Tariffs on China take effect February 4; tariffs on Canada and Mexico delayed until March 4.
Through three Executive Orders signed on February 1, 2025 (collectively, the “Executive Orders”), U.S. President Donald Trump announced significant additional tariffs on imports of goods from Canada, Mexico, and China. The President stated that he was taking this action because of the alleged involvement, complicity, and/or inaction by the three countries with respect to drug trafficking and illegal immigration across the northern and southern borders of the United States.
The tariffs on goods from China take effect today, February 4, 2025, while the tariffs on goods from Canada and Mexico have been paused for one month.
The key details of the three Executive Orders are as follows:
Legal Authority:
International Emergency Economic Powers Act (“IEEPA”). In each of the Executive Orders, President Trump expanded the national emergency declared in Proclamation 10886 of January 20, 2025 relating to the “influx of illegal aliens and illicit drugs into the United States.” This expanded declaration is the prerequisite for the President taking action under IEEPA (in this case, through the imposition of tariffs) to address the declared national emergency.
This marks the first time that a U.S. president has imposed tariffs under IEEPA, which is the statutory authority typically used for the imposition of economic sanctions.
Tariff Rates:
Canada: 10 percent ad valorem duty on energy or energy resources from Canada, as defined in section 8 of Executive Order 14156 of January 20, 2025. For purposes of this Executive Order, “energy” or “energy resources” means 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).
25 percent ad valorem duty on all other “articles that are products of Canada,” which generally refers to goods that are wholly obtained or produced in Canada, produced exclusively from Canadian materials, or substantially transformed in Canada.
Mexico: 25 percent ad valorem duty on “all articles that are products of Mexico” as defined in a Federal Register notice that will be issued by the Department of Homeland Security. Although this notice is not yet published, the definition is likely to refer to goods that are wholly obtained or produced in Mexico, produced exclusively from Mexican materials, or substantially transformed in Mexico.
China: 10 percent ad valorem duty on “all articles that are products of China,” which generally refers to goods that are wholly obtained or produced in China, produced exclusively from Chinese materials, or substantially transformed in China.
Effective Date of Tariff Rates: Baker Botts’ globally positioned and recognized International Trade Practice is active and diverse. Working as one team across four offices (Houston, Washington DC, Brussels, and London), we help clients to navigate U.S., EU, and UK regulations that affect the cross-border movement of goods, technology, services, and investment. The team has extensive experience advising clients on U.S., EU, and UK economic sanctions including those administered and maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the European Commission and the UK’s Office of Financial Sanctions Implementation (OFSI). We also advise clients on all aspects of U.S., EU, and UK export controls and regularly represent clients before the Bureau of Industry and Security (BIS), the competent authorities of the EU Member States and the licensing and enforcement authorities in the UK (ECJU and HMRC). The team also assists clients in addressing regulatory challenges with access to the U.S. market involving customs, market access barriers, and CFIUS review of foreign investment.
With respect to China, the tariffs apply beginning today, February 4, 2025, for goods “entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time” on that effective date.
Goods entered for consumption, or withdrawn from warehouse for consumption, after the effective date that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12:01 a.m. eastern time on February 1, 2025, are not subject to the tariffs if the importer certifies to U.S. Customs and Border Protection that the goods qualify.
With respect to Canada and Mexico, President Trump spoke with Prime Minister Justin Trudeau and President Claudia Sheinbaum, respectively, on the day before the tariffs were set to go into effect, and each of the leaders agreed to pause the tariffs for one month. Consequently, pursuant to two executive orders issued by President Trump implementing the pause, the tariffs against Canada and Mexico are set to go into effect at 12:01 a.m. eastern time on March 4, 2025, absent any further agreements between the leaders.
In addition, these executive orders withdraw the potential exception for goods that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before this date. Therefore, goods in transit to the United States from Canada and Mexico will be subject to the new tariffs if they are entered for consumption on or after the effective date regardless of when they were shipped.
Duration of Tariff Rates:
The President must review and, if necessary, may extend national emergencies declared under IEEPA on an annual basis. The tariffs issued in the Executive Orders will remain effective until specifically revised or revoked by the President, or until the President terminates the declared national emergency that is the basis for these tariffs.
Additional Customs Notes:
The tariff rates imposed under the Executive Orders are in addition to any other duties, fees, or charges applicable to the imported goods. This includes antidumping/countervailing duties and tariffs imposed under other trade relief statutes (e.g., Section 232/Section 301 tariffs).
Duty drawback will not be available for the duties imposed under the Executive Orders.
Duty-free de minimis treatment will not be available for goods under $800 in value.
Goods subject to these tariff rates will not be eligible for duty inversion treatment when entering merchandise into the United States from foreign trade zones. In other words, such goods must be admitted into the foreign trade zone in privileged foreign status.
Exclusions:
There are only limited exclusions from the tariffs for goods exempted from coverage under IEEPA. These exempted goods include:
- postal, telegraphic, telephonic, or other personal communications;
- donations by U.S. persons of articles intended to relieve human suffering;
- information or informational materials; and
- travel-related transactions.
There are no other exclusions for goods subject to the Executive Orders, such as any exclusions related to the U.S. – Mexico – Canada Agreement (“USMCA”) for Mexico or Canada. In addition, there is no process noted for requesting an exemption from these duties for goods subject to the Executive Orders.
Retaliation:
The President may increase or expand the scope of the tariffs imposed under the Executive Orders in response to retaliatory measures imposed by Canada, Mexico, and China, respectively.
In response to President Trump’s announcement of the tariffs, Canadian and Mexican leaders initially announced retaliatory tariff actions against U.S. imports. However, since the announcement of a one-month pause with respect to the tariffs on Canadian and Mexican imports, Prime Minister Trudeau and President Sheinbaum, respectively, have indicated that Canada and Mexico will not proceed with implementing any retaliatory measures during this time.
Earlier today, February 4, 2025, China announced tariffs of 10 to 15 percent on imports of U.S. liquefied natural gas, coal, crude oil, certain automobiles, and farm equipment, effective on February 10, 2025. China will also pursue other retaliatory measures, including new export controls on rare metals and regulatory investigations into certain U.S. companies. China has also indicated that it would file a lawsuit with the World Trade Organization in response to the tariffs and “take necessary countermeasures.” President Trump and Chinese President Xi Jinping are expected to hold discussions in the coming days.
