UPDATED FEB 4, 2025: This article will be updated as new information becomes available.
On Saturday, President Trump signed executive orders planning to impose new tariffs on imports from Canada, Mexico, and China incl. Hong Kong, citing national security concerns related to illegal immigration and the influx of illicit drugs, particularly fentanyl. Both Canada and Mexico’s proposed tariffs have been postponed for 30 days.
Details of the Tariffs
- Canada (postponed for 30 days): A 25% tariff on most imports, with a reduced 10% tariff specifically on Canadian energy resources.
- Mexico: A 25% tariff on all imports (postponed for 30 days)
- China & Hong Kong: A 10% tariff on all imports (issued retaliatory tariffs, see below).
These tariffs are in addition to existing duties, such as the Section 301 tariffs on Chinese goods and previous measures on steel and aluminum. Except for Mexico and Canada, tariffs on China are scheduled to take effect on February 4, 2025, at 12:01 am.
Justification for the Tariffs
The administration has invoked the International Emergency Economic Powers Act (IEEPA), declaring that the threats posed by illegal immigration and the flow of drugs like fentanyl constitute a national emergency. The executive orders state that:
- Canada has failed to adequately prevent the production and distribution of fentanyl within its borders, contributing to the drug crisis in the United States.
- Mexico has not taken sufficient action against drug trafficking organizations, which are responsible for manufacturing and transporting dangerous narcotics into the U.S.
- China has not effectively controlled the export of precursor chemicals used in fentanyl production, which are often trafficked through Mexico and Canada into the United States.
The administration is emphasizing that access to the American market is a privilege and that these tariffs are a means to hold these nations accountable for their roles in exacerbating the crises of illegal immigration and drug trafficking. President Trump asserts that these measures are necessary to protect American citizens and uphold national security, fulfilling his campaign promise to address these issues.
Retaliatory Measures
Canada’s Response
Canadian Prime Minister Justin Trudeau initially denounced the tariffs as unwarranted and harmful to both economies, warning that they would disrupt cross-border trade and drive up costs for consumers. In retaliation, Canada had announced plans to impose a 25% tariff on approximately $155 billion worth of U.S. goods, specifically targeting consumer products, alcohol, appliances, furniture, and industrial goods.
However, in what appeared to be moderate concessions, Trudeau has since outlined additional measures that Canada will take. These include:
- Continuing to implement a border security spending plan launched in December, valued at 1.3 billion Canadian dollars ($900 million). This plan includes the acquisition of two additional Black Hawk helicopters, 60 U.S.-made drones, and other technical equipment that Canada deployed at the border last month.
- Expanding personnel at the border under the same plan, with 10,000 frontline personnel stationed along the Canada-U.S. border. The exact number of existing officials remains unclear, but the Canada-U.S. border spans over 5,500 miles, making it the world’s longest.
- Strengthening efforts to combat the opioid crisis by establishing a new position for a fentanyl czar. Canada is committing 200 million Canadian dollars to intelligence-gathering on cartels and criminal drug gangs, as well as officially designating those groups as terrorist entities.
The Canadian retaliatory tariffs (view list here) will still go into effect immediately after the U.S. tariffs take effect. However, both countries have agreed to postpone implementation for 30 days as negotiations continue. Trudeau also emphasized that Canada remains prepared to take further trade actions if the U.S. does not reconsider its position.
Mexico’s Response
Mexican President Claudia Sheinbaum strongly rejected the tariffs, calling them unjustified and politically motivated. She also pushed back against the link between Mexico and fentanyl production, arguing that the U.S. should focus on its own drug crisis rather than penalizing its trading partners.
As part of the arrangement reached with the United States, Sheinbaum announced that she and President Donald Trump had agreed to a one-month pause on tariffs. In exchange, Mexico committed to several key actions, including:
- Deploying 10,000 members of the Mexican National Guard to the U.S.-Mexico border. This force, in addition to existing police, Army soldiers, and border patrols, will focus on curbing the flow of fentanyl and illegal migration into the United States.
- Establishing two high-level working groups with U.S. officials—one on security and another on trade. Sheinbaum stated that the agreement includes U.S. action to prevent the trafficking of high-powered weapons into Mexico, though President Trump made no public mention of such a commitment.
- Strengthening efforts against drug trafficking, particularly fentanyl, with a coordinated approach along the northern border.
In a post on X, Sheinbaum reiterated her commitment to deploying additional National Guard troops to combat drug trafficking, while also emphasizing the need for U.S. cooperation in limiting the flow of weapons into Mexico.
China’s Response
China’s Ministry of Commerce has strongly condemned the U.S. tariffs, labeling them as a violation of global trade rules and announcing plans to file an official complaint with the World Trade Organization (WTO). The ministry argues that the U.S. measures are unilateral and protectionist, undermining international trade norms.
In addition to legal action, China is preparing countermeasures against U.S. imports, though specific details have yet to be disclosed. The latest retaliatory measures include a 15% levy on coal and liquefied natural gas, as well as a 10% tariff on crude oil, agricultural machinery, and large-engine vehicles imported from the U.S. These tariffs will take effect on Monday, February 10.
Further escalating tensions, China’s State Administration for Market Regulation has launched an antitrust investigation into Google, signaling broader economic retaliation beyond tariffs. This move highlights China’s strategic response to the intensifying trade war, particularly in the technology sector, where both nations are vying for dominance.
Chinese officials have also rejected the U.S. justification that these tariffs are necessary to address fentanyl trafficking, asserting that China has strict anti-narcotics policies and has cooperated with the U.S. on drug enforcement. They accused Washington of using trade policy as a political tool rather than a legitimate security measure.
With both nations entrenching their positions, analysts warn that this escalating trade conflict could have significant global economic implications, potentially affecting GDP growth, inflation rates, and foreign investment stability. The situation remains fluid, with further retaliatory actions likely in the coming weeks.
Key Legal Implications:
- No Exclusion Process: The executive orders do not include a process for seeking exclusions from the tariffs, meaning all covered goods will be subject to these additional duties with no current relief mechanism.
- No Duty Drawback: Drawback cannot be claimed on these additional tariffs, removing a common avenue for companies to recover duties on re-exported goods.
- No De Minimis Entry: Shipments covered by the orders are not eligible for de minimis entry, meaning small-value shipments that might have previously entered duty-free will now be taxed.
- Risk of Further Escalation: The orders contain an anti-retaliation clause, allowing President Trump to increase or expand the tariffs if Canada, Mexico, or China retaliates against U.S. products. Given the countermeasures already announced, an escalation in trade tensions is highly likely.
Legal Basis & Potential Duration of the Tariffs
As the tariffs have been imposed under the International Emergency Economic Powers Act (IEEPA) and based on President Trump’s declaration of a national emergency related to immigration and drug trafficking, this means:
- The President is supposed to consult with Congress before declaring a national emergency.
- Congress has the authority to terminate the national emergency through a joint resolution, but given the political makeup of Congress, this is unlikely to pass.
- Under the National Emergencies Act (NEA), if Congress does not act, the tariffs will remain in place for at least one year unless President Trump terminates the emergency or extends it before the expiration period.
The above means that the additional tariffs are likely to remain in place indefinitely, barring a resolution between the U.S. and affected trading partners.
What Importers Should Do Next
- Assess shipment timing – If goods are already in transit, determine whether they qualify for the limited in-transit exception and secure the required certifications.
- Contact our office immediately if you intend to reject the goods and do not want us to file the entry or pay duties. Once the entry is filed, there will be no provisions for duty recovery.
- Review duty liability – Businesses should calculate the impact of these new tariffs on their landed costs, as there are currently no exclusion or drawback options available. Contact our Compliance team to provide you with an analysis of your imported goods and your duty exposure
- As you consider alternative sourcing, we can assist with pricing analysis and transit times from various origins. Be cautious with suppliers who may tranship the product to another country for export. Where the goods are made impacts the tariffs regardless of where they are shipped from. Stay informed on trade developments – Given the anti-retaliation provisions, further tariff increases remain a real possibility and can and will affect your export goods
M.E. Dey is here to help navigate these new tariff policies and will work diligently to keep you informed. Be sure to read our updates and check our website for posted details on understanding the various dates and details of imposed tariffs.