On March 4, 2025, the Trump Administration commenced new broad and sweeping tariffs on products of Canada and Mexico, while doubling tariffs on China previously imposed in early February of this year. On March 6, 2025, the Administration announced that tariffs on products of Canada and Mexico that are covered by the U.S.-Mexico-Canada Agreement (“USMCA”) will be postponed through April 2, 2025. The updated country-based duty regimes follow President Trump’s mid-February announcement of new and revised steel and aluminum tariffs targeting imports from all countries. As global trade tensions continue to rise and many countries have already begun to introduce retaliatory tariffs on the U.S., it will be critical to monitor how increased duty rates will impact your company’s cross-border transaction activity, as well as to develop practical supply chain strategies to mitigate the impact of these fluid and dynamic trade disputes.
I. Targeted IEEPA Tariffs
On February 1, 2025, pursuant to the International Emergency Economic Powers Act (“IEEPA”), the Trump Administration originally announced new 25 percent tariffs on nearly all imports from Mexico and Canada (except for certain energy products from Canada, subject to a 10 percent duty), as well as additional 10 percent tariffs on nearly all imports from China. While the 10 percent tariffs on goods from China went into effect on February 4, 2025, the proposed tariffs on Mexico and Canada were initially suspended for 30 days. President Trump subsequently announced on March 3, 2025 that he is proceeding with the 25 percent IEEPA tariffs on Canada and Mexico, in response to outstanding national security concerns associated with both illegal immigration and drug trafficking at the northern and southern borders. In addition, President Trump issued an Executive Order to double the original 10 percent IEEPA tariffs on China to 20 percent.
The Administration then announced a temporary pause on automobile tariffs on Mexico and Canada for one month on March 5, 2025 and subsequently on March 6, 2025 announced an additional temporary pause on USMCA-compliant products through April 2, 2025 – when additional announcements on the Trump Administration’s “reciprocal tariff” regime is anticipated. In the interim, U.S. Customs and Border Protection (“CBP”) is continuing to update its Cargo Systems Messaging Service with related guidance implementing the Administration’s tariff-related Executive Orders.
As of the date of this article, a brief summary of current tariff impacts is included below.
- Canada
- IEEPA 25% Tariff: CBP announced on March 3, 2025 that all goods that are the product of Canada (except those identified below) that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on March 4, 2025, will be subject to an additional ad valorem duty of 25 percent. (Classified in U.S. Harmonized Tariff Schedule (“HTSUS”) 9903.01.10).
- IEEPA 10% Tariff: In the same guidance, CBP announced the following products of Canada will be subject to a 10 percent ad valorem duty effective March 4, 2025: Crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606(a)(3). (Classified in HTSUS 9903.01.13).
- USMCA Compliant Goods – Temporary Pause: On March 6, 2025, the Administration announced that tariffs on all products of Canada that comply with the USMCA free trade agreement will be paused until April 2, 2025.
- Mexico
- IEEPA 25% Tariff: CBP announced on March 3, 2025 that all goods that are the product of Mexico (except those identified below) that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on March 4, 2025, will be subject to an additional ad valorem duty of 25 percent. (Classified in HTSUS 9903.01.01).
- USMCA Compliant Goods – Temporary Pause: On March 6, 2025, the Administration announced that tariffs on all products of Mexico that comply with the USMCA free trade agreement will be paused until April 2, 2025.
- Canada and Mexico Tariff Exclusions
- Products for personal use included in accompanied baggage of persons arriving in the United States;
- Donations of food, clothing and medicine intended to relieve human suffering;
- Certain informational materials; and
- Certain goods entered under HTSUS Chapter 98 (e.g., HTSUS 9802.00.40, 9802.00.50, and 9802.00.60, where additional duties apply to the value of repairs, alterations, or processing performed in Mexico or Canada).
- Foreign Trade Zones, Drawback, and De Minimis
- Products of Canada or Mexico admitted to a foreign trade zone (“FTZ”) after 12:01 a.m. ET on March 4, 2025 subject to IEEPA tariffs must be admitted as privileged foreign status. Upon entry for consumption into the U.S., they will be subject to the rate of duty in effect at the time of admission into the zone.
- Goods eligible for admission to an FTZ under domestic status (as defined in 19 CFR 146.43) are exempt from the tariffs.
- Duty drawback is not available for impacted goods from Canada or Mexico.
- The duty-free de minimis exemption under 19 U.S.C. 1321 continues to be available until the Department of Commerce establishes a system to collect such tariffs.
- China
- IEEPA 20% Tariff: President Trump originally imposed a 10 percent additional IEEPA tariff effective February 4, 2025 applicable to all imported articles that are the products of China and Hong Kong. This Order was amended March 3, 2025 and CBP announced that an additional 20 percent IEEPA tariff will apply to all imported articles that are the products of China and Hong Kong effective March 4, 2025.
- Section 301 Tariffs: The 20 percent IEEPA tariffs apply in addition to any general rate of duty, Section 301 duty, or Section 232 duty that may be applicable to articles of Chinese origin. A full list of Section 301 China tariff classifications can be found on the HTSUS website administered by the U.S. International Trade Commission.
II. Section 232 National Security Tariffs
In February 2025, the Trump Administration announced updated 25 percent tariffs on steel and aluminum products pursuant to Section 232 of the Trade Expansion Act of 1962 (“Section 232”), targeting all countries. The updated Section 232 tariffs will be effective March 12, 2025 – and the formal Federal Register notices describing impacted articles by HTSUS classifications for steel and aluminum were published on March 5, 2025. A summary of key information from these Proclamations is included below:
- Blanket 25% tariffs on imports of steel, aluminum, and certain steel and aluminum derivative articles effective March 12, 2025.
- For newly covered derivative articles that are outside of HTS Chapter 73 (steel) and Chapter 76 (aluminum), the additional duty will apply only to the value of the steel or aluminum content of the derivative product. Further, tariffs on the new derivatives outside of Chapters 73 and 76 will only take effect “upon public notification of the Secretary of Commerce,” upon determining that systems are in place to process and collect tariff revenue for such articles.
- Importers will be required to report to CBP the primary country of smelt, secondary country of smelt, and country of cast on imports of all aluminum articles subject to the aluminum and aluminum derivatives Section 232 measures.
- Rescission of previous country-specific Section 232 exclusions and tariff rate quotas implemented since 2018.
- Recission of Section 232 product-specific exclusion process administered by the Department of Commerce. Previously granted product-specific exclusions remain in effect until they expire or the approved quantity has been exhausted.
- CBP is directed to prioritize monitoring of steel and aluminum imports to discover misclassifications of merchandise that result in non-payment of the Section 232 duties, and to assess maximum monetary penalties against importers determined to have misclassified such articles.
In addition, on February 25, 2025 and March 1, 2025, the White House subsequently announced two new Section 232 investigations into (i) copper, and (ii) timber and lumber imports – which may result in additional tariff actions.
III. Supply Chain Strategies and Key Takeaways
Tariffs have been and will continue to be a focal point of the Trump Administration’s global trade policy, whether in pursuit of economic security, national security, or as a broader negotiation tactic. Further, the Administration has made it clear that a broad reciprocal tariff regime will be announced on April 2, 2025 – the scope of which is currently unclear, but which is anticipated to be both sector-based (e.g., automobiles, agriculture, pharmaceuticals, semiconductors, and advanced computing equipment) as well as country-based. That being said, the tariff landscape is evolving rapidly and subject to constant evolution and change – and accordingly, companies and importers should take the following steps as soon as possible:
- Evaluate your supply chain and diversify suppliers to mitigate tariff costs;
- Reevaluate product designs and manufacturing operations to establish favorable country(ies) of origin;
- Negotiate tariff cost-sharing provisions in supply and distribution contracts to mitigate effect of increased tariffs;
- For outbound products, identify potential new costs to customers and distributors associated with retaliatory tariffs implemented by third-countries;
- Closely monitor evolving negotiations and regulatory changes for new exclusions, exemptions, or carve-outs that may impact your cross-border transaction activity;
- Utilize free trade agreements or free trade zones where practicable; and
- Consistently audit and document HTS classifications and country of origin determinations for imported goods to ensure customs compliance, timely duty payments, and efficient responses to requests for information issued by CBP.