On 25 November, President-Elect Donald Trump announced plans to impose substantial tariffs on goods from China, Mexico, and Canada through executive action, signaling a return to his aggressive trade policies. If implemented, these measures could have significant implications for businesses reliant on international supply chains.
Trump has indicated that, effective 20 January 2025, his administration would impose an additional 10% tariff on all Chinese imports and a 25% tariff on goods from Mexico and Canada. These tariffs are framed as responses to national security concerns to combat the influx of illegal drugs and undocumented individuals into the United States. Trump’s message invokes congressionally delegated executive authority to implement these tariffs—a move that may require declaring a national emergency.
Legal Pathways for Executive Action
The US Congress has delegated significant authority to the President to impose tariffs or other measures impacting imports and exports. Trump is likely to use existing authority under the International Emergency Economic Powers Act (IEEPA), which forms the basis for most US sanctions laws and has been used in the past by presidents (including President Biden) to impose tariffs or other restrictions on imports. The President can invoke IEEPA via Executive Order by declaring a national emergency, a step Trump has signaled by referring to the influx of drugs and undocumented individuals as an “invasion.” Because such actions are based in part on the President’s national security and foreign policy powers under the Constitution, they are likely to survive court challenges—as has been the case with other IEEPA-based actions.
Impact to Business Operations
The proposed tariffs would dramatically disrupt existing supply chains, particularly for industries dependent on goods that are challenging to source outside the targeted countries. For example, Chinese imports currently play a significant role in sectors like electronics and machinery, while North American trade is vital for automotive manufacturing, agriculture, and consumer goods. Tariffs on Mexico and Canada would add a layer of complexity for businesses accustomed to generally duty-free access under the United States–Mexico–Canada Agreement (USMCA). The tariffs are also likely to provoke a reciprocal response from Canada, China, and Mexico that will impact US exports to those countries.
The announcement underscores the importance of being proactive. Companies should conduct risk assessments now to understand the potential impacts of these tariffs on their operations. This includes engaging with policymakers and trade associations to advocate for exemptions or alternative solutions. Businesses should also prepare contingency plans, such as diversifying supply chains or renegotiating supplier contracts, to minimize disruption.
If implemented, these tariffs will undoubtedly reshape the global trade landscape and present complex challenges for US businesses. While legal and political uncertainty remains, companies should start taking concrete actions now to protect their interests. Our International Trade practice group will continue monitoring developments to provide actionable guidance.
