UPDATE: Shortly after the publication of this alert, the tariffs on Canadian-origin products were paused for 30 days.
On February 1, 2024, the U.S. announced a sweeping range of tariffs on imported goods:
- 25% on all Canadian-origin products except for energy-related products, which will be subject to a 10% tariff
- 10% on all Chinese-origin products
- 25% on all Mexican-origin products
However, the tariffs on Mexican-origin products were suspended on February 3, 2025, for a period of 30 days. The tariffs officially come into force at 12:01 a.m. EST on February 4, 2025. Items that were in transit by 12:01 a.m. EST on February 1, 2025, will not be subject to a tariff — but anything shipped after that time will be tariffed.
Observations
- Because these tariffs were issued under the International Emergency Economic Powers Act (“IEEPA” — usually used for sanctions), there appears to be no mechanism to seek an exclusion or exemption from the tariffs.
- Again, because these tariffs were issued under IEEPA, the tariff payments are not subject to any duty drawback claims. A duty drawback is a program that refunds duties, taxes, and fees paid on imported goods that are then exported or destroyed.
- There is no exclusion under the tariffs for components or parts imported to support U.S. manufacturing.
- There is no de minimis exception to these tariffs. Typically, an item ordered from overseas that costs less than $800 is not subject to any tariffs when shipped (think items ordered from the Amazon marketplace). That is no longer the case as every item from Canada, China, and Mexico will be subject to the tariff. It’s not clear whether the elimination of the de minimis exception extends to the $400 in products an individual can bring back with them when they travel.
Retaliatory Tariffs Against U.S.
As has been reported, Canada has retaliated with a 25% tariff on certain U.S.-origin products, and those tariffs will go into effect at 12:01 a.m. EST on February 4, 2025. The 25% Canadian tariff will extend to more U.S.-origin products in 21 days. Canada’s provinces are also retaliating. For example, British Columbia, Ontario, and Nova Scotia have ordered that all U.S. alcoholic beverages be removed from liquor stores by at 12:01 a.m. EST on February 4, 2025. Other provinces are looking at excluding U.S. companies from government procurement opportunities.
China has threatened to retaliate, but it’s not clear what that will look like.
The Trump administration has threatened to increase the tariff rate on Canada if they retaliate (which they have). The European Union is also on the list of the Trump administration’s tariff targets.
