On Saturday, Feb. 1, 2025, President Donald Trump issued three executive orders raising tariffs on goods from Canada, Mexico and the People's Republic of China. The executive orders were issued under the International Economic Emergency Power Act to address drug trafficking and illegal immigration, as declared national emergencies.
Canadian Goods: An additional duty rate of 25% will be applied to all Canadian products, as these will be defined on the forthcoming Federal Register. The exception to this is energy or energy resources, where a 10 % duty will apply instead. Update: We’re expecting more information on Canada’s tariffs after Canada and the U.S. meet this afternoon.
Mexican Goods: An additional 25% duty rate will apply to all products of Mexico, as these will be defined in the Federal Register. Update: As of Feb. 3, the tariff increases for articles from Mexico have been paused.
People’s Republic of China (PRC) Goods: An additional duty rate of 10% will be applied to all products from China. There is no mention of products from Hong Kong and Macau in the executive order. This isn’t to say there won’t be any duties applied to products from these locations.
Affected Articles: The tariffs apply to products “entered for consumption or withdrawn from warehouses for consumption” on or after 12:01 a.m. on Feb. 4, 2025.
Exemption: No exemption for United States-Mexico-Canada Agreement (USMCA) originating goods. Limited exemption exists for products that were “entered for consumption, or withdrawn from warehouse for consumption, after such time that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to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,” and those under the enumerated categories of 50 U.S.C. 1702(b) that encompass mainly goods for personal use, donations for humanitarian reasons, information and information related materials, artworks and newswire feeds.
No Duty Drawback: As it relates to these imposed tariffs, duty drawback is not available.
Response from Canada, Mexico and PRC
The three countries have declared they will retaliate.
Canada: Canadian Prime Minister Justin Trudeau announced 25% tariffs on $155 billion in imports from the U.S. Canada is taking a phased approach. Canada buys over $356 billion worth of U.S. products annually. A meeting between Canada and the U.S. is taking place this afternoon which should provide greater clarity.
Phase 1: A 25% tariff will be applied to $30 billion in goods published on the list of covered goods. This takes effect on Feb. 4, 2025, at 12:01 a.m., impacting beverages, paper products and cosmetics.
Phase 2: The remainder of $125 billion worth of goods which are subject to the additional tariffs will be made available soon and for a 21-day public comment. The list is expected to include “passenger vehicles, trucks and buses, steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy products and more.”
Mexico: No plan has been implemented yet, as tariffs have been paused for a month as of today. It is expected that tariffs will increase from 5%-20% on steel, aluminum, pork, cheese and fresh produce. The U.S. exports $322 billion worth of goods annually to Mexico that could be targeted for tariffs by Mexico.
PRC: Aside from publicly denouncing the tariff increase, it is expected that the PRC will leverage the World Trade Organization’s dispute resolution mechanisms to challenge the measure. Simultaneously, PRC will likely engage in diplomatic negotiations in an effort to reach a resolution, while keeping the option of retaliatory strategies open.
