On Saturday, February 1, 2025, President Trump signed three Executive Orders imposing tariffs against goods of the United States’ three largest trading partners—Canada, Mexico and China. Only one Executive Order (as to Canada) has been published thus far on the White House website, https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-flow-of-illicit-drugs-across-our-national-border/, but copies of all three are circulating and they largely track each other. As we have speculated could be the case, the President is taking these actions based on the International Emergency Economic Powers Act (“IEEPA”). The tariffs will take effect on February 4 (though it is not yet clear when the necessary modifications to the HTSUS to implement these tariffs will be published or whether U.S. Customs and Border Protection has made the necessary software and system updates to allow for entries to be made with payment of the additional tariffs).
To utilize the authority under IEEPA, the President declared a national emergency with respect to “the influx of illegal aliens and illicit drugs into the United States” and declared that the “failure to act on the part of Canada [and Mexico and China] constitutes an unusual and extraordinary threat, which has its source in substantial part outside the United States, to the national security and foreign policy of the United States.” On this basis, the President ordered the imposition of the tariffs by invoking the authority of IEEPA for him to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.” These IEEPA provisions, familiar to those who follow U.S. sanctions which are largely based on IEEPA, have never before been the basis for the imposition of tariffs.
Here is what we know about the tariffs:
- 25% effective February 4– applicable to all “products of Canada as defined by the Federal Register notice”
- 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), of Canada will be subject to a 10% tariff
- 25% effective February 4– applicable to all “products of Mexico as defined by the Federal Register notice”
- 10% effective February 4- applicable to all “products of China as defined by the Federal Register notice”
- These duties apply in addition to all other applicable duties
- These duties are not eligible for drawback
- These duties cannot be avoided through the use of de minimis entry procedures applicable to certain shipments valued at $800 or less
- Goods subject to these tariffs must be admitted to Foreign Trade Zones in privileged status, and “upon entry for consumption” will be subject to the applicable duties at the time of admittance into the Foreign Trade Zones
- Each Executive Order includes language stating that if Canada [or China or Mexico] retaliate, the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action
- The orders also call upon the Secretary of Homeland Security to “recommend additional action, if necessary, should the Government of Canada [or Mexico or Canada] fail to take adequate steps to alleviate the illegal migration and illicit drug crises”
None of the Federal Register notices referenced in the three Executive Orders have been published. We expect them to be published no earlier than Tuesday. While those notices should be consulted for additional details, such as the treatment of HTSUS 9802 goods imported from Canada or Mexico, we understand that they will apply the tariffs to all goods of Canadian, Mexican, or Chinese origin, respectively, and without regard to the USMCA eligibility of the products.
With regard to the USMCA, which was negotiated by President Trump and the implementing legislation for which passed the Senate by a vote of 89-10 and the House by a vote of 385-41, Article 32.2 provides that nothing in the USMCA shall be construed to “preclude a Party from applying measures that it considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.”