Update: After a February 3 call with Mexico’s president, President Trump announced on Truth Social that the tariffs on Mexican goods will be paused for one month. He is also scheduled to speak with Prime Minister Trudeau, which could result in the Canadian tariffs being paused. More details to come.

Key takeaways

  • U.S. imposes tariffs on Canada, China, and Mexico, triggering immediate retaliation threats.
  • New tariffs apply from February 4, covering key imports with varying rates by country.
  • Canada, China, and Mexico announce countermeasures, including tariffs and non-tariff barriers.

On February 1, President Trump signed three executive orders imposing tariffs on imports from Canada, China, and Mexico. These new tariffs are in addition to any already-existing duties and tariffs, including antidumping and countervailing duties, Section 232 tariffs on steel and aluminum imports, and Section 301 tariffs on Chinese-origin goods.

Ad valorem tariff rates, effective February 4

Effective at 12:01 a.m. (ET) on February 4, products of Canada, China, and Mexico entered for consumption, or withdrawn from warehouse for consumption, will be subject to the following ad valorem tariffs:

  • Canada: Except for “energy or energy resources,” all products of Canada will be subject to a 25% tariff. Energy or energy resources will be subject to a 10% tariff. “Energy or energy resources” means “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. § 1606 (a)(3).”[1]
  • China: 10% additional tariff.
  • Mexico: 25% tariff.

The executive orders do not define “products of” Canada, China, or Mexico. The Secretary of Homeland Security is expected to define these terms in a Federal Register notice published this week. Typically, however, the phrase would be interpreted to mean Canadian-, Chinese-, or Mexican-origin goods.

Savings clause

The new tariffs do not apply to goods entered for consumption, or withdrawn from warehouse for consumption, that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12.01 am ET on February 1. The importer of record must certify to U.S. Customs and Border Protection (CBP) that the imported goods meet the conditions in the savings clause. The forthcoming Federal Register notice will provide further details on the specific requirements for the certification.

Providing a false certification to CBP can result in penalties under 19 U.S.C. § 1592 and create civil exposure under the False Claims Act.

USMCA duty-free treatment

The executive orders do not impact products’ duty-free treatment under the United States-Mexico-Canada Agreement (USMCA). Thus, originating products will still be entered without paying general duties, even though the new tariffs will apply.

Additional provisions

Other key provisions include:

  • Changes to the Harmonized Tariff Schedule of the United States (HTSUS): The forthcoming Federal Register notice will modify the HTSUS to implement these tariffs. For goods subject to the tariffs, importers will declare the products’ normal HTSUS classification, as well as a tariff-related classification.
  • Goods admitted to Foreign Trade Zones (FTZs): Any goods eligible for “domestic status”[2] that are also subject to these tariffs must be admitted to an FTZ under “privileged foreign status.”[3] When these goods are entered for consumption, the new tariffs will still apply, even if President Trump has since withdrawn the tariffs.
  • Drawback ineligibility: These tariffs are not eligible for drawback.
  • No de minimis exemption: The goods covered by the executive orders will not be eligible for the duty-free de minimis exemption, which typically applies to goods imported by one person on one day having a fair retail value not exceeding $800.[4]

Response from Canada, China, and Mexico

Despite President Trump signaling that any retaliation from Canada, China, or Mexico could result in further action, all three countries have promised to retaliate.

Canadian Prime Minister Trudeau held a news conference on February 1, promising $155 billion in retaliatory tariffs:

  • Effective February 4, Canada will impose a 25% ad valorem tariff on U.S.-origin goods classified under 1,256 tariff lines falling into 217 tariff headings. The tariff headings cover a wide variety of items, including agricultural products, machinery, construction materials, household appliances, automobile parts, cosmetics, clothing, shoes, household items, furniture, chemical products, alcoholic beverages, tobacco products, sports equipment, lumber, and plastic products.
  • After a 21-day public comment period, Canada intends to impose tariffs on another $125 billion in U.S.-origin products. That list of products will be published in the coming days and is expected to include passenger vehicles and trucks (including electric vehicles), steel and aluminum products, additional fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats.

Canada is also considering a number of non-tariff measures. To date:

  • British Columbia’s premier directed provincial liquor stores to stop buying and selling American liquor from “red states.” The provincial government and Crown corporations have also been directed to buy Canadian goods and services first.
  • Nova Scotia announced it is doubling the cost of tolls at the Cobequid Pass for commercial vehicles entering from the United States and removing all U.S. alcohol from its provincial liquor stores. The provincial government also promised to cancel contracts with U.S. firms and limit American companies’ access to provincial procurement.
  • Ontario is also taking American alcohol products off the shelves in its government-run liquor stores. Wholesale sales of American alcohol products to restaurants, bars, and retailers will also be suspended by February 4.

China’s Ministry of Commerce promised to initiate a dispute resolution proceeding before the World Trade Organization (WTO). China took a similar approach when President Trump first imposed Section 301 tariffs in 2018. Although the WTO panel reviewing those tariffs sided with China, the United States appealed the decision to the Appellate Body. The appeal remains pending because the WTO’s Appellate Body currently does not have any appointed members to hear the case. The United States continues to block appointments to the Appellate Body.

Mexican President Sheinbaum directed the Ministry of Economy to implement Mexico’s “Plan B,” which she said has been in the works since President Trump threatened tariffs on Mexico. Although the specifics have not yet been announced, Plan B is expected to include tariffs and non-tariff measures. In the lead-up to Saturday’s tariff announcement, reports indicated Mexico was considering 5% to 20% tariffs on U.S.-origin pork products, cheese, certain agricultural products, bourbon, and manufactured steel and aluminum. Initially, Plan B is not expected to impact the auto industry.

Next steps

To assess the impact of these new tariffs and countermeasures and mitigate the potential impact, companies should:

  • Review the country of origin, valuation, and classification of their imports. For imports into the United States, country of origin and valuation will be most important for across-the-board tariffs. Classification will also be critical for imports into Canada given the published list of tariff codes subject to additional duties.
  • Assess existing contractual provisions to determine which party bears the cost of these tariffs, whether the force majeure or termination provisions can be invoked based on these new government orders, and how surcharges can be used to mitigate the unexpected expenses.
  • Monitor updates in each jurisdiction, including whether the United States establishes an exclusion process to exempt certain imports from the tariffs, the specifics behind Mexico’s Plan B, and the second list of goods Canada intends to impose tariffs on later this month.

[1] Exec. Order No. 14156 (Jan 20, 2025).

[2] “Domestic status” may be granted to goods that are: “(1) The growth, product, or manufacture of the U.S. on which all internal-revenue taxes, if applicable, have been paid; (2) Previously imported and on which duty and tax has been paid; or (3) Previously entered free of duty and tax.” 19 C.F.R. § 146.43(a).

[3] See id. § 146.41.

[4] See id. §§ 10.151-10.152.