Since February, the Trump administration has announced and issued several sets of tariffs. As of last week, putting aside further reciprocal or retaliatory tariffs, it appears all expected tariffs have now been announced. This blog summarizes the announced tariffs, the percentages that apply and how to address these tariffs within your supply chain.
The Tariffs
Mexico and Canada:
- Imports from Mexico and Canada are subject to a 25% tariff.
- Energy products and certain other products are subject to a lower 10% tariff.
- Products that fall within the USMCA are not subject to these tariffs as of now.
- The 10% base tariffs do not apply to Canadian and Mexican imports.
- Steel and aluminum tariffs apply to Mexican and Canadian imports, regardless of USMCA compliance status.
China:
- All imports from China are subject to a 20% tariff.
- Starting April 9, 2025, China will also be subject to a country-specific reciprocal tariff of 34%, resulting in an overall tariff rate of 54%.
- The 10% across the board tariffs do not apply to China because of its specific 34% tariff.
- China has indicated it will retaliate, and the Trump administration has indicated a further retaliatory tariff may be issued as a result.
Steel and Aluminum:
- All steel and aluminum imports are subject to a 25% tariff.
- USMCA compliance does not exempt products from this 25% tariff.
- Certain steel and aluminum derivatives are also subject to this 25% tariff, and this list may be enlarged over time by the United States Department of Commerce.
Automobiles and Auto Parts:
- All automobile imports defined to include “passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans and cargo vans) and light trucks” are subject to a 25% tariff.
- Automobile parts, with the detailed list to be provided, will be subject to a 25% tariff starting May 3, 2025.
Across the Board Base Tariffs:
- Imports from all countries, other than those countries subject to specific tariffs, are subject to a base tariff of 10% as of April 5, 2025.
Country-Specific Tariffs:
Numerous country- and region-specific tariffs will be imposed starting April 9, 2025. These tariffs are in addition to other tariffs in place with the exception of the 10% base tariff. A few of the country and region-specific tariffs include:
- China: 34%
- European Union: 20%
- Japan: 24%
- India: 26%
- South Korea: 25%
- United Kingdom: 10%
- Brazil: 10%
- Vietnam: 46%
- Taiwan: 32%
- Thailand: 36%
- Indonesia: 32%
- South Africa: 30%
- Chile: 10%
- Australia: 10%
- Turkey: 10%
- Peru: 10%
- Costa Rica: 10%
- Argentina: 10%
Tariff Exemptions and Exceptions: While the current Trump administration has indicated little to no exemptions and exceptions or classification avenues for avoiding these tariffs, certain exemptions and classifications have been issued and more are expected. For example, there are calculations for content where 20% of value being U.S. content can provide some relief from certain tariffs. Despite these exemptions and exceptions being limited, it is important for you to work with your freight companies and other professionals to determine if there are any such avenues for avoiding these tariff costs.
Your Supply Chain
As you are starting to assess the impact of these tariffs, and as your organization is starting to pay these tariffs one way or another, it is important to keep certain contract provisions in mind. While the importer of record pays the tariff to the CBP upon importation, where the cost is absorbed in the supply chain rests on the contract terms between the supply chain partners up and down the chain. Several contract terms are key, both in your assessment of current contracts and in negotiation of new contracts in this tariff landscape.
- Delivery Term: If you are the importer of record or the purchaser of the product from the importer of record, your delivery term determines responsibility for the cost of the applicable tariffs. For example, if your contract with the importer of record provides for DDP (delivery duty paid) delivery term, the importer of record pays and absorbs the tariffs. If your delivery term does not provide for payment of duties by your supplier, then the tariffs will likely be added to your invoice to be paid to the importer of record. It is important to understand where your goods come from and which delivery terms make sense for your business when you are dealing with imported goods.
- Price Term: Most contracts and terms and conditions specify what is included in the price and whether that price is fixed or subject to adjustment based on market factors. Carefully review the payment terms to determine whether tariff costs can be passed through as part of the price — either by you to your customer or by a supplier to you. Understanding who bears the burden of tariffs is critical to managing financial risk. Price provisions are also provisions you can negotiate for new contracts to allow for absorption of tariffs as these tariffs change going forward.
- Taxes/Duties Term: If your contract or set of terms and conditions includes a taxes and duties provision, it is important to review this provision to determine which party is responsible for payment. A tariff is a duty. You can also use this provision in current negotiations to provide for some certainty going forward as tariffs change.
- Termination/Enforceability: If all else fails, examine your contracts to determine whether you have the right to terminate and seek an alternate supplier that may not impose tariff-related costs. Or review your contract to determine if there are any deficiencies making it unenforceable and thus providing a way out to avoid tariff costs.
