On Saturday, February 1, 2025, President Trump signed three Executive Orders (“EOs”) following through with the promised tariffs targeting products of Canada, Mexico and China (the “February 1 EOs”), and the White House issued a supporting informational fact sheet.
The United States will impose 25% tariffs on all products of Mexico and Canada (except Canadian energy products, which are subject only to a 10% tariff), as well as a 10% additional tariff on all products of China. The tariffs will apply to goods entered into the United States on or after 12:01 am (Eastern) on February 4, 2025.
Legal Authority and Basis for Actions
The underlying authority used to enact the tariffs is IEEPA, the International Emergency Powers Act (50 U.S.C. §1701 et seq.). Under IEEPA, in the event of a national emergency, the President can take immediate action to regulate any importation or exportation of property subject to U.S. jurisdiction. On January 20, 2025, President Trump declared a national emergency under the National Emergencies Act (50 U.S.C. §1601 et seq.) at the southern border (see Presidential Proclamation 10886). President Trump used this national emergency he declared on Day One of his second term as the basis on which to take immediate tariff action under IEEPA. In each of the February 1 EOs, the President expanded the scope of the national emergency declared in Proclamation 10886 to include the threat to “the safety and security of Americans, including the public health crisis of deaths due to the use of fentanyl and other illicit drugs,” and the failure of each target country to do more to combat drug trafficking organizations, drug/human traffickers, criminals and drugs. The February 1 EOs state that the target countries’ failure to act constitute “an unusual and extraordinary threat, which has its source in substantial part outside the United States, to the national security and foreign policy [and, in the Mexico EO and the China EO, the economy] of the United States.”
Although the United States Mexico Canada Agreement (“USMCA”) provides duty free treatment to Canadian and Mexican originating goods, the agreement has an exception stating that nothing in the USMCA will preclude a Party from applying measures it considers necessary to protect its own essential security interests. See USMCA Article 32.2 (Essential Security). In other words, the USMCA allows the Parties to potentially take tariff action if national security is at stake.
Scope of the Tariff Actions
Beginning at 12:01 am (Eastern) on February 4, 2025, the tariffs will apply as follows.
- 25% on all products of Canada, but 10% on Canadian “energy” products.
- As defined in an earlier EO by President Trump, the terms “energy” and “energy resources” mean “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). See Declaring a National Energy Emergency, EO 14156 (Jan. 20, 2025).
- 25% on all products of Mexico.
- 10% additional tariffs on all products of China.
- In-Transit Exception. The tariffs will not apply to goods entered on or after February 4, 2025, if the importer certifies to CBP that the goods 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 (Eastern) on February 1, 2025.
- Goods Covered. While the EOs do not expressly state as much, the tariffs will likely apply to products that are Canadian, Mexican or Chinese “origin” based on the U.S. customs substantial transformation analysis (similar to the origin determinations for assessing Section 301 tariffs). Thus, tariffs may apply regardless of whether the goods are eligible for duty-free treatment under the USMCA.
- No Exclusions. No exclusion process has been announced.
- No De Minimis. No product of Canada, Mexico, or China shall be eligible for de minimis duty-free entry under the Section 321 program (19 U.S.C. §1321).
- No Avoidance Under FTZ. If any product of Canada, Mexico or China is admitted to a foreign trade zone (“FTZ”) on or after 12:01 am (Eastern) on February 4, 2025, must be admitted as “privileged foreign status” (unless otherwise qualifying as “domestic status” under the customs regulations). Therefore, when later exiting the FTZ for entry into the U.S. commerce, such goods will be subject to the tariff rate applicable at the time admitted to the FTZ – i.e., the tariffs announced in the February 1 EOs.
- No Drawback. Duties collected because of the tariffs applicable to products of Canada, Mexico and China will not be eligible for drawback if exported.
- Penalties. Non-compliance with these tariffs may be subject to civil and criminal penalties under IEEPA, which carries a 10-year statute of limitations. See 50 U.S.C. §1705. These may apply in addition to customs penalties under, including, but not limited to, the 592 civil penalties.
What Comes Next?
The February 1 EOs will be followed by a formal notice in the Federal Register, which will reflect further details regarding the implementation of the tariffs. The Federal Register Notice is expected to include the formal modifications to the Harmonized Tariff Schedule of the United States (“HTSUS”) such that importers and their customs brokers can properly claim the tariffs at the time of entry. The HTSUS codes will be particularly salient in defining the Canadian “energy” products that will be subject to a 10% tariff. The notice may also include details on the in-transit duty exemption certification process.
The Department of Homeland Security, in consultation with other executive departments, will lead implementation, collection and enforcement of the tariffs and may issue regulations to support those efforts. DHS also is expected to issue reports to Congress on the necessity of the tariffs in light of the national security threat facing the United States and related matters as required by IEEPA. See 50 U.S.C. §1703.
The February 1 EOs previewed what the consequence of retaliatory tariffs by the target countries would be. The President threatened to increase or expand the scope of the tariffs. As the target countries each have announced their own retaliatory tariff scheme already (see below), more punitive actions by the Trump administration may be ahead.
Retaliatory Tariffs
- Canada
On February 2, the Government of Canada published a list of approx. CAD 30 billion of U.S. goods that will be subject to an additional 25% tariff also beginning Tuesday, February 4. Covered goods include certain foods and beverages, appliances, apparel and footwear, cosmetics, motorcycles, pulp and paper. The full list of specific goods according to their harmonized tariff schedule codes can be found here. The Government of Canada also has outlined a framework and process for how it will consider remission requests for the tariffs on U.S. products, i.e., an exclusion process. See Process for requesting remission of tariffs that apply to certain goods from the U.S. (last modified Feb. 2, 2025).
Further, after a mandatory 21-day public comment period, Canada may impose a 25% tariff on an additional CAD 125 million in U.S. imports, covering passenger vehicles and trucks (including electric vehicles), trucks and buses, recreational vehicles and boats, steel and aluminum products, aerospace products, and certain food products. See Canada’s response to U.S. tariffs on Canadian goods (last modified Feb. 2, 2025).
Some provincial governments in Canada have also announced retaliatory measures against the U.S. tariffs on Canadian goods, including removing U.S. alcohol from provincial outlets, reviewing and potentially canceling contracts with U.S. companies, prohibiting U.S. companies from bidding on new contracts, and doubling tolls for U.S. commercial vehicles.
- Mexico
On February 1, Mexican President Claudia Sheinbaum announced retaliatory tariff and non-tariff measures. Reporting indicates that Mexico has been preparing possible retaliatory tariffs on U.S. imports (dubbed “Plan B”), ranging from 5% to 20% on products including pork, cheese, fresh produce, and manufactured steel and aluminum, but that the auto industry would be spared, initially. Formal implementation of these tariffs and an effective date are pending.
- China
On February 2, China’s Ministry of Commerce announced that China would take corresponding countermeasures against the U.S. action, but specific actions are yet to be announced, except that China intends to file a case against the United States at the World Trade Organization.