In his first tangible action implementing his campaign promise to impose broad tariffs, on February 1, 2025, President Trump issued three Executive Orders (the EOs) directing that across-the-board tariffs be imposed on goods from Canada, China and Mexico (the Canada EO, China EO and Mexico EO, respectively). Shortly thereafter, however, the President paused for one month the effective date of the Canada and Mexico tariffs following discussions with the leaders of both countries, who committed to take cooperative actions to address US concerns. In contrast, the tariffs imposed on products from China became effective on February 4. As of February 10, China imposed a series of retaliatory measures, including tariffs on liquefied natural gas, coal, crude oil and farm equipment from the United States.
All three sets of tariffs were issued pursuant to the International Emergency Economic Powers Act (IEEPA) in response to President Trump’s declaration of an emergency at US borders as a result of illegal immigration and drug trafficking. The China EO was also issued under the purported authority of Section 301 of the Trade Act of 1974.
US Customs and Border Protection (CBP) released an unpublished Federal Register notice on February 4 for the China tariffs outlining additional information, including the specific Harmonized Tariff Schedule of the United States (HTSUS) codes associated with the tariffs. Federal Register notices for the Canada and Mexico tariffs were also released but have been subsequently withdrawn due to the postponement of the effective date of those tariffs.
- The Canada EO would have imposed a 25% ad valorem duty on all articles that are products of Canada. However, Canadian “energy” or “energy resources” would have been subject to a lower 10% duty. The terms “energy” and “energy resources” were defined to include 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.”1
- The Mexico EO would have imposed a 25% ad valorem duty on all articles that are products of Mexico. Unlike the Canada EO, the Mexico EO did not provide for a lower ad valorem duty on energy and energy resources that are products of Mexico.
- The China EO imposes an additional 10% ad valorem duty on all articles that are products of China or Hong Kong, entered for consumption or withdrawn from a warehouse for consumption.
Some key takeaways and considerations with respect to the EOs are as follows:
Uncharted IEEPA Territory. One critical issue that will likely be litigated is whether the President has the authority to impose tariffs under IEEPA. IEEPA grants the President the authority to declare a “national emergency” in order to address “an unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States . . .” In response to such an emergency, IEEPA authorizes the President to utilize a number of tools in the trade toolbox, including the regulation of “any . . . importation . . . of . . . any property in which any foreign country or a national thereof has any interest by any person . . . subject to the jurisdiction of the United States.” Any Presidential declaration of a national emergency will be difficult to challenge given the deference accorded to the President’s in foreign affairs. However, the authority of the President to impose tariffs under IEEPA in response to such an emergency¬—the first such use of the statute—is open to debate. The imposition of tariffs is, in the first instance, the power of Congress, not the Executive Branch, and IEEPA’s use to impose tariffs in the absence of an express delegation by Congress will undoubtedly be challenged in court. It is relevant that other congressional delegations of authority to impose tariffs, such as Sections 201, 232 and 301, were accompanied by far more rigorous procedural requirements.
De Minimis Treatment and Drawback. At the time of their release, the EOs stated that de minimis treatment would not be available for the articles subject to the new duties, which means that low-value shipments (under $800 in value) of articles covered by the EOs would be subject to Customs entry and duty requirements. However, the Trump Administration subsequently paused the repeal of de minimis treatment of goods from China on February 7 for the time being. Further, each of the EOs states that no drawback is available with respect to the duties imposed under the EOs.
Impact on Energy Markets. As noted above, Canadian energy and energy products would be subject to a lower 10% tariff. This includes imports of 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.” Note that imports of electricity from Canada would be subject to 25% tariffs as it does not fall within the categories of energy and energy resources subject to the 10% tariffs. Canada is a major energy-trading partner with the United States, supplying upwards of four million barrels of oil per day into the United States and through the expanded Trans Mountain Pipeline. In contrast, “energy” and “energy resources” that are the product of Mexico would be subject to the full 25% duty. Although the United States imports much less crude oil from Mexico than it does from Canada (approximately 450,000 barrels per day), US Gulf Coast refiners that rely on Mexican oil in their refineries are likely to be impacted.
Retaliation. Each of the EOs provides that the United States may increase or expand the scope of the duties imposed under the EOs should the Canadian, Chinese or Mexican governments “retaliate against the United States in response to [the EOs] through import duties on United States exports.” Canada initially announced retaliatory measures, but those have now been held in abeyance given the delay in the imposition of US tariffs. China has scheduled retaliatory measures to become effective February 10, but there will presumably be negotiations between the US and China that could lead to a postponement of Chinese retaliation.
Exclusions. It is currently unclear whether the tariffs contemplated by the EOs will be subject to an exclusion process, which was the case for the first Trump Administration’s China tariffs. That exclusion process afforded affected parties an opportunity to advocate that their imported products be removed from the scope of the tariffs. The EOs did not indicate that exclusions would be made available, and President Trump and White House officials have not provided any guidance on the issue.
Procedures for Removal. The EOs do not address what the governments of Canada, China and Mexico must do in response to the national emergencies in order to forestall tariffs. Rather, the EOs state that the Secretary of Homeland Security will inform the President of circumstances that indicate, through cooperative actions: (a) the government of Mexico has taken adequate steps to alleviate the illegal migration and illicit drug crisis; (b) the government of Canada has taken adequate steps to alleviate the public health crisis declared by the EO; and (c) the government of China has taken adequate steps to alleviate the opioid crisis. The only guidance offered is that the tariffs will be removed “[u]pon the President’s determination of sufficient action to alleviate the crisis.”
Implications of the USMCA. The tariffs on Mexico and Canada are at odds with the United States-Mexico-Canada Agreement (USMCA), which allows preferential duty treatment for imports of Canadian and Mexican goods into the United States. The USMCA was negotiated by President Trump and took effect in 2020, promoting further cross-border trade between the countries. The recent actions of the Administration give rise to questions about the future of the USMCA, at least in its present form.
Getting to Yes. What remains to be seen is whether the 30-day delay in the imposition of the tariffs on Canadian and Mexican imports will result in negotiated resolutions or the imposition of tariffs. This depends on a range of factors, including the outcome of ongoing negotiations and whether the Trump Administration intends to utilize the revenues from the duties to shore up border security or replace revenue from tax cuts elsewhere in the budget. One reasonably plausible scenario is that negotiations extend beyond 30 days and the Trump Administration issues yet additional delays in terrif imposition.
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1 The term “critical minerals” is defined in 30 USC § 1606(a)(3).
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