President Trump Imposes Steep Tariffs on Mexico, Canada and China
President Trump made good on his threat, imposing steep tariffs on Mexico, Canada and China through executive order under an expansive use of the International Emergency Economic Powers Act (IEEPA). The White House cited “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl” flowing into the U.S. which warranted action under IEEPA. The President is imposing a 25% additional tariff on imports from Canada and Mexico, and an additional 10% tariff on imports from China. Canadian oil and energy resource imports will be subject to a lower tariff of 10%, rather than the 25% levy on all other goods from Canada. These duties will go into effect on or after 12:01 a.m. EDT on February 4.
President Trump asserted that there was nothing that the three countries could do now to stop the tariffs. The White House stated that the tariffs will remain in effect until such time as the flow into our country of drugs (fentanyl in particular) and illegal migrants is alleviated. Whereas American importers under President Trump’s first term could seek exclusions (exemptions) from the tariffs for their products, a White House official commented that no similar process would be available at this time.
Since U.S. importers/manufacturers have to pay for tariffs upon importation of goods, they inevitably will pass along the increased cost of goods to U.S. consumers, leading the way to higher prices. Economists are predicting that the tariffs will have a significant financial impact on U.S. households—approximately $1300 annually—according to the Budget Lab of Yale—as prices increase on everything imported from Canada (such as cars, oil, and timber), from Mexico (such as cars, avocados, tomatoes, tequila), and China (such as medicine, shoes, electronics, and steel) among many other products.
Prime Minister Justin Trudeau of Canada wasted no time announcing 25% retaliatory tariffs of C$30 Billion on a wide range of U.S. goods effective February 4, and further duties of C$125 Billion on the remaining products in 21 days. Retaliatory tariffs by Mexico is expected to be announced today by President Claudia Sheinbaum. China has warned of “corresponding countermeasures.” In anticipation of such reaction, President Trump had threatened the targeted countries that he would ratchet up the tariff levels announced in his executive order, leading trade pundits to say a trade war could be underway.
Since Canada and Mexico have been party to the standing U.S.-Mexico-Canada Free Trade Agreement, various legal challenges are likely to be raised, although the USMCA includes a provision which permits the imposition of tariffs on national security grounds. The President’s novel use of IEEPA to impose such comprehensive tariffs is most likely to lead to court challenges in the coming months.
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Attorneys in Pierson Ferdinand LLP’s International Practice and other PierFerd sector experts stand ready to counsel clients in response to these tariffs and monitor ongoing developments. We practice before the U.S. Trade Representative (Executive Office of the President), Department of Commerce, U.S. Customs and Border Protection, U.S. International Trade Commission, and the Congress and other federal regulatory agencies. For additional information, please contact the following PierFerd International Practice attorneys or your regular PierFerd contact for assistance:
Philip Gallas, Founding Partner philip.gallas@pierferd.com
Tiffany Comprés, Founding Partner and Co-Chair of International Practice, Co-Chair of International Disputes tiffany.compres@pierferd.com
PierFerd’s attorneys have a breadth of experience and expertise to navigate the many facets of doing business internationally. Accordingly, the Firm offers clients a multidisciplinary approach in this and other matters. For example, the International Practice group has experience in Customs & Trade tariffs and trade remedy proceedings (China Section 301, Section 201 Global Safeguards, Section 232 National Security, Antidumping & Countervailing Duty proceedings). The Renewables & Alternative Energy practice group has experience in the solar, wind, EV and battery storage industries and is available to advise on ways to reduce the impacts of the increased tariffs through corporate restructuring and tax strategies that are specific to these industries. Our International Transactional Practice includes extensive experience with dozens of countries across the world including China. If there are transactions to be paused, unwound, or restructured, the International Transactional Practice is well-placed to advise. Finally, our International Disputes Team can handle international arbitration needs.
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