This article was originally published on February 2, 2025. It has been updated to reflect changes from additional Presidential Actions. Four additional Executive Orders released on February 3, 2025. A subsequent Executive Order dated for February 5, 2025, released on February 7, 2025.
United States supply chains now have a degree of clarity following a flurry of verbal threats about new tariffs. The White House issued a Fact Sheet and three Executive Orders on February 1, 2025, following wide speculation about President Trump imposing new tariffs on Mexico, Canada, and China. The new Fact Sheet describes the Administration policy for each of the top three trading partners. The first Executive Order published on February 1, 2025, only addresses trade with Canada. Subsequent Executive Orders published early on February 3, 2025, address trade with China and Mexico. Two additional Executive Orders released late on February 3, 2025, institute a pause on the implementation of tariffs on products imported from Canada and Mexico. Another Executive Order released on February 7, 2025, temporarily reinstates duty-free de minimis treatment on low-value shipments for goods imported from China.
The key provisions of the President’s actions as known or expected to date include:
- All products imported from Canada and Mexico will bear a 25% duty for entry into the United States. Energy and energy resources from Canada will bear a lower 10% duty. All products imported from China will bear an additional 10% duty for entry into the United States.
- Application of the duties on products imported from China is expected to begin on February 4, 2025. Goods in transit prior to February 1, 2025, are excluded from the new tariffs together with a few other operational exceptions. Application of the duties on all products imported from Canada and Mexico is paused until March 4, 2025. A reservation to implement immediate tariffs exists.
- Duty-free de minimis treatment of low-value shipments will be unavailable for goods covered by these duties. Cessation of the duty-free de minimis treatment for goods imported from China is paused indefinitely until Commerce establishes systems to collect tariff revenue.
- No exclusion process will be available for domestic importers.
- No drawback will be available for duties paid under these actions.
- Any retaliation from our trading partners will be met with higher duty rates or expanded scope at the President’s discretion.
President Trump declared a public health crisis and national emergency arising from the flow of illegal drugs into the United States in addition to his previously declared declaration of national emergency arising from illegal immigration. The legal basis cited for these actions was the International Emergency Economic Powers Act (“IEEPA”).
How Supply Chains Attempted to Prepare – These are the first formal written announcements of the President’s intentions following the America First Trade Policy memorandum signed on Inauguration Day. Our team has been advising clients on this departure from 30 years of North American trade since the President’s comments during Thanksgiving Week of 2024. See our “Trump Tariffs - 2025 Expectations, Facts, and Options” bulletin here:
Trump Tariffs – 2025 Expectations, Facts, and Options
China Supply Chain Impact – Domestic importers have responded to higher duties on imports from China since the Trump ’45 Administration. The Biden Administration continued and even expanded those increased tariffs. Our recent publications on those developments are available here:
China Tariffs – New Section 301 Customs Duties Effective September 27, 2024
Action Items for New China Tariffs
Immediate Next Steps for New China Tariffs
Some importers with sourcing relationships in China have already weathered near- and long-term cost negotiations due to landed cost volatility. Many importers also began strategic procurement tours throughout Southeast Asia and elsewhere beginning in 2018. Prior sole-source relationships in China for some supply chains grew into global relationships with many suppliers and manufacturers. Supplier diversity was understood as an effective means to mitigating tariff, logistics, and other geopolitical risk challenges. North America was a beneficiary of those “friendshore” and “nearshore” trends until now.
Canada and Mexico Supply Chain Impact – The USMCA (formerly NAFTA) was an achievement of the Trump ’45 Administration that maintained continental free trade. The new agreement was ratified by each country’s legislature to continue the three decades of investment and trade growth. USMCA was set for review next year in 2026. President Trump’s Trade Policy memorandum called for internal United States review of relevant USMCA trade factors followed by a report of findings in April 2025. Now, many of those foundational understandings between our first and second greatest trading partners are called into question. Canada and Mexico have forecasted for some time that they will meet any tariff action with proportionate tariff increases on United States items entering their commerce. Canada met President Trump’s February 1 announcement with a plan to scale 25% tariffs on United States imports into the country. Mexico announced that it would execute on a “Plan B” retaliation strategy. China also implemented its own set of retaliatory tariffs on United States origin items falling within key sectors. Details are forthcoming.
Business and Legal Strategy Going Forward – We are counseling clients through immediate near-term strategies: (1) contingency planning with foreign suppliers, (2) updating as necessary written procurement and sale terms, (3) reviewing current terms for the availability of flexibility in performance obligations, (4) confirming correctness of tariff classification and duty applicability, and (5) identifying any commercial risk where committed production or sales will be loss-generating or are inherently inelastic. Long-term planning necessarily involves examining production and commercial relationships for adjustment.
The greatest challenge at this stage is how the one-time safe harbor for price volatility, North America, is now on the high-risk side of the geopolitical spectrum alongside China. The toolbox of options of course includes increasing supplier diversity by sourcing alternate producers for finished goods and raw materials. Domestic sourcing may be the best option even if it is presently unavailable for many supply chains. Retaliation by our trading partners may also necessitate exploring customer diversity options on a global basis.
One simple truth is that domestic United States importers and industry appear to be entering a volatile and higher cost operating environment. There remain plenty of known unknowns right now such as the duration of these actions, the degree and nature of foreign retaliation, whether the President will escalate these rates, and whether any legal challenges will be successful.
Jonathan Todd is Vice Chair of the Transportation & Logistics Practice Group at Benesch Law. He can be reached at 216.363.4658 or jtodd@beneschlaw.com.
Vanessa Gomez is an Associate in the Transportation & Logistics Practice Group at Benesch Law. She can be reached at 216.363.4482 or vgomez@beneschlaw.com.