In recent weeks, the global trade landscape has been significantly impacted by U.S. President Donald Trump’s “Liberation Day” tariffs, which have targeted numerous countries, including those in the Association of Southeast Asian Nations (ASEAN) and China. Each country has reacted differently based on its economic relationship with the U.S., local industry concerns, and geopolitical considerations.
 
In this tenth day digest following Liberation Day, we summarise key developments and positions adopted by ASEAN members and China thus far, as two of the biggest trading partners of the U.S.

Infographic illustrating generally Liberation Day tariffs and 90-day reprieve, product-specific and existing tariffs excepted. For more information, please refer to Reed Smith’s Trump 2.0 tariff tracker.

*Infographic illustrating generally Liberation Day tariffs and 90-day reprieve, product-specific and existing tariffs excepted. For more information, please refer to Reed Smith’s Trump 2.0 tariff tracker.

ASEAN

ASEAN, as a bloc, is currently broadly united in its diplomatic approach, rather than opting for a more aggressive retaliatory stance. In a joint statement on 10 April 2025, ASEAN ministers emphasized the importance of “frank and constructive dialogue” with the U.S. to address trade concerns through an enhanced forward-looking ASEAN-U.S. economic cooperation framework.

A 90-day reprieve was announced on 9 April 2025 which provides for all U.S. trading partners to drop to the baseline 10% tariffs, with the notable exception of China.

Prior to this 90-day reprieve, ASEAN members’ responses are summarised below:

  • Cambodia (49%): Faced with one of the highest tariffs among ASEAN nations prior to the 90-day reprieve, Cambodia is actively seeking to negotiate tariff exemptions and to diversify its export markets to minimize risks associated with U.S. trade policies. In 2024, U.S. exports accounted for around 38% of the country’s total exports, according to Cambodian trade statistics. As of 10 April 2025, the U.S. has agreed to Cambodia’s proposal to begin negotiations on tariffs.
  • Laos (48%): Focused on solidarity within the ASEAN framework to address the challenges posed by the tariffs. Laos is likewise evaluating the tariffs’ impact on trade agreements and looking at diversifying its export markets.
  • Vietnam (46%): Like other ASEAN members, Vietnam has engaged in diplomatic efforts rather than retaliation. The U.S. is the biggest export market for Vietnam, and the two countries had on 10 April 2025 opened discussions on a reciprocal trade agreement.
  • Myanmar (44%): Appears to be more cautious likely due to ongoing economic and political challenges. The government has called for collaboration within ASEAN to navigate the tariffs’ implications.
  • Thailand (36%): Thailand has yet to announce specific retaliatory measures and is presently part of ASEAN’s collective diplomatic approach. Thailand is working to stabilize the key affected sectors, such as automotive and agriculture, through domestic support and regional trade agreements, particularly within ASEAN. Prime Minister Paetongtarn Shinawatra on 8 April 2025 said a meeting between Thailand and the US Trade Representative had been confirmed.
  • Indonesia (32%): Indonesia has likewise not announced retaliatory measures but likely to engage in diplomatic efforts alongside other ASEAN members. On 8 April 2025, Indonesia announced concessions, such as lowering import taxes on electronics and steel, and is preparing to send a high-level delegation to the U.S. on 17 April 2025 to negotiate.
  • Brunei (24%): Brunei largely maintained a diplomatic stance, emphasizing the need for multilateral trade agreements. On 3 April 2025, the Ministry of Finance and Economy of Brunei announced that it would engage with its U.S. counterparts to seek clarification on the new tariff regime and continue supporting affected exporters.
  • Malaysia (24%): Reacted decisively by engaging in bilateral and multilateral talks aimed at reducing the impact of the tariffs on its economy. Malaysia hosted the Special ASEAN Economic Ministers’ Meeting on 10 April 2025 where the ASEAN countries made the decision not to retaliate. The government has assessed industries vulnerable to the tariffs, specifically electronics and palm oil, and exploring diversification of trade arrangements.
  • Philippines (17%): Philippines is exploring opportunities and pursuing free trade agreements with other countries. As of 8 April 2025, the government has sought a united front with other ASEAN members to respond to the U.S.
  • Singapore (10%): While subject to baseline tariff of 10%, the lowest among ASEAN countries, Singapore observed that it actually runs a trade deficit with the U.S. Singapore’s present position is that it will not impose retaliatory tariffs, but urge diplomacy with the U.S. together with other ASEAN countries.

China

China expressed grave concern and has taken a more assertive stance against the U.S. tariffs, reflecting differing economic, political and even cultural dynamics. While the U.S. has increased tariffs on Chinese imports by up to 125%, China has imposed additional retaliatory tariffs of 125% on U.S. goods. Various other measures have been put forth, including complaints filed with the World Trade Organisation (WTO), implementing export controls on certain heavy rare earths, adding certain U.S. entities on the Export Control List and the Unreliable Entity List, and suspending the qualification of some U.S. entities to export soybeans to China. China has expressed its willingness to engage in talks with the U.S., but any such talks must be based on mutual respect and equality.

The Hong Kong government expressed its strong disapproval and dismay regarding the U.S. tariffs. In response to these tariffs, the government introduced various enhanced measures aimed at supporting the export trade in Hong Kong and assisting enterprises in accelerating their expansion into new markets to navigate the current circumstances. Furthermore, the Hong Kong Government asserted that it will continue to evaluate the measures imposed by the U.S., which it views as inconsistent with fair trade principles, and intends to take appropriate actions to defend Hong Kong’s interests, including filing a complaint in accordance with the WTO dispute settlement mechanism.

What lies ahead?

Against this varied backdrop, businesses operating in Asia would be wise to re-examine their supply chain and customer base. Of immediate relevance would be questions raised on:

  • Origins: Determining the Country of Origin (COO) is a fundamental step in customs compliance and along with other factors will determine the applicable tariff to be applied to imported products. How and to what extent are products subject to the new U.S. tariffs? This can be a particularly complex analysis in instances where product components come from various origin countries of differing tariffs and assembled in a jurisdiction faced with yet a different tariff. It is likely that under current circumstances, U.S. Custom and Border Protection (CBP) will be undertaking a deeper examination of COO declarations for products imported into the U.S. Determining the COO early and basing that determination on factual information will help ensure that the product remains compliant with CBP import rules and regulations.
  • Pricing: We are increasingly seeing commodities counterparties dealing with the implications of the latest round of tariffs, in particular those levied by the U.S. and China on each other’s commodities. Sale and purchase agreements for commodities often contain price adjustment clauses that give parties the right to renegotiate pricing terms upon the occurrence of certain events. The imposition of tariffs, duties and other events (geopolitical or otherwise) which may materially affect commodity pricing indexes are often including as trigger events to price adjustment clauses. Counterparties must then seek to negotiate alternative pricing that is feasible for both parties or face termination of their agreements. As a result of recent tariffs and rather unsurprisingly, we are seeing that the spot market for commodities unaffected by the U.S. and Chinese tariffs are trading at a premium, as parties look for alternatives to commodities originating in the U.S. for delivery into China, and vice versa.
  • Materially Adverse? Force Majeure?: Can a transaction, whether an investment or acquisition, continue as planned or will it risk being impacted by so-called “material adverse event” and “material adverse change” clauses? Additionally, can such events constitute sufficiently adverse conditions to justify the exit from or dissolution of a joint venture? Contracting parties are also increasingly concerned (and cautious) on the operation of the doctrines of “frustration” and “force majeure” on existing contracts. Generally speaking, increase in pricing (or costs) may not be sufficient to, in itself, trigger the operation of these doctrines in seeking to terminate or avoid what may have become an unprofitable contract.

What is increasingly clear today is the urgent need to understand, confirm, and evaluate the commercial, legal, and other implications for existing arrangements. In the short to mid-term, businesses in affected countries would undoubtedly be considering new, alternative or hedging strategies for trade diversification, while also seeking to enhance domestic and regional collaboration and integration. The situation is still dynamic, with ongoing negotiations and the possibility of additional changes in trade policies that could further influence global trade relations.

Trump 2.0 tariff tracker

In addition to the post above, don’t miss our Trump 2.0 tariff tracker which tracks the latest threatened and implemented U.S. tariffs, as well as counter-tariffs from other countries around the world.

Access the tracker.

With President Donald Trump’s return to the White House, the legal environment has been ever-changing. On Wednesday, April 9th, we gathered a group of regulatory attorneys from across Reed Smith’s global platform to provide a 90-minute CLE that outlines the key changes that have occurred during Trump’s first 100 days, as well as highlights practical steps companies should take to minimize risks associated with these latest developments. In their latest alert, our lawyers recap the top takeaways from the event, which touch on the following topics:

  • Pause on FCPA Enforcement & UK Bribery Act
  • State AG Consumer Protection Enforcement Trends 
  • DEI and Government Contracts
  • False Claims Act Enforcement Trends
  • Trump’s Executive Orders on Harassment and Focus on Immigration Enforcement
  • State of Sanctions Enforcement
  • Tariffs & Counter-Tariffs
  • Shutdown of the Consumer Financial Protection Bureau
  • SEC & CFTC Priorities
  • Antitrust and AI: Algorithmic Collusion

Updated: April 3, 2025 at 3:30 p.m. ET to reflect the specific exemptions outlined in the unofficial version of the Harmonized Tariff Schedule of the United States (HTSUS) modifications that will implement the reciprocal tariffs.

On April 2, President Trump signed a pair of executive orders as part of a “Liberation Day” ceremony in the White House Rose Garden. The first executive order implements Trump’s reciprocal tariff plan. The second executive order ends the duty-free de minimis exemption for Chinese-origin goods.

Reciprocal tariffs

Effective at 12:01 a.m. (ET) on April 5, 2025, the United States will impose a 10% ad valorem baseline tariff on imports of all foreign-origin goods. This baseline tariff is in addition to any other applicable duties or tariffs.

Effective at 12:01 a.m. (ET) on April 9, 2025, the United States will impose country-specific tariff rates on imports from certain trading partners, which will apply even if goods are imported under a free trade agreement. These rates already include the 10% baseline tariff, so these countries may be able to reduce their tariff rate (e.g., by removing monetary and non-monetary trade barriers, Algeria may be able to reduce its 30% ad valorem tariff rate down to the 10% baseline rate). All other duties and tariffs will also still apply. Thus, imports from China (including Hong Kong and Macau) will also be subject to the existing 20% ad valorem tariffs imposed earlier this year, as well as the Section 301 tariffs.

The country-specific rates included in an annex to the executive order are:

CountryAd Valorem Tariff Rate
Algeria30%
Angola32%
Bangladesh37%
Bosnia and Herzegovina36%
Botswana38%
Brunei24%
Cambodia49%
Cameroon12%
Chad13%
China34%
Cote d’Ivoire21%
Democratic Republic of Congo11%
Equatorial Guinea13%
European Union20%
Falkland Islands42%
Fiji32%
Guyana38%
India27%
Indonesia32%
Iraq39%
Israel17%
Japan24%
Jordan20%
Kazakhstan27%
Laos48%
Lesotho50%
Libya31%
Liechtenstein37%
Madagascar47%
Malaysia24%
Mauritius40%
Moldova31%
Mozambique16%
Myanmar (Burma)45%
Namibia21%
Nauru30%
Nicaragua19%
Nigeria14%
North Macedonia33%
Norway16%
Pakistan30%
Philippines18%
South Africa31%
South Korea26%
Sri Lanka44%
Switzerland32%
Taiwan32%
Thailand37%
Tunisia28%
Venezuela15%
Vietnam46%
Zambia17%
Zimbabwe18%

From 12:01 a.m. (ET) on April 5 to 12:00 a.m. (ET) on April 9, imports from these countries will be subject to the 10% baseline reciprocal tariff instead of the country-specific rate.

The Harmonized Tariff Schedule of the United States will be modified to reflect these new tariffs.

If at least 20% of an imported item’s value is U.S. originating, the ad valorem reciprocal tariff will only apply to the non-U.S. content. In this context, “U.S. content” means the value of an article attributable to the components produced entirely, or substantially transformed in, the United States. U.S. Customs and Border Protection will establish a process to collect and verify claims related to the value of an item’s U.S. content.

Exceptions

The new reciprocal tariffs will not apply in the following circumstances:

  • Goods loaded onto a vessel at the port of loading and in transit on the final mode of transport before the reciprocal tariffs take effect will not be subject to the baseline or country-specific ad valorem tariffs (as applicable).
  • Articles and derivatives of steel and aluminum that are already subject to Section 232 tariffs are excluded.
  • Automobile and automobile parts that are subject to Section 232 tariffs at the time of import are excluded.
  • Additional articles listed in Annex II to the executive order, including copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products, will be excluded.
  • Imports from Belarus, Cuba, North Korea, and Russia (known as Column Two countries) will continue to be subject to their separate duty rates only.
  • Future goods subject to Section 232 tariffs will be excluded.
  • Canadian- and Mexican-origin goods will not be subject to the reciprocal tariffs as long as Trump’s existing executive orders remain in place. Under those executive orders, the current exemption for goods that qualify as originating under the United States-Mexico-Canada Agreement (USMCA) will also continue.

If the existing executive orders related to Canadian- and Mexican-origin imports are terminated or suspended, goods from both countries will be subject to 12% ad valorem reciprocal tariffs. Those tariffs will not apply to items that qualify as originating under the USMCA, energy or energy resources, potash, or any items eligible for duty-free treatment under the USMCA that are a part or component of an article substantially finished in the United States.

End of the de minimis exemption for Chinese-origin goods

Effective at 12:01 a.m. (ET) on May 2, 2025, the United States will end the duty-free de minimis exemption for imports of Chinese-origin goods (including goods originating in Hong Kong). The de minimis exemption typically applies to goods imported by one person on one day having a fair retail value not exceeding $800.

For goods valued at or under $800 that would otherwise qualify for the de minimis exemption, the duty rates will vary depending on the shipping method:

  • For goods sent through means other than the international postal network, all applicable duties and tariffs will be due upon import.
  • For goods sent through the international post network, the import will be subject to duties of 30% ad valorem or $25 per item (at the transportation carrier’s discretion) in lieu of any other duties, including those previously imposed by executive order. The per item dollar amount will increase to $50 per item on June 1, 2025. Carriers must apply the same duty collection methodology to all shipments but may change collection methodologies monthly.
Next steps

To assess and mitigate the impact of these new tariffs and any counter-tariffs, companies should:

  • Review the country of origin, valuation, and classification of their imports. For imports into the United States, country of origin and valuation will be most important for these across-the-board tariffs. Classification will also be important for some of the product-specific carveouts and could be important for counter-tariffs imposed by other countries.
  • Assess existing contractual provisions to determine which party bears the cost of these tariffs, whether the force majeure or termination provisions can be invoked based on these new government orders, and how surcharges can be used to mitigate the unexpected expenses. Companies may also consider modifying contract templates to reflect these developments and potential counter-tariffs.
  • Monitor updates in each jurisdiction, including the extent to which the United States grants further exemptions or other countries impose counter-tariffs or reduce monetary and non-monetary trade barriers to try to reduce their country-specific tariff rate.

Background to the Reciprocal Plan on Trade

On February 13, the U.S. administration introduced its Fair and Reciprocal Plan on Trade, outlining its approach to reciprocal tariffs. The policy aims to address what the administration perceives as an unfair trade imbalance, where the U.S. maintains relatively low import tariffs while other countries impose higher tariffs on U.S. exports. According to the administration, this lack of reciprocity is unjust and “contributes to [the U.S.] large and persistent annual trade deficit“.

This rationale was challenged during the first Trump administration by economists (example), who pointed out that bilateral trade deficits are not primarily caused by trade barriers. Instead, they result from structural factors, global supply chain dynamics, and the way trade is measured. Economic data suggests that countries with lower tariffs do not necessarily experience larger trade deficits.

A Notice from the United States Trade Representative (USTR) indicates that reciprocal tariffs will primarily target countries with the largest trade deficits with the U.S., which are also some of its biggest trading partners, including the United Kingdom and the European Union. In response, the EU has pushed back against the policy, emphasizing that while the U.S. runs a trade deficit in goods, it enjoys a significant trade surplus in services with the EU, effectively balancing the overall trade relationship.

U.S. Treasury Secretary Bessent indicated last week that the administration’s primary focus – at least for the most significant reciprocal tariffs – is on the so-called “Dirty 15”: the 15 countries with persistent trade imbalances with the United States. In 2024, the U.S. recorded its largest trade deficits with Cambodia, Canada, China, the EU, India, Indonesia, Japan, Malaysia, Mexico, South Africa, South Korea, Switzerland, Taiwan, Thailand, and Vietnam. Notably, the UK is not on this list, suggesting that it may avoid major tariffs on the announced “Liberation Day” next week.

Reciprocal Tariffs and their Feasibility

At this stage, it remains unclear what the reciprocal tariffs set to be announced on April 2 will entail. Much will depend on how the U.S. defines reciprocity and the data it chooses to use.

The most likely scenario is that for each country with a trade deficit in goods, the U.S. administration will analyze differences in average tariff rates and impose country-specific tariffs to offset those disparities. Alternatively, the administration may adopt a more targeted approach, implementing sector-specific measures or reliefs, particularly for industries such as automotive and pharmaceuticals. A hybrid model, combining both country-level and sector-specific measures, appears the most probable outcome. That this is the most likely scenario also seems confirmed yesterday with the announcement of 25% automotive tariffs on passenger vehicles, light trucks, and spare parts, with no country exempted.

A key question is how the U.S. will account for other measures it views as trade barriers for U.S. companies. These include Digital Services Taxes (DST) and Value-Added Tax (VAT), which are quantifiable, as well as broader regulatory issues, such as online content moderation rules in the UK, which are under scrutiny by the White House. Notably, some of these concerns – such as the DST – are reportedly already part of ongoing UK-U.S. trade negotiations. This confirms that the U.S. announced tariffs are in part negotiation tactics rather than the implementation of long-term, enforceable measures.

VAT, a non-discriminatory consumption tax applied to all goods regardless of origin, has attracted significant attention. If VAT were to be factored into reciprocal tariffs, the impact would be substantial – given the UK VAT rate of 20%. It is of course true that VAT is not a tariff and should theoretically be neutral for businesses. In practice, however, compliance obligations in some countries are perceived as very burdensome and sometimes difficult to meet – particularly for non-established companies with occasional imports that need to move quick. As a result, some businesses ultimately treat VAT as a cost of doing business rather than a recoverable expense.

Impact of Reciprocal Tariffs on the United Kingdom

The imposition of U.S. tariffs on UK-originating goods would significantly increase their cost in the U.S. market. This may impact demand. Businesses on both sides of the Atlantic will adjust their strategies accordingly. We recently explored the importance of origin in the context of tariffs. Businesses will likely reassess their customs processes and optimize their supply chains, considering factors such as supplier relationships, manufacturing locations, and key customer markets. Whether the tariffs will genuinely result in reshoring – the intended revival of U.S. domestic production – remains highly uncertain.

In a time of escalating tariff tensions, companies are investing heavily in analyzing the impact of tariff changes on their business and adapting to the shifting trade landscape. To mitigate tariff impacts and maintain competitiveness, many explore supply chain adjustments, such as alternative sourcing or relocating production. While “tariff engineering” is becoming an increasingly popular strategy, it carries significant risks. Businesses must ensure that their sourcing and relocation strategies align with legal standards, economic rationality, and customs scrutiny to minimize trade disruptions and financial exposure. In this article, we examine common tariff-related pitfalls that businesses should consider when making sourcing and relocation decisions.

Customs country of origin and its importance in destination markets

As governments impose specific tariffs on imports from certain countries, the (non-preferential) customs country of origin (COO) plays a critical role in determining whether a product is subject to these tariffs. COO directly influences tariffs, trade barriers, and economic policies, making it essential for businesses to correctly identify and assess the origin of their goods.

Determining COO is a technical customs analysis, independent of the location from which a product is shipped. Instead, it depends on where the product is substantially transformed as part of the production process. Under the globally harmonized, yet incomplete, COO framework, an assembled product is considered to originate in a country if it undergoes its last substantial transformation there. At a high level, this means the last point in the supply chain where the product was fundamentally altered or where it acquired new functionalities.

In other words, not all processing activities confer COO. Various “minimal operations”—such as screwdriver assembly, simple packaging, or minor alterations like cutting and sorting—do not qualify as substantial transformation. Additionally, jurisdictions may define product-specific binding and non-binding rules for substantial transformation, making it a complex issue for companies operating across multiple markets. With each jurisdiction applying its own legal framework, companies must assess COO requirements separately for each destination market.

Three key pitfalls in sourcing and relocation decisions

Businesses considering alternative sourcing or relocation in response to tariff changes must navigate several risks. We have identified three major pitfalls in the decision-making process.

  1. Ambiguity around substantial transformation
    The determination of “substantial transformation” is not harmonized across jurisdictions. Each importing country interprets the concept differently, leading to inconsistencies in COO assessments. Customs authorities evaluate supply chain facts based on country-specific frameworks, making borderline cases—where the transformation’s substantiality is questionable—common. The ambiguity can be rooted in several causes. For instance, import countries use different legal standards, causing identical production processes to yield different COO conclusions depending on the jurisdiction. In addition, if final assembly is moved but critical components still originate from a high-tariff country, customs authorities may question whether the relocation meaningfully alters the product’s COO.
  2. Misrepresentationon origin and supplier dependence
    When importers rely on third-party manufacturers for production, additional risks emerge. Suppliers may have commercial incentives to misrepresent COO, leading to potential compliance violations for importers. Common tactics to manipulate COO include transshipment – where goods are routed through an intermediary country and repackaged or relabeled to mask true origin; minimal processing—where minor, insufficient modifications are performed to claim a new COO; and falsified documentation—where forged certificates of origin are used to deceive downstream importers and customs authorities.

    Importers must be aware that certificates of origin, which are commonly used in practice, do not guarantee compliance. Customs authorities actively monitor trade flows and conduct onsite verifications in export countries. If COO misrepresentation is uncovered, importers bear the legal and financial consequences, even if the misrepresentation was made by a supplier. Companies must therefore implement rigorous due diligence measures to validate COO claims and protect against liability.
  3. Tariff circumvention and the importance of intentionality
    Relocation decisions made in response to tariffs are scrutinized by regulators, particularly when they appear to be motivated solely by tariff avoidance rather than genuine economic reasons. Trade policies are often driven by political considerations, meaning that even legally sound COO claims can be challenged if authorities suspect an attempt to circumvent tariffs.

    A key precedent for this occurred during the “trade war” under the first Trump administration (2017-2021). In response to EU rebalancing duties on U.S. goods, Harley-Davidson shifted production of EU-destined motorcycles to Thailand to escape the tariffs. However, the EU ultimately rejected the COO change, ruling that the relocation was primarily tariff-driven rather than economically justified. This case underscores that customs authorities may disregard COO claims if the relocation lacks a genuine commercial rationale beyond tariff mitigation.

Steps to mitigate country of origin risks

To navigate COO complexities and avoid regulatory pitfalls, we recommend that companies adopt risk-mitigating strategies:

  1. Different jurisdictions have unique COO rules, requiring a comprehensive analysis of legal standards across all destination markets before making supply chain adjustments.
  2. Importers must verify production processes through robust due diligence on suppliers and take contractual steps to protect against supplier misrepresentations.
  3. Companies must ensure that relocations have genuine business justifications; if a shift in production is primarily driven by a desire to avoid tariff changes, customs authorities may reject the new COO claim. Many jurisdictions offer advance customs rulings on COO, providing legal certainty before goods are imported. Companies should carefully weigh the benefits and risks of seeking an advanced customs ruling.

In 2024, the Department of Justice saw a record number of qui tam actions under the False Claims Act (FCA), with total settlements and judgments exceeding $2.9 billion. Throughout this next year, we expect to see this uptick in enforcement continue, especially in light of the Trump administration’s crackdown on diversity, equity, and inclusion policies and the imposition of new tariffs and trade policies. In a recent blog post, our team provides an overview of key FCA enforcement trends from 2024 and what federal contractors, grant recipients, and private sector companies should be on the lookout for this year.

On February 10, President Trump signed two proclamations adjusting the already-existing Section 232 tariffs on imports of steel and aluminum. He also directed U.S. Customs and Border Protection (CBP) to “dramatically increase” its enforcement efforts to prevent circumvention.

Increased tariff enforcement

The proclamations direct CBP to prioritize reviews of the classification of imported steel and aluminum products. If classification errors result in underpaid Section 232 tariffs, CBP:

  • Must impose the maximum penalty permitted by law.
  • May not consider evidence of any mitigating factors in its penalty determination.

Adjustments to steel and aluminum tariffs

Under the proclamations:

  • The previously granted exclusions for steel and derivative steel articles from Argentina, Australia, Brazil, Canada, the European Union, Japan, Mexico, South Korea, Ukraine, and the United Kingdom will be revoked, effective March 12, 2025 at 12:01 a.m. (ET). Imports of steel and derivative steel articles from these countries will then be subject to 25% ad valorem duties.
  • The previously granted exclusions for aluminum and derivative aluminum articles from Argentina, Australia, Canada, the European Union, Mexico, and the United Kingdom will be revoked, effective March 12 at 12:01 a.m. (ET).
  • The ad valorem tariff rate for aluminum and derivative aluminum articles will increase from 10% to 25%, effective March 12 at 12:01 a.m. (ET).
  • The Secretary of Commerce’s ability to consider or renew product exclusion requests is revoked, effective February 10. Granted product exclusions will remain in effect until they expire or the excluded product volume is imported.
  • The Secretary of Commerce must terminate all existing General Approval Exclusions, effective March 12.
  • The lists of derivative steel and aluminum products subject to Section 232 tariffs will be expanded by yet-to-be-published annexes to the proclamations. Tariffs on these derivatives will be suspended until the Secretary of Commerce gives public notice that adequate systems are in place to fully, efficiently, and expediently process and collect the tariffs.
  • Steel and aluminum products impacted by these proclamations that are admitted to foreign trade zones on or after March 12 must be admitted as “privileged foreign status” unless they are eligible for admission under “domestic status.”
  • Importers may not claim drawback on these newly imposed tariffs.
  • The Secretary of Commerce will establish a process within 90 days to include additional derivative steel and aluminum articles within the scope of the Section 232 tariffs. Domestic producers and related industry associations may request that derivative products be included within the tariffs’ scope. The Secretary of Commerce must then issue a determination within 60 days of the request.

Update: On February 1, 2025, President Trump signed three executive orders imposing U.S. tariffs on imports from Canada, China, and Mexico. These new tariffs are in addition to any already-existing duties and tariffs, including antidumping and countervailing duties, Section 232 tariffs on steel and aluminum imports, and Section 301 tariffs on Chinese-origin goods.

Just hours before the new tariffs on Canadian and Mexican imports went into effect, Trump delayed both until March 4. Although no tariffs have been announced in respect of other countries, Trump has also stated his intention for EU tariffs to follow. 

Key takeaways:

  • Effective February 4, the United States imposed an additional 10% tariff on all Chinese-origin imports, including products from Hong Kong. Although goods from Hong Kong have been marked as “made in China” since President Trump’s first term in office, this is the first time the United States has expanded the tariffs’ scope to include Hong Kong-origin products.
  • China retaliated with 15% tariffs on supercooled natural gas and coal from the United States and a 10% tariff on U.S.-origin crude oil. China’s retaliatory tariffs will go into effect on February 10.
  • The U.S. tariffs on Canadian- and Mexican-origin goods, as well as those countries’ counter-tariffs, have been delayed until March 4.
test

China tariffs and response

Effective February 4, the United States imposed a 10% ad valorem additional tariff on all Chinese-origin imports entered for consumption, or withdrawn from warehouse for consumption, including products of Hong Kong. Until now, U.S. Customs and Border Protection’s (CBP) published guidance indicated that Hong Kong-origin goods should be marked as “made in China” but entered with Hong Kong as the country of origin. CBP’s guidance is expected to be updated to align with the recent tariff actions.

In response, China announced retaliatory measures, including:

  • 15% tariff on supercooled natural gas and coal from the United States
  • 10% tariffs on U.S.-origin crude oil
  • New export controls on tungsten, tellurium, bismuth, molybdenum and indium products

China’s new tariffs go into effect on February 10.

Canada and Mexico tariffs and response

Although tariffs on Canadian- and Mexican-origin goods were also originally scheduled to go into effect on February 4, Trump delayed those tariffs until March 4.

Once implemented, products of Canada and Mexico entered for consumption, or withdrawn from warehouse for consumption, will be subject to the following ad valorem tariffs:

  • Canada: Except for “energy or energy resources,” all products of Canada will be subject to a 25% additional tariff. Energy or energy resources will be subject to a 10% additional tariff. “Energy or energy resources” is defined by President Trump’s National Energy Emergency Executive Order dated January 20, 2025 as “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.”[1] By reference to 30 U.S.C. § 1606 (a)(3), “critical minerals” is defined as any non-fuel mineral, element, substance, or material designated as critical by the Secretary of the Interior, who has published a comprehensive list, with further guidance available from the Department of Energy.
  • Mexico: 25% additional tariff on all imported products. No reduced tariff rate applies to energy or energy resources.

In response, Canada promised $155 billion in retaliatory tariffs:

  • Effective March 4, Canada will impose a 25% ad valorem tariff on U.S.-origin goods classified under 1,256 tariff lines falling into 217 tariff headings. The tariff headings cover a wide variety of items, including agricultural products, machinery, construction materials, household appliances, automobile parts, cosmetics, clothing, shoes, household items, furniture, chemical products, alcoholic beverages, tobacco products, sports equipment, lumber, and plastic products.
  • After a 21-day public comment period, Canada intends to impose tariffs on another $125 billion in U.S.-origin products. That list of products will be published in the coming days and is expected to include passenger vehicles and trucks (including electric vehicles), steel and aluminum products, additional fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats.

In addition, Mexico is prepared to implement “Plan B,” which is expected to include tariffs and non-tariff measures. Mexico’s counter-tariffs will also be delayed until March. In the lead-up to Saturday’s tariff announcement, however, reports indicated Mexico was considering 5% to 20% tariffs on U.S.-origin pork products, cheese, certain agricultural products, bourbon, and manufactured steel and aluminum. Initially, Plan B is not expected to impact the auto industry.

Products of Canada, China, and Mexico

Products of Canada, China, and Mexico will include goods manufactured, produced, grown, or substantially transformed in those countries, consistent with how a product’s country of origin is currently determined at the time of import into the United States.

Savings clause

The new tariffs do not apply to goods entered for consumption, or withdrawn from warehouse for consumption, that 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 (ET) on February 1, 2025. The importer of record must certify to CBP that the imported goods meet the conditions in the savings clause. In accordance with the Federal Registry notices, the importer must declare new HTSUS heading 9903.01.14 in respect of Canadian goods and new HTSUS heading 9903.01.23 in respect of Chinese goods, as set out in the annexes to the notices.

Providing a false certification to CBP can result in penalties under 19 U.S.C. § 1592 and create civil exposure under the False Claims Act.

USMCA duty-free treatment

The executive orders do not impact products’ duty-free treatment under the United States-Mexico-Canada Agreement (USMCA). Thus, originating products will still be entered without paying general duties, even though the new tariffs will apply.

Additional provisions

Other key provisions include:

  • Changes to the Harmonized Tariff Schedule of the United States (HTSUS): The HTSUS has been modified to implement these tariffs. For goods subject to the tariffs, importers will declare the products’ normal HTSUS classification, as well as a tariff-related classification in Chapter 99.
  • Goods admitted to Foreign Trade Zones (FTZs): Any goods eligible for “domestic status”[2] that are also subject to these tariffs must be admitted to an FTZ under “privileged foreign status.”[3] When these goods are entered for consumption, the new tariffs will still apply, even if President Trump has since withdrawn the tariffs.
  • Drawback ineligibility: These tariffs are not eligible for drawback.
  • No de minimis exemption: The goods covered by the executive orders will not be eligible for the duty-free de minimis exemption, which typically applies to goods imported by one person on one day having a fair retail value not exceeding $800.[4] Supply chains that are modeled around using this exemption to keep consumer prices down, a practice particularly prevalent in e-commerce businesses, will therefore be impacted by the tariffs.

Further tariff activity in relation to the EU

According to President Trump’s press notice on January 31, the United States will “absolutely” impose tariffs on the EU. The president made repeated calls in the last month for the EU to increase its U.S. oil and gas purchases to rebalance the current U.S. trade deficit but to no avail. Although it is currently unclear what the scope of the tariffs is likely to be, the EU has promised to respond robustly.

President Trump also has suggested global tariffs may be imposed on semi-conductors, oil, steel, aluminum, and copper.

Anticipated EU response

The EU would certainly respond with tariffs of its own on U.S. products. However, it is unlikely that this response would be immediate.

During Trump’s first term as president in 2018, his administration imposed tariffs of 25% on EU imports of steel and 10% on EU imports of aluminum. The EU retaliated with ad hoc tariffs on approximately $6 billion of U.S.-origin goods. However, the implementation of these tariffs took several months, as the EU commission was required by EU law to first take steps to comply with the World Trade Organization’s rules. While the EU now has a regulation that allows it to respond more rapidly to U.S. measures (the Anti-Coercion Instrument introduced in December 2023), its use is limited to situations in which U.S. tariffs are not punitive or do not aim to alter EU policy. As such, unconditional tariffs, such as those imposed against Canada, Mexico, and China, may fall outside the scope of the regulation, and thus take longer for the EU to respond to. That said, with an EU summit starting in Brussels on February 3 that includes discussion of the anticipated “trade war,” the EU is likely to want to demonstrate both agility and readiness in countering any forthcoming U.S. tariffs.

If the EU imposes retaliatory tariffs on U.S.-origin products, moving production would be unlikely to benefit U.S. businesses, as it could be considered an attempt to circumvent the tariffs, which would not be permitted under EU law. This was the case in 2018 when Harley Davidson tried to shift its production of motorbikes from the EU to Thailand, but still had to pay the 25% tariff.

Assessing the impact on supply chains

The new tariffs and countermeasures are likely to have a significant economic effect on both existing supply agreements and wider trading patterns. Depending on how contractual responsibility for additional tariffs falls between producers, traders, and end users, existing agreements may become uneconomic to perform, and sources of supply that were intended to satisfy existing contractual commitments may no longer be economically viable. Market participants will need to review the economic implications of the new measures on their relevant cross-border business, relationships, and contracts. 

An assessment of the impact of the new tariffs and countermeasures on existing contracts and a plan to mitigate their potential impact should involve:

  • For the relevant contract goods, reviewing the country of origin, valuation, and classification of imported goods. For imports into the United States, country of origin and valuation will be most important for across-the-board tariffs. Classification will also be critical for imports into Canada given the published list of tariff codes that will become subject to additional duties.
  • Assessing which party is liable contractually to bear the cost of tariffs and any contractual right that may be invoked as a result of or in response to the tariffs. Such rights may include:
    • Exercising optionality around the source of supply and country of origin in a manner that is most cost effective.
    • Invoking rights to renegotiate commercial terms, e.g., under price review and price reopener clauses.
    • Exercising termination rights that may arise where performance of a contract becomes economically onerous, e.g., under “hardship” clauses, force majeure clauses, or “new and changed regulations” clauses.
  • Monitoring updates to the tariffs in each jurisdiction, including notably the specifics behind Mexico’s Plan B; the second list of goods Canada intends to tariff; whether any agreements can be reached that may further delay or cancel tariffs imposed on China, Mexico, or Canada; and whether the United States creates an exclusion process to exempt certain imports from the tariffs. By way of example of potential exemptions, the American Petroleum Institute has stated it will continue to work with the Trump administration to developing exclusions to the tariffs with the objective of protecting energy affordability for consumers. It may be that more detailed government guidance therefore develops an exclusion process for certain commodities.

It is likely that the energy, automobile, manufacturing, agriculture, steel, and aluminum sectors will be particularly affected by tariffs in the United States, China, Canada, and Mexico once these come into effect. In the energy sector, for example, the United States imports approximately four million barrels of crude oil per day from Canada and 500,000 barrels per day from Mexico. Prices on West Texas Intermediate crude oil increased nearly 4% shortly after the tariffs were announced, but whether the price spike will continue remains to be seen. Nearly all of Canada’s crude oil exports go to the United States, so Canadian suppliers may have few options in terms of alternative shipping markets.

Market participants will need to continue to assess and monitor which imports are caught by the tariffs as they come into effect to understand the extent to which supply chains can be modified to reduce the long-term impact of these tariffs. Operational limitations such as requirements by refineries to use specific fuel specifications may mean that the tariffs will cause permanent complications for supply chain economics if such imports do not become exempt. For example, refineries in the Midwest rely extensively on Canadian crude oil because it is relatively heavy compared to U.S. shale oil, and those refineries are configured to run on heavier forms of crude.

[1] Executive Order No. 14156 (January 20, 2025).

[2] “Domestic status” may be granted to goods that are or have been: “(1) The growth, product, or manufacture of the US on which all internal-revenue taxes, if applicable, have been paid; (2) Previously imported and on which duty and tax has been paid; or (3) Previously entered free of duty and tax.” 19 C.F.R. § 143.43(a).

[3] See id. § 143.41.

[4] See id. §§ 10.151-10.152.

Update: After a February 3 call with Mexico’s president, President Trump announced on Truth Social that the tariffs on Mexican goods will be paused for one month. He is also scheduled to speak with Prime Minister Trudeau, which could result in the Canadian tariffs being paused. More details to come.

Key takeaways

  • U.S. imposes tariffs on Canada, China, and Mexico, triggering immediate retaliation threats.
  • New tariffs apply from February 4, covering key imports with varying rates by country.
  • Canada, China, and Mexico announce countermeasures, including tariffs and non-tariff barriers.

On February 1, President Trump signed three executive orders imposing tariffs on imports from Canada, China, and Mexico. These new tariffs are in addition to any already-existing duties and tariffs, including antidumping and countervailing duties, Section 232 tariffs on steel and aluminum imports, and Section 301 tariffs on Chinese-origin goods.

Ad valorem tariff rates, effective February 4

Effective at 12:01 a.m. (ET) on February 4, products of Canada, China, and Mexico entered for consumption, or withdrawn from warehouse for consumption, will be subject to the following ad valorem tariffs:

  • Canada: Except for “energy or energy resources,” all products of Canada will be subject to a 25% tariff. Energy or energy resources will be subject to a 10% tariff. “Energy or energy resources” means “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).”[1]
  • China: 10% additional tariff.
  • Mexico: 25% tariff.

The executive orders do not define “products of” Canada, China, or Mexico. The Secretary of Homeland Security is expected to define these terms in a Federal Register notice published this week. Typically, however, the phrase would be interpreted to mean Canadian-, Chinese-, or Mexican-origin goods.

Savings clause

The new tariffs do not apply to goods entered for consumption, or withdrawn from warehouse for consumption, that 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 ET on February 1. The importer of record must certify to U.S. Customs and Border Protection (CBP) that the imported goods meet the conditions in the savings clause. The forthcoming Federal Register notice will provide further details on the specific requirements for the certification.

Providing a false certification to CBP can result in penalties under 19 U.S.C. § 1592 and create civil exposure under the False Claims Act.

USMCA duty-free treatment

The executive orders do not impact products’ duty-free treatment under the United States-Mexico-Canada Agreement (USMCA). Thus, originating products will still be entered without paying general duties, even though the new tariffs will apply.

Additional provisions

Other key provisions include:

  • Changes to the Harmonized Tariff Schedule of the United States (HTSUS): The forthcoming Federal Register notice will modify the HTSUS to implement these tariffs. For goods subject to the tariffs, importers will declare the products’ normal HTSUS classification, as well as a tariff-related classification.
  • Goods admitted to Foreign Trade Zones (FTZs): Any goods eligible for “domestic status”[2] that are also subject to these tariffs must be admitted to an FTZ under “privileged foreign status.”[3] When these goods are entered for consumption, the new tariffs will still apply, even if President Trump has since withdrawn the tariffs.
  • Drawback ineligibility: These tariffs are not eligible for drawback.
  • No de minimis exemption: The goods covered by the executive orders will not be eligible for the duty-free de minimis exemption, which typically applies to goods imported by one person on one day having a fair retail value not exceeding $800.[4]

Response from Canada, China, and Mexico

Despite President Trump signaling that any retaliation from Canada, China, or Mexico could result in further action, all three countries have promised to retaliate.

Canadian Prime Minister Trudeau held a news conference on February 1, promising $155 billion in retaliatory tariffs:

  • Effective February 4, Canada will impose a 25% ad valorem tariff on U.S.-origin goods classified under 1,256 tariff lines falling into 217 tariff headings. The tariff headings cover a wide variety of items, including agricultural products, machinery, construction materials, household appliances, automobile parts, cosmetics, clothing, shoes, household items, furniture, chemical products, alcoholic beverages, tobacco products, sports equipment, lumber, and plastic products.
  • After a 21-day public comment period, Canada intends to impose tariffs on another $125 billion in U.S.-origin products. That list of products will be published in the coming days and is expected to include passenger vehicles and trucks (including electric vehicles), steel and aluminum products, additional fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats.

Canada is also considering a number of non-tariff measures. To date:

  • British Columbia’s premier directed provincial liquor stores to stop buying and selling American liquor from “red states.” The provincial government and Crown corporations have also been directed to buy Canadian goods and services first.
  • Nova Scotia announced it is doubling the cost of tolls at the Cobequid Pass for commercial vehicles entering from the United States and removing all U.S. alcohol from its provincial liquor stores. The provincial government also promised to cancel contracts with U.S. firms and limit American companies’ access to provincial procurement.
  • Ontario is also taking American alcohol products off the shelves in its government-run liquor stores. Wholesale sales of American alcohol products to restaurants, bars, and retailers will also be suspended by February 4.

China’s Ministry of Commerce promised to initiate a dispute resolution proceeding before the World Trade Organization (WTO). China took a similar approach when President Trump first imposed Section 301 tariffs in 2018. Although the WTO panel reviewing those tariffs sided with China, the United States appealed the decision to the Appellate Body. The appeal remains pending because the WTO’s Appellate Body currently does not have any appointed members to hear the case. The United States continues to block appointments to the Appellate Body.

Mexican President Sheinbaum directed the Ministry of Economy to implement Mexico’s “Plan B,” which she said has been in the works since President Trump threatened tariffs on Mexico. Although the specifics have not yet been announced, Plan B is expected to include tariffs and non-tariff measures. In the lead-up to Saturday’s tariff announcement, reports indicated Mexico was considering 5% to 20% tariffs on U.S.-origin pork products, cheese, certain agricultural products, bourbon, and manufactured steel and aluminum. Initially, Plan B is not expected to impact the auto industry.

Next steps

To assess the impact of these new tariffs and countermeasures and mitigate the potential impact, companies should:

  • Review the country of origin, valuation, and classification of their imports. For imports into the United States, country of origin and valuation will be most important for across-the-board tariffs. Classification will also be critical for imports into Canada given the published list of tariff codes subject to additional duties.
  • Assess existing contractual provisions to determine which party bears the cost of these tariffs, whether the force majeure or termination provisions can be invoked based on these new government orders, and how surcharges can be used to mitigate the unexpected expenses.
  • Monitor updates in each jurisdiction, including whether the United States establishes an exclusion process to exempt certain imports from the tariffs, the specifics behind Mexico’s Plan B, and the second list of goods Canada intends to impose tariffs on later this month.

[1] Exec. Order No. 14156 (Jan 20, 2025).

[2] “Domestic status” may be granted to goods that are: “(1) The growth, product, or manufacture of the U.S. on which all internal-revenue taxes, if applicable, have been paid; (2) Previously imported and on which duty and tax has been paid; or (3) Previously entered free of duty and tax.” 19 C.F.R. § 146.43(a).

[3] See id. § 146.41.

[4] See id. §§ 10.151-10.152.

With U.S. President Donald Trump’s recent return to the White House, major regulatory changes are on the horizon for 2025. On Thursday, January 23rd, we gathered a group of regulatory attorneys from across Reed Smith to provide a one-hour CLE that outlined the key trends to watch for this year. In their latest alert, our lawyers recap the top takeaways from the event, which includes key regulatory changes and the practical implications of a second Trump administration from various angles, including international trade, antitrust, labor and employment, consumer protection, and data privacy.