![European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources](https://eaccny.com/wp-content/uploads/2020/06/eaccny-logo.png){kind=logo}
On February 1, President Trump announced new tariffs on imports from Canada, Mexico, and China, which sparked intense negotiations with the affected countries. On February 10, President Trump reportedly announced 25% tariffs on all steel and aluminum imports — and there is the possibility of further tariff announcements on the horizon. As we continue to monitor the situation, this comprehensive analysis delves into the potential far-reaching consequences of the first round of proposed tariffs and what they could mean for your business.
Frequently asked questions about the Trump tariffs
What happened as new tariffs were introduced?
On February 1, 2025, the United States White House released a fact sheet and executive orders imposing additional tariffs on Canada, Mexico, and China. President Trump implemented a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China, in addition to the tariffs already in force. Energy resources from Canada will face an initially lower tariff of an additional 10%.
The tariffs are a result of President Trump’s national emergency declaration in response to “illegal immigration” and “drug trafficking” and will remain in place until the perceived crisis is alleviated.
In response, Canada announced their own retaliatory measures, while China denounced the tariffs but left the door open for negotiations and enacted a 10% – 15% tariff on certain U.S. products. Following negotiations, U.S. tariffs on Canada are paused for “at least 30 days” and the tariffs on Mexican-origin goods were postponed for a month (until March 1).
What is Trump’s authority to assess tariffs?
President Trump invoked the International Emergency Economic Powers Act (IEEPA) to impose the tariffs. Enacted in 1977, the IEEPA grants the president authority to impose economic sanctions, control foreign assets, and undertake other measures to address threats to national security, foreign policy, or the economy.
While the IEEPA serves as the legal authority for various export controls and sanctions-related regulatory actions, it has never before been invoked by a U.S. president to impose tariffs on imports. This unprecedented use of the IEEPA has sparked legal debates and potential challenges.
What are the tariff rates by country?
The tariff rates imposed by President Trump are as follows:
- Canada: 25% on all products of Canada, except for energy resources, which face a 10% tariff.
- Mexico: 25% on all products of Mexico.
- China: 10% on all products of China (on top of any existing tariffs, including the Section 301 tariffs implemented during the previous Trump administration, and to a lesser extent the Biden administration, and that range from 7.5% to 25%).
How are tariffs applied to imported goods?
Critically, once these tariffs are fully implemented, goods shipped from China will no longer qualify for entry into the United States under the “de minimis” Section 321 provisions, which grant duty-free entry if the aggregate fair retail value of articles imported by one person on one day does not exceed $800.
Unlike Section 301 tariffs, these tariffs would not be eligible for duty-drawback. This means they would not be eligible to be refunded if imported tariffed goods are later destroyed or exported from the United States.
With potential federal tax law changes and other legislation from the new administration, evaluating tax planning opportunities is crucial. View our Tax Policy Watch webinar covering TCJA, tariffs, and taxes.
When do tariffs take effect?
The additional duties apply to goods imported for consumption or withdrawn from a warehouse for consumption starting February 4, 2025, at 12:01 a.m. EST.
However, goods that were loaded onto a vessel or were in transit on the final mode of transport before February 1, 2025, at 12:01 a.m. EST will not be subject to additional duty, provided the importer certifies this to U.S. Customs and Border Protection (CBP).
Tariffs delayed for Canada and Mexico
The tariffs are subject to a 30-day delay with respect to Canada and Mexico. It is not clear at this time whether the in-transit exemption will also be delayed (if/when the 30-day reprieve ends for goods from Canada and Mexico), or whether importers will be deemed to be on sufficient notice from this point forward.
Why were tariffs paused against Canada and Mexico?
Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum Pardo negotiated with President Trump, leading to an agreement to pause the tariffs for 30 days. This pause allows for further negotiations and efforts to address the issues of border security and drug trafficking.
How did Mexico and Canada respond to Trump?
In exchange for the 30-day delay, Canada and Mexico made several pledges to President Trump.
- Canada — Prime Minister Justin Trudeau announced that Canada would name a fentanyl czar, list Mexican cartels as terrorist groups, and launch a Canada – U.S. Joint Strike Force to combat organized crime, fentanyl, and money laundering.
- Mexico — President Claudia Sheinbaum Pardo committed to deploying 10,000 national guard members to the U.S. – Mexico border to help stop the flow of fentanyl and illegal immigration.
The tariff impact on your business and beyond
What products are affected by the new tariffs?
Tariffs can increase the cost of imported goods, leading to higher prices for consumers and potentially reducing their purchasing power. The tariffs affect a wide range of products across key industries and sectors.
| Canada | Mexico | China |
|---|---|---|
| Wine, spirits, and beer | Steel | All goods of Chinese origin, including: |
| Appliances | Aluminum | Electronics |
| Apparel and footwear | Copper | Clothing |
| Cosmetics | Computer chips | Household goods |
| Pulp and paper | Semiconductors | Medical supplies |
| Passenger vehicles and motorcycles | Pharmaceuticals | |
| Trucks and buses | ||
| Recreational vehicles and boats | ||
| Steel and aluminum products | ||
| Beef, pork, dairy, and certain fruits and vegetables |
How could tariffs impact the economy?
Higher prices could reduce consumer spending and slow economic growth. In addition, tariffs can disrupt supply chains and raise production costs for businesses.
This economic landscape could introduce more market uncertainty, which can lead to fluctuations in the stock market. Consider the potential impact of tariffs on the economy and your portfolio.
Which industries are most likely to be affected by Trump’s 2025 tariffs?
How can I help protect my business from the impact of tariffs?
- Analyze both financial and physical flows of imports and exports to assess the potential total landed cost of goods against which tariffs (and baseline duties) will be applied.
- Review contracts with suppliers and customers to clarify contractual liability for duties, tariffs, and taxes, including an examination of sales terms and importer-of-record roles and responsibilities.
- Consider renegotiating supplier and customer pricing agreements and/or cost-splitting arrangements.
- Evaluate current domestic or alternative sourcing options for the impacted countries and consider country-of-origin planning to mitigate duties.
- Keep up with the latest news and developments in trade and tax policies so you can respond quickly to changes in trade regulations and tariff rates.
- Model currency exchange, direct and indirect taxes, and other drivers.
- Consider proactive steps to address margin erosion and adapt to tariffs.
For more information, please connect CLA tax professionals who can help you stay informed and adaptable, navigate any challenges posed by new trade regulations, and continue to thrive in a rapidly changing global market.
Compliments of CLA (CliftonLarsonAllen) – A member of the EACCNY