On February 1, 2025, President Trump issued three Executive Orders directing the United States to impose new tariffs on imports from Mexico, Canada and China, each set to take effect on February 4, 2025. On February 3, 2025, however, Mexico and Canada each separately agreed to a deal to delay the tariffs for a month with the United States.
Background:
In his Executive Orders, President Trump declared an economic emergency under the International Emergency Economic Powers Act (the “IEEPA”), which is the legal basis for the tariff orders. While no U.S. President has ever used the IEEPA to impose tariffs, the Trump Administration argues that the IEEPA’s extensive authority allow President Trump to implement tariffs without the need for investigations or oversight by Congress.
In general, the tariffs would impose an additional 25% ad valorem rate of duty on imports from Canada and Mexico, in each case, to the extent the one month delays expire and/or are not extended and a 10% ad valorem rate on imports from China. Energy imported from Canada, however, including oil, natural gas and electricity, would be subject to a tariff at a lower 10% rate. Notably, President Trump’s Executive Orders suggest that tariff rate increases could be imposed to the extent Mexico, Canada or China take their own retaliatory countermeasures.
The Executive Orders also suspend access to a de minimis exception, which would have exempted products under $800 from being subject to the tariffs. While the kaleidoscope of economic implications of the tariffs and retalitatory countermeasures are uncertain at this juncture, it is clear that the Trump Administration is keenly focused on deploying tariffs at a signficantly higher rate than prior administrations over the last century.
Mexico tariffs (currently paused):
The tariffs on Mexico were paused for one month after Mexico committed to enhace its participation in immigration and migrant enfrorcement.
- Tariff rate. The additional tariffs for imports from Mexico would be 25% ad valorem. Unlike Canada, there would not be a reduced tariff rate for energy or energy resources imported from Mexico.
- Retaliatory countermeasures. Before the agreement reached on Feburary 3rd, Mexico was contemplating a series of potential retaliatory measures.
Canada tariffs:
The tariffs on Canada were paused for one month after Canada committed to launch a “strike force” to combat organized crime and fentanyl and commited to push ahead with its participation in a border reinforcement plan.
- Tariff rate. Prior to the agreement reached on February 3rd, the additional tariffs for imports from Canada would generally be 25% ad valorem, subject to the potential lower 10% rate for oil, natural gas and electricity, as noted above.
Weil Observation: Based on the Executive Orders, it is clear that certain industries will be relieved from the full brunt of a tariff should the one month pause lapse (in the case of energy being imported from Canada). While the Executive Orders are not a surgicial strike, there does appear to be flexibility for industries that the U.S. is particularly reliant on. While the current tariffs are on hold with respect to Mexico and Canada, it is possible that – should the one month delays lapse – certain industries, including agricultural products or automobile production from Mexico may be subject to a reduced tariff rate.
- Retaliatory countermeasures. Canada and its various provinces had already indicated that they plan to enact various countermeasures in response to these tariffs prior to the agreement reached on February 3rd. These retaliatory tariffs were expected to be 25% ad valorem and were expected to include U.S. wine, beer, and spirits, as well as fruits and fruit juices, clothing, sports equipment and household appliances. While Canada’s Prime Minister Justin Trudeau also noted that Canada was considering potential non-tariff measures, it appears that such retaliatory measures would only be imposed should the one month pause lapse.
China tariffs
- Tariff rate. The additional tariffs for imports from China will be 10% ad valorem. The tariffs appear to apply only to products classified as originating from the People’s Republic of China (i.e., there is no indication that the duties would apply to goods that originate in Hong Kong or Macau).
- Retaliatory countermeasures. China’s Ministry of Commerce said it would file a legal case against the United States at the World Trade Organization, in response to the tariffs on Chinese goods. In a statement, the ministry’s spokesperson vowed further “countermeasures” against the U.S. but did not specify what steps (if any) it would take.
Additionally, President Trump has recently raised tariff threats against other economies, including the European Union and BRICS member countries (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates). Beyond country-specific tariffs, Trump has also suggested the possibility of new global tariffs on semiconductors, pharmaceuticals, oil, steel, aluminum, and copper.
These actions illustrate President Trump’s willingness to use tariffs aggressively to pressure other countries over various policy disputes that extend beyond traditional trade policy concerns. Historically, the United States, including during President Trump’s first term, has typically reserved the use of tariffs for trade disputes. However, President Trump is now adopting an expansive approach, treating tariffs as a universal tool to address foreign policy disputes. Free trade agreement partners will not be immune from these actions, raising questions about the reliability of any trade commitments made by the United States, including those made under the United States-Mexico-Canada Agreement, especially if the one month pause lapses and the United States enforces its previously announced tariffs.