezbollah after at least 300 people were killed in Israeli strikes on the country on Wednesday. A U.S. delegation will head to Pakistan for talks with Iran on Saturday. At this time, the ceasefire appears to be holding, although only a handful of vessels have reportedly been allowed through the Strait of Hormuz since the ceasefire began.

The President has multiple incentives to reach a lasting deal. The prospects for peace have already resulted in an economic surge and falling gas prices. Despite accusations from both sides that the agreement has been violated, the White House will likely try to maintain the fragile ceasefire. The situation is unstable and it is unknown whether Iran will keep up its end of the agreement. While hostilities could resume, there is clear motivation for President Trump to maintain the U.S. side of the ceasefire. 

DHS Shutdown Continues Until Congress Returns Next Week

It has been 55 days since the Department of Homeland Security (DHS) shutdown began on Valentine’s Day. This marks the longest agency budget shutdown in the history of the United States. As a reminder, here is the current state of play:

• The House has passed funding for DHS multiple times since the shutdown.

• Senate Democrats blocked these bills because none included reforms to Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) enforcement practices.

• As a result, regular DHS appropriations funding lapsed.

• Most DHS functions are operational because they are deemed essential.

• The vast majority of DHS employees were not being paid.

• To break the logjam, the Senate unanimously passed a bill last week that funded every part of DHS for the year except ICE ($18.2 billion) and CBP ($10 billion).

• That bill was initially rejected, then accepted, by House Republican leaders. 

House Republicans initially opposed the Senate deal because of the policy and the process. With regard to the policy, conservatives do not like excluding funding for immigration enforcement. From a process standpoint, Republicans in the House are frustrated by repeatedly being “jammed” by the Senate. This occurs when the upper chamber passes legislation in the dead of night and leaves town, expecting the House to pass whatever the Senate approved without debate or amendment.

To alleviate conservative concerns about ICE and CBP funding, the current agreement to reopen DHS next week includes a promise from the Senate to fast-track a reconciliation budget. This process would be used to fund the two agencies for three years and protect them from Democratic attacks during that time period. Due to the limited trust between the House and Senate, reopening DHS might have to move simultaneously with the first 2026 reconciliation bill. 

Congress Returns Next Week with a Busy Schedule

The House and Senate are both set to return to Washington, D.C., next week with a full agenda in front of them. Both chambers are scheduled to work for three consecutive weeks until the next recess on April 30, 2026.  Here’s a quick reminder of the issues they will be facing for the rest of the year:

• Approving the Senate DHS funding bill in the House (more above). 

• FISA section 702 surveillance reauthorization, which expires April 20, 2026. 

• Passing a concurrent budget resolution to start the reconciliation process.

• First reconciliation bill with funding for ICE and CBP.

• Senate hearings and confirmation for Fed Chair nominee Kevin Warsh. 

• Senate hearings and confirmation for the next Attorney General. 

• SAVE America Act voting reform and voter ID legislation. 

• Housing affordability and federal home assistance legislation (H.R. 6644). 

• CLARITY Act to regulate and authorize currency pegged to the U.S. dollar.

• Second reconciliation bill with GOP funding and reform priorities.

• Funding for defense and Iran War operations.  

• Farm Bill with agricultural assistance and SNAP programs.

• Highway Trust Fund expiration on September 30, 2026.

• Export-Import Bank expiration on September 30, 2026.

New and Modified 232 Tariffs on Pharmaceuticals and Metal 

Late last week, the President signed two executive actions to increase tariffs. With respect to the new pharmaceutical tariffs, the President and his team are clearly using the threat of tariffs to pressure companies into adopting “most favored nations” pricing. The White House has been trying to peg U.S. drug prices to those in foreign countries in years. The use of tariff threats to cajole domestic companies is an escalation of administrative leverage but also an indication that the policy is dead in Congress. 

Patented Pharmaceutical Products: The President signed an executive order (EO) imposing 100% tariffs on patented pharmaceutical products and ingredients. The tariffs will be imposed under Section 232 national security justification. The EO also stipulates that any company that currently has plans to onshore production will only be subject to a 20% tariff (until April 2030), and those companies with most-favored nation (MFN) agreements with the administration will not be subject to any tariffs through the remainder of the President’s term. Additionally, pharmaceutical products from certain countries with existing trade agreements will be subject to lower or no tariffs, depending on the agreement. Tariffs will enter into force within 120 days of the order for “certain large companies” and 180 days for smaller companies. 

Modifying Steel, Aluminum, and Copper: The President also signed an executive order modifying the application of tariffs on imported steel, aluminum, and copper products. As a result of the order, “articles made entirely or almost entirely of aluminum, steel, or copper” will be subject to a 50% tariff on their full value. Derivative products will be subject to a 25% tariff on their full value. Products made with entirely U.S. metals but are made abroad will be subject to lower tariffs of 10%. And products with less than 15% of these metals will no longer be subject to the Section 232 tariffs. 

Warsh Hearing Delayed

Kevin Warsh’s nomination hearing was postponed late yesterday after he failed to gather the necessary paperwork in enough time to notice the hearing. Warsh was originally set to come before the Senate Banking Committee next week for his nomination to serve as Chair of the Federal Reserve.

The White House had hoped to have Warsh confirmed by the Senate by mid-May, before current Chair Jerome Powell’s term as chair ends on May 15, 2026. However, that timeline will be difficult to meet between the hearing delays and Senator Thom Tillis’ (R-NC) requirement that the Department of Justice probe into Powell be dropped before he will vote to move Warsh’s nomination forward.

Powell has committed to remaining at the Fed until the DOJ probe is resolved. Although his term as chair ends in May, his full term does not end until January 31, 2028.

ICYMI: Congress Looks to Start Reconciliation 

Republicans in the House and Senate have agreed to use the budget reconciliation process this year to accomplish major goals without the need for Democrat votes. While that fact is now clear, it is yet to be decided how many bills there will be, what policies will be addressed, how much money will be spent, and when these votes will all take place.

As we previewed earlier this week, here’s a quick timeline of how Republicans hope that the reconciliation process will play out. 

• Step One – Concurrent Budget Resolution: Before anything gets started, the House and Senate must pass identical budgets with instructions that committees produce reconciliation bills that meet spending targets. Both budget committees hope to move quickly before the end of April. 

• Step Two – “Skinny” Reconciliation Bill Moves First: The first bill will likely be narrowly focused on providing three years of appropriations for ICE and CBP. This will be the easier of the two bills, and the President has said that he wants it sent to his desk by June 1, 2026.

• Step Three – Large Reconciliation Bill: Most of the big-ticket policy issues Republicans want to pass before the midterms will likely be part of a second reconciliation bill after ICE and CBP are funded. This means voting reform dollars, spending cuts, defense spending, and affordability measures will be pushed into the summer before the August recess. 

• Wild Card – Bipartisan Spending Bill: Given the difficulty of a second reconciliation bill this summer, Republicans could pivot and try to pass spending priorities like defense spending in a bipartisan bill before the midterms. Democrats also have spending priorities that could be added to garner votes. It is highly unlikely Democrats would vote for defense spending while the conflict in Iran continues.

Estimating Potential Costs of Certain Policies 

One variable that will impact the likelihood of passing reconciliation is the total cost associated with the bills. Conservatives may ask for some spending to be offset with cuts elsewhere, and those cuts, in turn, could dissuade moderate support. Many costs will come in the form of mandatory appropriations and grants. Below is a first attempt to estimate those levels.: 

Three Years of Appropriations for ICE and CBP -  $90 to $120 Billion: Based on FY 2026 proposed funding levels ($28 billion) and standard annual increases, three years of funding for ICE and CBP could cost somewhere between $90 billion and $120 billion. 

Funding for States to Implement Voting Reforms - $40 to $100 Billion: The level of funding required to entice states to enact voting reforms is highly speculative. We estimate the amount necessary would vary by state size and would range from $500 million to $5 billion. 

Supplemental Spending for Defense - $350 Billion: Last week, the Office of Management and Budget (OMB) released the President’s FY 2027 budget request for Congress, including a mandatory supplemental defense spending request of $350 billion.