U.S. Tariff Update

Tariffs on Canada and Mexico

On March 2, 2025, President Trump signed executive orders confirming that the 25% tariff on Canadian and Mexican imports (10% on Canadian energy and energy resources) would not be further paused and would take effect on March 4, 2025.

In response, Canadian Prime Minister Justin Trudeau announced that retaliatory tariffs on U.S. imports would take effect the same day. Meanwhile, Mexican President Claudia Sheinbaum stated that Mexico would wait to see if the U.S. follows through on its 25% tariff threat before deciding on a response. 

On March 5, White House Press Secretary Karoline Leavitt said, “We are going to give a one-month exemption on any autos coming through USMCA,” reading from a statement she attributed to President Trump. The exemption came after Trump held a call earlier Wednesday with representatives of Stellantis, Ford and General Motors at the request of the companies, which rely on North American production lines enshrined in the United States-Mexico-Canada Agreement (USMCA). She added, “Reciprocal tariffs will still go into effect on April 2, but at the request of the companies associated with USMCA the president is giving them an exemption for one month, so they are not at an economic disadvantage.”

Leavitt explained further that the reprieve was meant to give those companies time to shift investments to the U.S. Trump has repeatedly said he wants to boost the domestic auto manufacturing sector, using tariffs to move away from free trade routes. “He told (the Big Three companies) they should get on it, start investing, start moving, shift production here to the United States of America where they will pay no tariff. That’s the ultimate goal,” she said.

The duration and final rates of these tariffs remain uncertain, as they may depend on ongoing discussions with U.S. companies, negotiations with Canada and Mexico and any measures taken by Canada and Mexico to address concerns over fentanyl and other drugs, illegal immigration and other trade-related issues.

Tariff Increases on China

On March 3, 2025, President Trump signed an executive order raising tariffs on Chinese imports from 10% to 20%, citing China's insufficient enforcement against illicit synthetic opioids, including fentanyl.

China retaliated on March 4, 2025, imposing:

• An additional 15% tariff on chicken, wheat, corn and cotton
• An additional 10% tariff on sorghum, soybeans, pork, beef, seafood, fruits, vegetables and dairy (effective March 10, 2025)
• Sanctions on 10 U.S. companies (declared "non-reliable entities") and 15 U.S. companies subject to export controls

Previously, in response to the February 4, 2025, U.S. tariff increase on China, Beijing had imposed additional tariffs on coal (15%), liquefied natural gas (LNG) (15%), crude oil (10%), agricultural machinery (10%), large-displacement vehicles (10%) and pickup trucks (10%), effective February 10, 2025.

Steel and Aluminum Tariffs Reinstated

On February 10 and 11, 2025, President Trump issued two presidential proclamations restoring the 25% tariff on steel and raising aluminum tariffs to 25%, effective March 12, 2025. Exemptions for Canada, Mexico, the EU and Japan will end, likely prompting retaliatory tariffs from affected trading partners unless new agreements or quotas are negotiated.

Reciprocal Global Tariff Regime

On February 13, 2025, President Trump signed a Presidential Memorandum directing the U.S. Trade Representative (USTR) and the Department of Commerce to investigate unfair trade practices and prepare a report by April 1, 2025. The initiative would introduce a reciprocal tariff system, imposing duties on imports equivalent to the tariffs that foreign nations apply to U.S. exports.

The policy may consider not just tariff rates but also:

• Non-tariff barriers, including value-added taxes (VATs), subsidies and regulatory burdens
• Currency policies and exchange rates
• Other trade practices deemed unfair or discriminatory

Once the investigation concludes, implementation of reciprocal tariffs could begin, with nations like Brazil, Vietnam and Argentina expected to be significantly affected. Intense bilateral negotiations on tariff reductions and exemptions are anticipated.

Potential Future Tariffs

Further tariff actions under recent executive orders include:

• Tariffs on copper, timber and lumber (under Section 232 of the Trade Expansion Act of 1962), potentially up to 25%, impacting Canada, Mexico and Chile
• Tariffs against digital services taxes (DSTs) imposed on U.S. tech companies by the EU and other countries
• Strategic sector tariffs on pharmaceuticals and semiconductors, which could target China, Taiwan, India and the EU, potentially serving as an escalation measure in broader trade disputes

Navigating the Evolving U.S. Tariff Landscape

As U.S. tariff policies evolve, we are closely monitoring developments and can assist both U.S. and foreign businesses in navigating the complex tariff landscape. Please contact us if you have any questions concerning the material discussed in this client alert or otherwise in connection with assessing the impact of U.S. and foreign country tariffs on your business.

For more information, contact Robert Oberlies, Jackson Guo or Michael Meagher.