Policy Week in Review - USTR Sets Up $375 Billion in New Tariffs, Reconciliation 2.0 Passes the Senate, and FISA Stalls
Key Takeaways
New tariffs would be either 10% or 12.5%, depending on the country.
The tariffs could hit up to $3.39 trillion based on 2025 U.S. imports.
Based on our analysis, the tariffs could total $375 billion in new revenue annually if fully implemented.
The Senate passed nearly $70 billion in immigration enforcement funding.
Because changes were made to the bill, it will now have to go back to the House of Representatives but should have the votes to finally pass.
The Senate rejected a bipartisan FISA reauthorization over concerns about warrants and controversial new leadership at U.S. intelligence agencies.
Seven Republicans cited the lack of a warrant requirement and joined with all Democrats to vote down the procedural motion.
There is now only a week before foreign surveillance authority expires.
A deal with Iran remains elusive despite White House focus on foreign policy.
Republicans are openly recognizing that the prolonged conflict and associated gas prices/inflation will be a major headwind in the midterms.
USTR Proposes New Tariffs Coming in July
This week, the Office of the United States Trade Representative (USTR) released the findings of its investigation into 60 countries to “determine whether the acts, policies, and practices of various economies related to the failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor are actionable under Section 301 of the Trade Act of 1974.” The legal rationale for the tariffs could be tested in court but historically 301 tariff justifications have been upheld.
After determining that these countries had not done enough to ban the trade of goods produced with forced labor, the USTR proposed additional tariffs at a rate of 10% for countries that have taken some steps to prohibit the importation of forced labor goods and a rate of 12.5% for all others. The tariffs will potentially hit $3.4 trillion of imported goods and impose $375 billion in new costs annually.
According to U.S. Trade Representative Jamieson Greer, the U.S. will respect tariff caps that have previously been agreed to as a part of previous trade deals. In absence of trade deals, these tariffs will be applied on top of any other existing duties. Notably, trade agreements with the European Union and Japan limit U.S. tariffs on imports to a maximum of 15%. The USTR will hold hearings on these proposed tariffs on July 6. Meanwhile, the temporary 10% tariffs imposed under Section 122 are set to expire on July 24, 2026.
Click below for afull list of all the impacted countries, tariff rates, current imports, and potential costs for U.S. companies and consumers. Download the Full List of Tariffs
Funding for CBP and ICE Finally Passes the Senate
The Senate voted 52-47 to pass nearly $70 billion in appropriations for Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CPB). The funding was considered under reconciliation rules that allow the Senate to move forward with a simple majority. Senator Lisa Murkowski (R-AK) was the only Republican to vote against the measure.
The vote came at the end of a “vote-a-rama” wherein any Senator can offer an amendment to the bill. Amendments were subject to immediate votes without debate. Both Republicans and Democrats forced votes to halt funding for the Department of Justice’s (DOJ) $1.776 billion “Anti-Weaponization Fund,” which was announced on May 18 and has drawn criticism from Democrats and some Republicans.
The DOJ preempted Congressional attempts to block the proposal by announcing that it would not be proceeding with the funding plan. This week, Acting Attorney General Todd Blanche said plainly that "[w]e are not moving forward with the fund. Period.” The decision paved the way for ICE and CBP funding to move forward and give the agencies three years of funding without any restrictions on immigration enforcement demanded by Democrats.
Ultimately, none of the amendments were adopted. The bill now goes to the House, which is expected to take it up early next week.
The current legislation contains $70 billion for the Department of Homeland Security (DHS), ICE, and CBP. Yesterday, the Senate removed $1 billion in Secret Service funding related to the White House East Wing construction in order to smooth the bill’s path through Congress. The latest version of the legislation will provide three years of DHS funding as outlined below.
FISA Stalls in the Senate
Early Friday morning, the Senate failed to advance a procedural motion to consider a bipartisan reauthorization of Section 702 of the Foreign Intelligence Surveillance Act (FISA), which is set to expire in a week on June 12. The revolt against the legislation came after President Trump appointed Bill Pulte as Acting Director of National Intelligence (DNI), with the departure of Tulsi Gabbard last month. Democrats and Republicans have raised concerns about Pulte’s qualifications for the role. Pulte current serves as head of the Federal Housing Finance Agency.
Assurances from President Trump on Thursday that Pulte would not be the permanent DNI did little to quell concerns from both Democrats and Republicans. Democrats, who will be needed to reach the 60-vote threshold for final passage, all voted against the procedural motion, and were joined by Republican Senators Tommy Tuberville (R-AL), Rick Scott (R-FL), Rand Paul (R-KY), Eric Schmitt (R-MO), Mike Lee (R-UT), Josh Hawley (R-MO) and John Kennedy (R-LA).
President Trump Signs Executive Order on Artificial Intelligence
This week, the President signed an executive order (EO) on artificial intelligence (AI) policy, which has been rumored for the last few weeks. The EO seeks to strengthen cybersecurity and critical infrastructure while allowing for the advancement of AI. The EO:
Directs federal agencies, including DHS, the Office of Management and Budget (OMB), and the National Cyber Director to create binding operation directives and guidance to “facilitate access to AI-enabled cybersecurity tools and services for Federal agencies, State and local authorities, and operators of critical infrastructure.”
Establishes a clearinghouse with AI industry partners, who can choose to participate, to identify and fix software vulnerabilities.
Directs OMB and the Office of Personnel Management to identify funding opportunities to AI cybersecurity and expand related federal hiring.
Calls for the creation of a “classified benchmarking process” that industries can use to assess their own models for AI cyber capabilities.
Directs the government to establish a voluntary framework with AI developers to provide government access for trusted partners.
The EO expressly notes that it is not meant to create a “mandatory government licensing, pre-clearance, or permitting requirement” for AI.
Talks with Iran Continue
While testifying before the Senate Armed Forces Committee on Tuesday, Secretary of State Marco Rubio told Senators that reaching a deal with Iran to extend the ceasefire and open the Strait of Hormuz was still possible. According to Secretary Rubio, “[t]here is the prospect before us, which could happen today, it could happen tomorrow, it could happen next week.” Iran is reportedly still reviewing a proposed agreement even as it has carried out attacks on Kuwait and Bahrain, targeting Kuwait’s international airport and launching missiles and drones at civilian sites in Bahrain.
Meanwhile, on Wednesday, Israel and Lebanon agreed to renew a ceasefire as part of a U.S.-brokered deal, “contingent on a complete cessation of Hizbollah fire and the evacuation of all Hizbollah operatives from the South Litani Sector.” However, Hezbollah rejected the agreement, saying that the stipulation that its fighters leave southern Lebanon would mean “surrender, defeat and achieving the enemy’s goals.” Tehran has demanded an end to Israeli military action in Lebanon as a part of any ceasefire agreement between the U.S. and Iran.
Russia Launches Attack on Kyiv, Zelensky Proposes a Meeting to End the War
On Tuesday, Russia launched “one of the deadliest offenses in months” as it unleashed more than 600 drones and dozens of missiles on the Ukrainian capital, killing at least 23 people. The attack followed a week of threats that a major attack would occur, sending Kyiv residents to seek shelter in underground metro stations. The next day, Ukraine struck St. Petersburg, Russia with drones on the opening day of Russian President Vladimir Putin’s economic forum. The attack targeted the city’s oil terminal and nearby military targets.
Ukrainian President Volodymyr Zelensky on Thursday penned an open letter to Putin proposing a meeting between the two leaders to negotiate an end to the war, which has now stretched into its fourth year. As Zelensky writes, “Ukraine proposes ending this war through direct engagement between us – and you. I am proposing a meeting … Ukraine is ready for a full ceasefire for the duration of the negotiations.” Previous negotiations have failed due to continuing disagreement about territorial concession, with Russia demanding full control of the eastern Donbas region of Ukraine.
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