International Emergency Economic Powers Act (IEEPA) Tariffs
In our earlier alert, we discussed the Trump administration’s February 1, 2025 International Emergency Economic Powers Act (IEEPA)-based Executive Orders (EO), implementing new tariffs on China, Canada and Mexico, in reaction to what President Trump called fentanyl and immigration-related national emergencies. Each EO levied tariffs on goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time on February 4, 2025, with some exceptions. The implementation of the EOs with respect to Canada and Mexico was paused for a period of 30 days. The paused tariffs go into effect today.
In addition to the 25% ad valorem tariff on all goods from Canada and Mexico, on March 3, 2025, the Trump administration published another EO increasing the existing IEEPA-based tariffs on China from 10 to 20%. The EO did not specify when the additional tariffs would attach.
The First Tariffs on Canada and Mexico in over 30 Years
As of 12:01 a.m. EST on March 4, 2025, goods imported from Canada and Mexico will be subject to tariffs of 25% (or 10% for imports of certain Canadian energy products). This will be the first time in more than 30 years that most goods entering from Canada or Mexico will be subject to any tariffs. De minimis treatment will remain in effect for goods from Canada and Mexico as well as China until the Commerce Secretary notifies the President that “adequate systems are in place” to process and collect tariffs on formerly de minimis shipments.
On March 3, 2025, Customs and Border Protection issued a pair of notices providing entry instructions for importers:
- As related to goods imported from Mexico, items will enter under new HTSUS 9903.01.01, whereas exempt goods such as donations will enter under HTSUS 9903.01.02, and informational materials, also exempt, will enter under HTSUS 9903.01.03.
- As related to goods imported from Canada, goods subject to the 25% tariffs will enter under subheading 9903.01.10, whereas Canadian energy imports subject to a 10% duty will enter under subheading 9903.01.13. Exempt donations will enter under HTSUS 9903.01.11, whereas exempt informational materials will enter under HTSIS 9903.01.12.
Section 232 Tariffs
On March 12, 2025, a 25% ad valorem tariff will attach to some of the new aluminum and steel derivatives listed in an annex to President Trump’s proclamation expanding the Section 232 tariffs. Specifically, 19 new HTSUS subheadings for derivatives in HTSUS Chapter 76 and the 157 new subheadings in HTSUS Chapter 73 will face 25% tariffs under HTSUS subheadings 9903.85.07 and 9903.81.90.
The original proclamations, released February 10, 2025 specified that the new aluminum derivatives within Chapter 76 would be subject to tariffs on March 12, 2025. The effective date was not mentioned for steel. Tariffs on the new derivatives outside of Chapters 73 and 76 will take effect “upon notification of the Secretary of Commerce,” and will apply only to the derivatives’ aluminum or steel content, respectively.
Retaliatory Tariffs
Today, March 4, 2025, Canada announced that it will impose a 25% tariff on US imports impacting over $107 billion of US goods. The first tranche will be effective immediately, while the remainder will become effective in 21 days.
Similarly, China has announced a 15% tariff on imports of corn, cotton, chicken and wheat from the United States. A 10% tariff will be levied on imports of aquatic products, beef, dairy products, fruits, pork, sorghum, soybeans, and vegetables.
Mexico, as yet, has not made any announcements with regard to retaliatory tariffs.
The Future of Tariff Policy
It may be helpful to remember that the United States, in 2024, made up a quarter of the global gross domestic product (GDP) which was $110 trillion US dollars. By some estimates, the US and its allies account for three quarters of the global GDP. The word “allies” in the preceding sentence is key since it may be redefined in 2025.
Myriad explanations have been provided by the current administration as to the ubiquitous use of tariffs. Often, we are told that tariffs will generate revenue that could replace taxes. During the last fiscal year, the Internal Revenue Service collected $5.1 trillion in taxes. By comparison, the United States imported only $3.3 trillion worth of goods during the same period. In other words, to replace taxes, the average tariff on all US imports would need to reach 150%. If, on the other hand, the goal is to reshore manufacturing in the United States, then there will presumably be fewer imports to offset the taxes. It speaks to logic that we can either use tariffs to raise revenue or to reshore jobs, but not both.