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On February 1, 2025, using authority under the International Emergency Economic Powers Act (IEEPA) and other legal provisions, President Trump signed three executive orders imposing new tariffs on all goods from Canada, Mexico, and China effective February 4.
On February 3, the administration paused the planned tariffs on all goods from both Canada and Mexico until March 4, pending negotiations. In response, Canada also paused its planned retaliatory tariffs.
The executive order imposing 10% tariffs on all goods from China has taken effect. China has announced countermeasures effective February 10.
In Depth
US TARIFFS ON CHINA
Details
Under the February 1 executive order, all US imports from China are currently subject to an additional 10% tariff. That 10% rate is on top of each entering good’s normal US tariff rate and other applicable tariffs under Section 301 of the Trade Act of 1974, Section 232 of the Trade Expansion Act of 1962, US trade remedy laws, and other authorities.
The executive order suspends the de minimis exemption for Chinese goods valued at less than $800.
The additional tariff measures entered into force at 12:01 am EST on February 4, but exclude goods entered after that time that were loaded on vessels at ports of loading or in transit on the final mode of transport before 12:01 am EST on February 1.
President Trump’s February 1 executive order contains a retaliation clause stating that, should China retaliate, the president “may increase or expand in scope the duties imposed under the order to ensure the efficacy of [the actions taken].”
Rationale for New Rates
The Trump administration cited concerns over fentanyl distribution and money laundering by transnational criminal gangs as its reason for imposing the additional 10% tariff on China.
CHINA’S RETALIATORY MEASURES
On February 4, the government of China announced retaliatory tariffs, which will take effect on February 10. The new tariffs include 15% tariffs on coal and liquefied natural gas and 10% tariffs on crude oil, a wide range of agricultural machinery, large displacement cars, and pickup trucks.
In addition, China reportedly has taken non-tariff measures, including additional export controls on rare earth minerals and various punitive actions against certain US entities.
30-DAY PAUSE IN NEW TARIFFS FOR CANADA AND MEXICO
On February 3, President Trump signed two new executive orders pausing the tariffs on Canada and Mexico after each of those countries pledged to take certain further actions to help stem cross-border migration and drug trade. The new executive orders preserve President Trump’s authority to reinstate the added duties at his discretion before March 4.
The bilateral talks underway with Mexico and Canada over the next 30 days are being led on the US side by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Secretary of State Marco Rubio. In addition to covering border issues, the talks could cover economic issues, including certain issues relating to the United States-Mexico-Canada Agreement (USMCA).
COMMERCIAL IMPLICATIONS
Clients doing business in China, and potentially in Canada and Mexico depending on the outcome of the negotiations now underway, should be prepared for increased costs, along with potential disruptions and modifications to supply chains.
WHAT’S NEXT
In addition to the February 1 executive orders on goods from China, Canada, and Mexico, President Trump has threatened to impose tariffs on goods from the European Union and certain other specific trading partners, tariffs on goods in certain industry sectors (steel, semiconductors, pharmaceuticals, and medical devices), and blanket tariffs on imports from all global origins. McDermott lawyers are advising clients on the evolving tariff outlook and counseling on commercial strategies to mitigate the impacts of any new tariffs.
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