Article

Trump administration's tariffs targeting China, Canada and Mexico

Trump administration's tariffs targeting China, Canada and Mexico
Published Date
Feb 4 2025

*Updated February 7, 2025

 

On February 1, 2025, President Trump issued three Executive Orders (EOs) announcing tariffs on China (the China EO) Canada (the Canada EO), and Mexico (the Mexico EO), respectively, pursuant to the International Economic Emergency Powers Act of 1977 (IEEPA) (collectively, the EOs), marking the first time in its history IEEPA has been used to introduce tariffs.1

The tariffs have been introduced to address the synthetic opioid supply chain (in the case of China), the flow of illicit drugs across the Northern border (in the case of Canada), and the situation at the Southern border (in the case of Mexico).  At a high level, the EOs detailed the following tariffs originally slated to take effect as of Tuesday February 4, 2025:

  • 10% additional tariff on all products of People’s Republic of China (PRC);
  • 10% additional tariff on “energy or energy resources” of Canada, and 25% additional tariff on all other products of Canada; and
  • 25% additional tariff on all products of Mexico.2

Effective February 4, 2025, and absent express delays, imports that meet the criteria above become subject to these tariffs on entry into the United States. As discussed further below, tariffs under the China EO came into effect on February 4, 2025, whereas tariffs under the Canada EO and Mexico EO were postponed for 30 days from February 3, 2025, subject to ongoing negotiations with the U.S. Government.

The importer of record for affected goods will need to pay the above-noted tariffs to CBP (defined in Footnote 2), evaluated as a percentage of the goods’ customs values.3

Scope of tariffs

Although the EOs are broadly similar, the scope and implementation of tariffs under each EO vary. Below we highlight the key elements of each EO and note key developments since February 4, 2025.

China EO

  • Rates: All articles that are products of the PRC (as defined) shall be subject to an additional 10% ad valorem rate of duty.
  • Implementation: The additional 10% rate generally will apply to goods entered for consumption, or withdrawn from warehouse for consumption, in the United States on or after 12:01 a.m. eastern time on February 4, 2025 (with certain limited exceptions).
  • Relationship to other Duties: Duty rates established by the EO are in addition to any other duties, fees, exactions, or charges applicable to such imported articles, which are not subject to duty-free de minimis treatment under 19 U.S.C. 1321 (see Breaking Developments below). Note no drawbacks shall be available with respect to such duties.
  • Other Key Stipulations: The President may increase or expand the duties imposed under the China EO if the PRC “retaliates” against the United States in response to the China EO.

Breaking developments:

  • Overnight on February 3, 2025, China announced a series of retaliatory tariffs, including a 15% tariff on U.S. liquified natural gas, and 10% tariffs on crude oil and farm equipment, as well as certain other measures.4

  • The Trump Administration issued an Executive Order on February 5, 2025, amending the China EO to provide that “duty-free de minimis treatment under 19 U.S.C. 1321 is available for otherwise eligible covered articles [under the China EO] . . . but shall cease to be available for such articles upon notification by the Secretary of Commerce to the President that adequate systems are in place to fully and expediently process and collect tariff revenue” for such articles in accordance with the China EO.

Canada EO

  • Rates: Two different tiers of duty rates apply depending on the classification of the product(s):
    • Energy or energy resources that are products of Canada (as defined) shall be subject to an additional 10% ad valorem rate of duty; and
    • All other articles that are products of Canada (as defined) an additional 25% ad valorem rate of duty.
  • Implementation: The additional 10% or 25% rates generally shall apply with respect to goods entered for consumption, or withdrawn from warehouse for consumption, in the United States on or after 12:01 a.m. eastern time on February 4, 2025 (with certain limited exceptions) (see Breaking Developments below).
  • Relationship to other Duties: Duty rates established by the Canada EO are in addition to any other duties, fees, exactions, which are not subject to duty-free de minimis treatment under 19 U.S.C. 1321. Note no drawbacks shall be available with respect to such duties.
  • Other Provisions: The President may increase or expand the duties imposed under the Canada EO if Canada “retaliates” against the United States in response to the Canada EO.

Breaking developments: 

  • The Trump Administration issued an Executive Order on February 3, 2025, amending the Canada EO to delay implementation of the tariffs against Canada until March 4, 2025.

Mexico EO

  • Rates: All articles that are products of Mexico (as defined) shall be subject to an additional 25% ad valorem rate of duty.
  • Implementation: Such rate of duty shall apply with respect to goods entered for consumption, or withdrawn from warehouse for consumption, in the United States on or after 12:01 a.m. eastern time on February 4, 2025 (see Breaking Developments below).*
  • Relationship to other Duties: Duty rates established by the Mexico EO are in addition to any other duties, fees, exactions, which are not subject to duty-free de minimis treatment under 19 U.S.C. 1321. Note no drawbacks shall be available with respect to such duties.
  • Other Provisions: The President may increase or expand the duties imposed under the Mexico EO if Mexico “retaliates” against the United States in response to the Mexico EO.

Breaking developments: 

  • The Trump Administration issued an Executive Order on February 3, 2025, amending the Mexico EO to delay implementation of the tariffs against Mexico until March 4, 2025.

Precautionary actions

Companies importing goods into the United States from China, Canada, or Mexico, or which are otherwise reliant on any such imports, should carefully evaluate their supply chains and associated contractual relationships and obligations. Tariff-related costs and uncertainty may significantly impact supply chains across a wide range of sectors. Potentially-impacted companies should explore possible solutions to minimize tariff impacts such as, where feasible, modifying their supply chains. We also recommend reviewing customer and supplier contracts to assess whether tariff costs can be allocated in whole or part to other parties.

Next steps

As noted above, China has issued retaliatory tariffs. Given the China EO expressly states that the President may impose additional tariffs on products of China for any retaliatory action taken against the United States, companies with touchpoints to China in their supply chains should continue to monitor the situation closely.  

Further tariffs could be enforced against and/or imposed by Canada or Mexico depending on how discussions between the United States and those countries proceed.  The Trump Administration has also threatened “very substantial” measures targeting Europe in the near term.  While potentially-impacted companies need to take tariff threats seriously and plan for the worst, such companies should avoid over-reacting or reacting too quickly given how fluid this situation is and the Trump Administration’s unpredictable and seemingly “transactional” approach.  For now, we advise following the precautionary steps laid out above, and continuing to carefully monitor related developments.

*Tariffs issued pursuant to IEEPA may evolve rapidly and unpredictably, with new requirements potentially taking effect with little or no prior notice and immediate effect. The information in this alert is subject to change as developments unfold.

Footnotes

1. Traditionally an authority used by the U.S. Government to impose economic, financial, and trade sanctions laws, embargoes, and restrictive measures, IEEPA has not (until now) been used as an authority to impose tariffs on U.S. trade partners. See “The International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), and Tariffs: Historical Background and Key Issues,” Congressional Research Service, February 3, 2025, available here. Note, also, that the Trading with the Enemy Act of 1917 (TWEA) – the authorizing statute for the Cuban Assets Control Regulations implementing U.S. sanctions against Cuba – was invoked once in 1971 by President Nixon to impose a 10% ad valorem supplemental duty on all dutiable items into the United States.  See “The International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), and Tariffs: Historical Background and Key Issues.”

2. U.S. Customs and Border Patrol (CBP) issued a notice in the Federal Register dated February 5, 2025, regarding CBP’s modification of the Harmonized Tariff Schedule of the United States (the HTSUS) to define the scope of “products of the PRC.”Clarification of the precise scope of “products of Canada” and “products of Mexico” are anticipated in one or more notices in the Federal Register. Such notices had not been published as of 4:30 PM Eastern on February 7, 2025. CBP also is expected to issue a fact sheet setting out operational details regarding tariff implementation under the EOs.

3. Customs value is generally the value of the product as per invoicing or other purchase records, but can be adjusted to incorporate other costs (e.g., shipping or insurance) if these are not included in invoice value. If no invoice value exists, CBP may determine customs value based on evaluation of the goods in question, including by comparing the goods to comparable other imports.

4. “China launches limited tariffs after Trump imposes sweeping new levies,” Reuters, February 4, 2025.  

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