Update: On February 1, 2025, President Trump signed three executive orders imposing U.S. 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.

Just hours before the new tariffs on Canadian and Mexican imports went into effect, Trump delayed both until March 4. Although no tariffs have been announced in respect of other countries, Trump has also stated his intention for EU tariffs to follow. 

Key takeaways:

  • Effective February 4, the United States imposed an additional 10% tariff on all Chinese-origin imports, including products from Hong Kong. Although goods from Hong Kong have been marked as “made in China” since President Trump’s first term in office, this is the first time the United States has expanded the tariffs’ scope to include Hong Kong-origin products.
  • China retaliated with 15% tariffs on supercooled natural gas and coal from the United States and a 10% tariff on U.S.-origin crude oil. China’s retaliatory tariffs will go into effect on February 10.
  • The U.S. tariffs on Canadian- and Mexican-origin goods, as well as those countries’ counter-tariffs, have been delayed until March 4.
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China tariffs and response

Effective February 4, the United States imposed a 10% ad valorem additional tariff on all Chinese-origin imports entered for consumption, or withdrawn from warehouse for consumption, including products of Hong Kong. Until now, U.S. Customs and Border Protection’s (CBP) published guidance indicated that Hong Kong-origin goods should be marked as “made in China” but entered with Hong Kong as the country of origin. CBP’s guidance is expected to be updated to align with the recent tariff actions.

In response, China announced retaliatory measures, including:

  • 15% tariff on supercooled natural gas and coal from the United States
  • 10% tariffs on U.S.-origin crude oil
  • New export controls on tungsten, tellurium, bismuth, molybdenum and indium products

China’s new tariffs go into effect on February 10.

Canada and Mexico tariffs and response

Although tariffs on Canadian- and Mexican-origin goods were also originally scheduled to go into effect on February 4, Trump delayed those tariffs until March 4.

Once implemented, products of Canada 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% additional tariff. Energy or energy resources will be subject to a 10% additional tariff. “Energy or energy resources” is defined by President Trump’s National Energy Emergency Executive Order dated January 20, 2025 as “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.”[1] By reference to 30 U.S.C. § 1606 (a)(3), “critical minerals” is defined as any non-fuel mineral, element, substance, or material designated as critical by the Secretary of the Interior, who has published a comprehensive list, with further guidance available from the Department of Energy.
  • Mexico: 25% additional tariff on all imported products. No reduced tariff rate applies to energy or energy resources.

In response, Canada promised $155 billion in retaliatory tariffs:

  • Effective March 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.

In addition, Mexico is prepared to implement “Plan B,” which is expected to include tariffs and non-tariff measures. Mexico’s counter-tariffs will also be delayed until March. In the lead-up to Saturday’s tariff announcement, however, 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.

Products of Canada, China, and Mexico

Products of Canada, China, and Mexico will include goods manufactured, produced, grown, or substantially transformed in those countries, consistent with how a product’s country of origin is currently determined at the time of import into the United States.

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, 2025. The importer of record must certify to CBP that the imported goods meet the conditions in the savings clause. In accordance with the Federal Registry notices, the importer must declare new HTSUS heading 9903.01.14 in respect of Canadian goods and new HTSUS heading 9903.01.23 in respect of Chinese goods, as set out in the annexes to the notices.

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 HTSUS has been modified 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 in Chapter 99.
  • 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] Supply chains that are modeled around using this exemption to keep consumer prices down, a practice particularly prevalent in e-commerce businesses, will therefore be impacted by the tariffs.

Further tariff activity in relation to the EU

According to President Trump’s press notice on January 31, the United States will “absolutely” impose tariffs on the EU. The president made repeated calls in the last month for the EU to increase its U.S. oil and gas purchases to rebalance the current U.S. trade deficit but to no avail. Although it is currently unclear what the scope of the tariffs is likely to be, the EU has promised to respond robustly.

President Trump also has suggested global tariffs may be imposed on semi-conductors, oil, steel, aluminum, and copper.

Anticipated EU response

The EU would certainly respond with tariffs of its own on U.S. products. However, it is unlikely that this response would be immediate.

During Trump’s first term as president in 2018, his administration imposed tariffs of 25% on EU imports of steel and 10% on EU imports of aluminum. The EU retaliated with ad hoc tariffs on approximately $6 billion of U.S.-origin goods. However, the implementation of these tariffs took several months, as the EU commission was required by EU law to first take steps to comply with the World Trade Organization’s rules. While the EU now has a regulation that allows it to respond more rapidly to U.S. measures (the Anti-Coercion Instrument introduced in December 2023), its use is limited to situations in which U.S. tariffs are not punitive or do not aim to alter EU policy. As such, unconditional tariffs, such as those imposed against Canada, Mexico, and China, may fall outside the scope of the regulation, and thus take longer for the EU to respond to. That said, with an EU summit starting in Brussels on February 3 that includes discussion of the anticipated “trade war,” the EU is likely to want to demonstrate both agility and readiness in countering any forthcoming U.S. tariffs.

If the EU imposes retaliatory tariffs on U.S.-origin products, moving production would be unlikely to benefit U.S. businesses, as it could be considered an attempt to circumvent the tariffs, which would not be permitted under EU law. This was the case in 2018 when Harley Davidson tried to shift its production of motorbikes from the EU to Thailand, but still had to pay the 25% tariff.

Assessing the impact on supply chains

The new tariffs and countermeasures are likely to have a significant economic effect on both existing supply agreements and wider trading patterns. Depending on how contractual responsibility for additional tariffs falls between producers, traders, and end users, existing agreements may become uneconomic to perform, and sources of supply that were intended to satisfy existing contractual commitments may no longer be economically viable. Market participants will need to review the economic implications of the new measures on their relevant cross-border business, relationships, and contracts. 

An assessment of the impact of the new tariffs and countermeasures on existing contracts and a plan to mitigate their potential impact should involve:

  • For the relevant contract goods, reviewing the country of origin, valuation, and classification of imported goods. 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 that will become subject to additional duties.
  • Assessing which party is liable contractually to bear the cost of tariffs and any contractual right that may be invoked as a result of or in response to the tariffs. Such rights may include:
    • Exercising optionality around the source of supply and country of origin in a manner that is most cost effective.
    • Invoking rights to renegotiate commercial terms, e.g., under price review and price reopener clauses.
    • Exercising termination rights that may arise where performance of a contract becomes economically onerous, e.g., under “hardship” clauses, force majeure clauses, or “new and changed regulations” clauses.
  • Monitoring updates to the tariffs in each jurisdiction, including notably the specifics behind Mexico’s Plan B; the second list of goods Canada intends to tariff; whether any agreements can be reached that may further delay or cancel tariffs imposed on China, Mexico, or Canada; and whether the United States creates an exclusion process to exempt certain imports from the tariffs. By way of example of potential exemptions, the American Petroleum Institute has stated it will continue to work with the Trump administration to developing exclusions to the tariffs with the objective of protecting energy affordability for consumers. It may be that more detailed government guidance therefore develops an exclusion process for certain commodities.

It is likely that the energy, automobile, manufacturing, agriculture, steel, and aluminum sectors will be particularly affected by tariffs in the United States, China, Canada, and Mexico once these come into effect. In the energy sector, for example, the United States imports approximately four million barrels of crude oil per day from Canada and 500,000 barrels per day from Mexico. Prices on West Texas Intermediate crude oil increased nearly 4% shortly after the tariffs were announced, but whether the price spike will continue remains to be seen. Nearly all of Canada’s crude oil exports go to the United States, so Canadian suppliers may have few options in terms of alternative shipping markets.

Market participants will need to continue to assess and monitor which imports are caught by the tariffs as they come into effect to understand the extent to which supply chains can be modified to reduce the long-term impact of these tariffs. Operational limitations such as requirements by refineries to use specific fuel specifications may mean that the tariffs will cause permanent complications for supply chain economics if such imports do not become exempt. For example, refineries in the Midwest rely extensively on Canadian crude oil because it is relatively heavy compared to U.S. shale oil, and those refineries are configured to run on heavier forms of crude.


[1] Executive Order No. 14156 (January 20, 2025).

[2] “Domestic status” may be granted to goods that are or have been: “(1) The growth, product, or manufacture of the US 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. § 143.43(a).

[3] See id. § 143.41.

[4] See id. §§ 10.151-10.152.