Since February 2025, President Trump has taken various executive actions, including the latest Executive Order published on April 2, 2025, imposing a wide array of tariffs on imports into the United States. These tariffs vary greatly in terms of their underlying rationale, legal authority, implementation speed, and amount. Some target countries based on their practices, including their tariffs and “non-tariff barriers” affecting US products, but also non-trade issues, while others are industry specific. These tariffs are also notable in that they do not come with the typical flexibilities and exemptions. It is however notable that earlier announced broad-based US tariffs on Canadian and Mexican products was then limited to products not complying with the USMCA – the free trade agreement between the three countries. This signals that trade agreements and diplomatic negotiations still play a role in the new US tariff policy.
Contractual, Compliance, and Supply Chain Implications for Companies
Companies should start considering the short- and long-term impacts of the new US tariffs, which may be raised with respect to specific countries or specific industries in the future. Most immediately, companies may need to consider:
- whether their operations would be impacted by new tariffs
- who contractually bears the cost of new tariffs
- importer declarations’ compliance with import rules on country of origin and valuation
- whether goods that are only temporarily present in the US are considered imported (“entered”) goods on which tariffs are levied
In the medium and longer term, companies may need to consider restructuring their supply chains, including by investing in countries less likely to be targeted by tariffs. This may include considering:
- what processing and manufacturing steps will determine the “country of origin” of goods
- the potential contractual, certification, and regulatory impact of changing supply chain sourcing (e.g., sourcing from different suppliers, near-sourcing, multi-sourcing)
- the possibility of requesting exemptions from any retaliatory measures that might be adopted by US trading partners
Stricter Features of the Recent Tariffs
- No Exclusion Process: Unlike prior US tariffs, the recent tariffs (such as the ones targeting China, Canada, and Mexico) do not provide for a process to apply for exemptions or exclusions from the blanket tariffs. An exclusion process may be implemented at a later date.
- No Duty Drawback: Duty drawback permits manufacturers to receive a rebate on duties paid on any imported inputs when they use these inputs in exported products. Removing duty drawbacks means that exporters will no longer receive this rebate. As a result, unless otherwise permitted, compounded duties will have to be paid for supply chains where the final product is made up of inputs that cross into the United States in different processed forms multiple times (e.g., the automobile industry).
- No de minimis Exemption: The $800 “de minimis” exemption in Section 321 of the Trade Act will not be available. This change is awaiting the implementation of a system to collect tariffs on such imports. This will impact, for example, global companies and US startups alike that ship Chinese goods valued under $800 directly to consumers duty free.
Reactions from the United States’ Largest Trading Partners
The United States’ four largest trading partners—the European Union, Mexico, Canada, and China—have implemented or announced a variety of retaliatory responses, as well as (except for Mexico) formally initiating disputes in the World Trade Organization.
China has imposed retaliatory tariffs on US exports into China including coal, liquified natural gas, certain farming equipment and cars, and many agricultural exports, opening an antitrust investigation into US big tech companies, as well as sanctions and export restrictions on other US companies.
Canada implemented 25% tariffs on a swath of US goods on March 13 (one day after the US steel and aluminum tariffs went into effect). Canada has not been swayed by the USMCA carveout.
The EU has announced that it will retaliate against US steel and aluminum tariffs, and is likely to retaliate against any other US tariffs announced on April 2. There have also been other tit for tat tariff threats: when the EU threatened to impose a 50% tariff on whiskey imported from the US, President Trump countered with a threat of an additional 200% tariff on EU wine and spirits. In addition, the EU has indicated that it will invoke – for the first time – its Anti-Coercion Instrument, which originated in response to tariff threats by the first Trump Administration. This would allow the EU to impose a wide variety of economic sanctions affecting US companies and their EU subsidiaries, including on services, intellectual property rights and government procurement. How fast the EU might be able to use the instrument is, however, uncertain given the procedural requirements of the instrument.
Ultimately, as new tariff packages go into effect, retaliation from vital US trading partners will depend, in large part, on how the tariffs are actually implemented. Further, and as was the case with near-universal 25% tariffs on imports from Canada and Mexico in February 2025, President Trump may choose to delay implementation of certain tariffs after or in anticipation of diplomatic negotiations.
Please contact us if you have any questions on how to navigate the new trade landscape.
