Key Takeaways on New U.S. Tariffs on Canada, China and Mexico Imports

On Feb, 1, 2025, the White House published new executive orders imposing tariffs on goods imported from Canada, Mexico and China citing national security threats of illegal immigration and drugs and statutory authority under the International Emergency Economic Powers Act (IEEPA). 

Specifically, the executive orders impose a 10 percent tariff on imports from China and a 25 percent tariff on imports from Mexico and Canada, excluding Canadian energy imports, which will carry a 10 percent tariff. Below are initial highlights from the orders and from the Federal Register notices published shortly after the orders:

• The effective date and time of the tariff actions is on or after 12:01 a.m. Eastern time on Feb. 4, 2025, except for tariffs on Mexico which have been deferred for one month
• The IEEPA tariffs appear to cover every imported commodity from Canada, Mexico, and China, with the exception of limited statutory exclusions on personal communications, donated articles, informational materials (e.g., certain publications, films, and artwork), and transactions ordinarily incident to travel
• The executive orders are silent on whether there will be a product exclusion process, akin to the exclusions for Section 301 and Section 232 tariffs
• The executive orders include a retaliation clause that should Canada/Mexico/China retaliate against the U.S. in response (i.e. tariffs on U.S. exports), then the “President may increase or expand in scope the duties imposed under this Executive Order to ensure the efficacy of this action.” 
• Drawback (refund) claims and the $800 de minimis exclusion are not available under these IEEPA tariffs

In a prior post on potential tariffs, we had noted the possible use of IEEPA to impose immediate tariffs. No president has used IEEPA to impose tariffs, although President Richard Nixon used a predecessor statute to IEEPA to impose a 10 percent tariff on all imports in 1971.

What does this all mean, and what is next for importers and stakeholders affected by these tariffs? We expect to learn more details with the publication of Federal Register notices this week, but in the meantime, below are a few issues and questions to keep in mind:

• What exactly will be the U.S. response to the announcement of retaliatory measures? Canada has ordered tariffs of 25 percent on $155 billion worth of American goods. These tariffs target products such as orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper. Mexico initially announced plans to impose retaliatory measures, but since that time, Mexico has agreed to take action at the border, resulting in a one-month deferral of the application of IEEPA duties against Mexico. 
• IEEPA tariffs on China are 10 percent, but these are on top of existing Section 301 tariffs that are 25 percent on most goods from China. Interestingly, there will now be a smaller group of products from China that are subject to lower Section 301 duties (List 4A, 7.5 percent) or even no Section 301 duties, such that certain imports from China may actually result in lower duties than imports from Canada/Mexico.
• For China, the Federal Register is silent on the applicable rule of origin, although it is anticipated that “substantial transformation” will be the applicable rule.  For Canada, there will actually be two applicable rules of origin for IEEPA tariffs – USMCA marking rules of origin and the “substantial transformation” legal standard. This will have particularly interesting implications for importers of goods produced in Canada from Chinese-origin materials. Indeed, an FAQ released by the White House states that IEEPA tariffs will be in addition to any other tariffs imposed under other authorities.