New Duties on Imports from Canada, Mexico and China – What Companies Need to Know – Update

By Orrick, Herrington & Sutcliffe LLP

Feb 4, 2025

The United States has announced, subject to reported suspensions with the two countries, 25% duties on most imports from Canada and Mexico, as well as 10% duties on most imports from China. These duties build on existing tariffs, which, for China, are substantial.
In general, the new duties are to apply to imports that occur beginning today, February 4. President Trump informally announced that the United States will suspend new tariffs on Mexican and Canadian imports for a month based on commitments by the President of Mexico and the Prime Minister of Canada.
The new duties are apparently to apply to imports of all or virtually all merchandise that originated in Canada, Mexico or China – regardless of the location from which the merchandise is imported.
The purported statutory authority for the new duties is novel – legislation that is normally invoked to impose economic sanctions. We expect parties to challenge the duties’ validity in court.
Canada, Mexico and China have suggested retaliating through duties on imports from the United States and other steps.

Announced Duties

The Trump administration is imposing, beyond existing tariff levels:

The new duties on imports from China will be in addition to substantial other duties (e.g., “Section 301” tariffs). Most imports from Canada and Mexico have been duty-free under the U.S.-Mexico-Canada Agreement. It seems difficult to reconcile the new tariffs with zero or lower tariff requirements of that and other trade agreements.

The “Section 321”de minimistariff exemption for low-value imports will not apply to imports covered by the new duties.

Implementation Timing

In general, the new duties on Chinese imports are to apply as of today, February 4, 2025. President Trump informally announced that the new duties on Mexican and Canadian imports are suspended for a month. Subject to an importer certification requirement, shipments that were in transit to the United States before February 1 will be exempt from the new duties.

Covered Merchandise

The new duties are to generally cover all merchandise that originated in Canada, Mexico or China. The new duties will not apply to imports of items that are exempt from IEEPA (see below), such as certain donations, personal luggage and informational materials.

Duties’ Legal Authority and Potential Vulnerability

The President is implementing the new duties through executive orders purportedly authorized by International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06 (IEEPA). Subject to conditions, IEEPA authorizes the President to regulate importation of any property in which any foreign country or a national thereof has an interest.

IEEPA authorities may be exercised only to “deal with an[] unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Here, the President has declared an emergency with respect to the U.S. southern and northern borders and the three countries’ alleged failure to prevent drug-related activity that affects the United States.

No President has purported to rely on IEEPA authority to impose duties on imports, and this action is likely to meet one or more court challenges in the near future. At the same time, in 1971, President Nixon declared a national emergency regarding adverse U.S. balance of payments circumstances and imposed a 10% supplemental duty on U.S. imports. In facing subsequent court challenges, the Nixon Administration purported to rely on the President’s authority to regulate imports during a national emergency under the Trading with the Enemy Act (TWEA). A U.S. court of appeals agreed that TWEA authorized the balance-of-payments tariffs.

Canadian, Chinese and Mexican Retaliatory Action

Canada, Mexico and China have announced retaliatory action.

On February 1, Canada announced 25% tariffs on imports on a variety of U.S. products, including alcohol, coffee, clothing, shoes, certain paper products, furniture and household appliances. It indicated that it might extend these tariffs to additional products, such as passenger vehicles, trucks and buses, steel and aluminum products, aerospace products, fruits and vegetables, and beef, pork and dairy products. Individual provinces, including Ontario and British Columbia, announced boycotts on American liquor. President Trump and Canadian Prime Minister Justin Trudeau informally announced that the United States and Canada have negotiated a pause in tariff implementation.
On February 1, Mexican President Claudia Sheinbaum announced on X that she has instructed her minister of economy to implement retaliatory tariff and non-tariff measures targeting U.S. products. President Trump and President Sheinbaum informally announced that the United States and Mexico have negotiated a pause in tariff implementation.
On February 2, the Chinese government issued a statement opposing the U.S. tariffs and pledging to challenge the U.S. duties at the World Trade Organization.