So the speculation is over.
And as much as I’d like to make this an opinion piece (and mine are quite strong on this topic), I’m going to stick to the facts.
- On February 1, 2025, the Trump Administration issued three executive orders directing the United States to impose new tariffs on imports from Canada, Mexico, and China.
- Tariffs of 25% were to have been levied against Mexican and Canadian imports, and a tariff of 10% is now in place on imports of products from China.
- In response, both Canada and Mexico announced that they were preparing similar tariffs on US goods.
- But as quickly as they were levied, the tariffs with Mexico and Canada have now been paused for 30 days after deals were struck with both countries. The tariff levied against China imports remains in effect.
- The remaining 10% tariff on all China products took effect at 12:01 am today, February 4, 2025.
- Overnight China announced that they were implementing a fusillade on countermeasures targeting American companies and imports of critical products. These retaliatory steps include additional tariffs on liquefied natural gas, coal, farm machinery, and other products. Also, restrictions on access to certain critical minerals used in the production of high-tech products were included.
- The tariff is an additional ad valorem “according to value” rate of duty. This means that the duty is calculated on the value of goods as listed on the Commercial invoice when presented for clearance with the office of U.S. Customs and Border Protection.
- The new China tariff will apply in addition to “any other duties, fees, exactions, and charges applicable to the covered imports.” Note that there are many categories of products as classified under HTS (Harmonized Tariff Schedule) codes that were already subject to tariffs. These were put into place during Trump’s 1st term and held over by the Biden Administration.
- The executive orders also suspend access to the Section 321 customs de minimis entry process, now subjecting shipments below US$800 (which are often e-commerce retail shipments) to the tariffs.
- The tariff on China goods will remain in effect indefinitely until the president decides to remove them. Further tariff increases – by the United States and the target countries – are possible over the next few weeks. The orders state that the president may raise the tariffs further if Canada, Mexico, and China retaliate.
Trump is using the International Emergency Economic Powers Act (IEEPA) as the basis for the tariff orders. Though no US president has ever used IEEPA to impose tariffs, policy advisors close to Trump have argued the law’s extensive authorities could allow the president to rapidly implement tariffs with less need for investigations or oversight. With few procedural limits around the use of IEEPA, Trump can escalate conflicts very suddenly, as he did in this case.
Trump also said he would be putting tariffs on oil and gas imports in the next several weeks as well as on computer chips, steel, and aluminum, but didn’t provide any details. In addition, he said he would be putting a “tariff wall” around pharmaceuticals to bring the industry back to the U.S. Little is known about what this actually means.
So far, Canadian Prime Minister Justin Trudeau has been the only leader to lay out details for what the country’s response could look like. Trudeau announced Saturday night that Canada would respond to Trump’s decision to enact a 25% tariff on Canadian exports to the U.S. by implementing a 25% tariff against $106 billion worth of U.S. goods. These measures were also paused after the Trump and Trudeau Administrations came to an agreement. A similar agreement was made with Mexico’s Sheinbaum Administration.
Mexico, Canada, and China together accounted for more than 40% of total U.S. imports last year. Tit-for-tat tariff announcements from their leaders could send prices soaring for consumers both in the U.S. and abroad. The tariffs could likely increase how much U.S. consumers and businesses pay for goods coming from Canada, Mexico, and China — including electronics, toys and games, shoes, fresh produce, lumber, and cars. Tariffs are paid by companies importing goods into the U.S., similar to a tax.