On February 1, 2025, President Trump signed new executive orders targeting Canada,1 Mexico,2 and China,3 implementing the first set of tariffs under his new administration. Citing concerns over human trafficking, illicit drug trade, migration, and trade imbalances, the Trump administration invoked the International Emergency Economic Powers Act (IEEPA) to justify the new tariffs.4 These tariffs are the first in what may be a foreign policy shift prioritizing the use of tariffs in lieu of traditional economic and trade sanctions to effectuate changes in the conduct of international actors.
These measures included a 25 percent tariff on most imports of Canadian and Mexican origin (with the exception of Canadian energy and energy resources which will be subject to a 10 percent tariff) and an additional 10 percent tariff on Chinese-origin imports. The additional tariff on Chinese imports will be imposed on top of the already-increased tariffs on some Chinese goods ranging from 7.5 percent to 100 percent. The tariffs are set to take effect on February 4, 2025—with tariffs on Canadian and Mexican origin goods likely suspended for 30 days pending further U.S. negotiations with Canada and Mexico pursuant to agreements President Trump reached with Canadian Prime Minister Trudeau and Mexican President Claudia Sheinbaum on February 3—and are expected to lead to increased prices for U.S. importers and potential disruptions in the availability of goods. However, note that these measures are under active negotiation at this time, and developments are rapidly occurring.
Affected countries have already announced retaliatory countermeasures, raising the prospect of escalating trade tensions.
Below we provide a brief overview of these new measures and suggested next steps.
Who [is affected]? U.S. importers and consumers of goods originating from Canada, Mexico, and China. Approximately one third of imports into the United States come from Mexico, Canada, and China including groceries such as fruits, vegetables, and meat; construction materials such as lumber and steel; automobiles and auto parts; alcohol; and other consumer goods including electronics, toys, sports equipment, and clothing.
What [are the measures]? A 25 percent ad valorem tariff on almost all imports of Canadian and Mexican origin (with Canadian energy and energy resources5 subject to a reduced 10 percent tariff). An additional 10 percent ad valorem tariff will be added to imports of Chinese-origin imports, on top of the already increased tariffs on some Chinese goods ranging from 7.5 percent to 100 percent.
Affected goods admitted into a foreign trade zone (FTZ) after the tariffs come into effect must be entered under “privileged foreign status.” For importers currently benefitting from goods processed in an FTZ, some of the common FTZ benefits may not assist in avoiding the impact of new tariffs.
These tariffs will be levied on top of existing Customs duties inclusive of standard Harmonized Tariff Schedule of the United States (HTSUS) duty rates, duty rates applicable under free trade agreements (including the U.S.-Mexico-Canada Agreement negotiated by the first Trump administration as a successor to NAFTA), and other applicable trade measures (including current Section 232 tariffs and Section 301 tariffs).
When [does this come into effect]? Although executive orders stated that the tariffs are scheduled to take effect on February 4, 2025, at 12:01 a.m. ET, we understand based on statements made by Mexican President Claudia Sheinbaum and President Trump on February 3, 2025, that, at least with regards to tariffs to be implemented on Mexican goods, this date is likely to be pushed back to allow for further negotiations. Goods already in transit to the United States as of February 1, 2025, will be exempt from the new tariffs, subject to certification by the importer. The tariffs are set to remain in place until such time as the President determines that sufficient action has been undertaken to alleviate the crises cited in the orders.
How [are these measures being adopted]? President Trump enacted these tariffs under the authority of IEEPA, a 1970s-era statute that allows the President to regulate transactions in response to an “unusual and extraordinary” threat as declared by the President to constitute a national emergency. While IEEPA undergirds many executive branch measures dealing with economic and trade sanctions, this executive order is the first time that IEEPA has been used to authorize the imposition of tariffs, an issue that will likely be tested by legal challenges in the coming months.
What’s next? Canadian Prime Minister Justin Trudeau, Mexican President Claudia Sheinbaum, and the Chinese Ministry of Commerce have already announced plans for retaliatory tariffs.
- On February 1, 2025, Prime Minister Trudeau detailed a 25 percent tariff on over $100 billion of U.S. goods—some set to take effect also on February 4, 2025, and the rest to take effect later this month. The Canadian-imposed tariffs are expected to impact U.S. exports to Canada of beverages including beer and wine, cosmetics, and paper products among other products.
- In a post on X, President Sheinbaum stated yesterday that she had instructed her government to implement “plan B” tariff and non-tariff measures to safeguard Mexican interests. We expect these measures to be deferred pending resolution of the U.S. tariffs pursuant to the agreement between President Trump and President Sheinbaum earlier today, but when, or if, they take effect, they could include tariffs on U.S. exports to Mexico of products including pork, cheese, fresh produce, manufactured steel, and aluminum.
- China’s Ministry of Commerce announced plans to implement unspecified retaliatory countermeasures against the United States and to file a legal challenge with the World Trade Organization (WTO). While this WTO challenge would be unlikely to impact U.S. policy, the legal challenge may provide a nexus for other WTO members to unite in opposition to the new U.S. tariffs.
The executive order allows for additional U.S. tariff increases or expansions in the event Canada, Mexico, or China retaliate in response to the new U.S. tariffs, suggesting further escalation in trade measures may be forthcoming.
Anything else? In addition to these tariffs on Canada, Mexico, and China (and the specter of further increases in the event of retaliatory measures), further rounds of tariffs may land in the not-too-distant future. These could include: i) as threatened by President Trump over the weekend, tariffs on products of European Union or UK origin; ii) tariffs on imports of specific types of goods, such as computer chips, pharmaceuticals, steel, aluminum, copper, oil, and gas (which could be universal or country specific); and iii) potential “universal tariffs” that could apply across the board to all U.S. imports—all ideas which have been floated by President Trump since returning to office. In addition, tariffs on the BRICS nations or other predicted actions cited in our recent 2025 national security year in preview piece may also be implemented.
Next Steps: What Can I Do?
- Review your U.S. imports for items having a country of origin of Canada, Mexico, or China (whether imported directly; transshipped from another destination; or withdrawn from an FTZ).
- Review how your products will be impacted by the new tariffs (the executive order does not include a list of covered products by HTSUS codes, but we expect it to have broad coverage because of the reference to “all articles”).
- Check in with your suppliers to determine whether the products that you are sourcing are expected to be impacted by these tariffs.
- Consider whether any changes to your supply chain may be advantageous in the long term, recognizing that uncertainty exists about which countries and/or products may be targeted by tariffs in the future.
- Monitor rapidly arriving developments in this area, as the scope and timing of the tariffs are likely to change from the current proposals.
[1]Executive Order of February 1, 2025, “Imposing Duties To Address The Flow Of Illicit Drugs Across Our Northern Border,” available at https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-flow-of-illicit-drugs-across-our-national-border/.
[2]Executive Order of February 1, 2025, “Imposing Duties to Address the Situation at Our Southern Border,” available at https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-situation-at-our-southern-border/.
[3]Executive Order of February 1, 2025, “Imposing Duties to Address the Synthetic Opioid Supply Chain in the People’s Republic of China,” available at https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-synthetic-opioid-supply-chain-in-the-peoples-republic-of-china/.
[4]The White House posted afact sheet on its website expanding upon the cited threats and measures taken.
[5]“Energy” and “energy resources” were defined in President Trump’s January 20, 2025, executive order “Declaring a National Energy Emergency” as “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).”
