On February 2, 2025, President Trump signed three Executive Orders imposing new tariffs on goods from Canada, Mexico and China.

Canada quickly retaliated by imposing tariffs on American goods. Mexico has announced that it will impose retaliatory measures, both in the form of tariffs and nontariff barriers. China has indicated that it will file a Complaint against the United States with the World Trade Organization.

In all three cases, the President declared a “national economic emergency” caused by the “influx of illegal aliens and illicit opioids and other drugs”. The President imposed the additional tariffs under authority of the International Emergency Economic Powers Act (IEEPA), which has been frequently invoked to impose political and export sanctions, but not previously cited as authority for imposing tariffs. [The President chose IEEPA over the Section 232 “national security” provisions of the Trade Expansion Act of 1962 and the retaliatory tariff provisions of Section 301 of the Trade Act of 1974, since those provisions require agency investigations and findings before the President may impose tariffs.]

We summarize the actions taken against each country:

 

CANADA

The full text of the Executive Order against Canada can be found here:

Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border | White House Pool | Forth

The actions taken against Canada are as follows:

• Imposition of 25% ad valorem rate on products of Canada, in addition to any other duties, taxes or fees owed, beginning for goods imposed on and after 12:01 AM February 4^th;
• Imposition of 10% ad valorem duties in certain “energy products beginning 12:01 AM Tuesday February 4^th;
• Goods en route on to the United States or before 12:01 AM February 1^st will not be subject to the taxes;
• Canadian-origin goods entered into FTZs on/after February 4^th must be entered with “privileged foreign status” to lock in the higher tariff;
• The new duties will not be eligible for duty drawback;
• Canadian-origin goods are no longer eligible for entry using the “de minimis” tariff exemption for commercial packages valued $800 and under pursuant to 19 USC § 1321;
• The tariffs may be increased if Canada retaliates (which it has already done).

The Government of Canada retaliated almost immediately by entering an Order in Council imposing tariffs against United States-origin products. The text of the Order in Council may be found here:

https://orders-in-council.canada.ca/attachment.php?attach=46660&lang=en.

The steps which Canada has taken include the following:

• Immediate imposition on February 4^th of a 25% tariff on United States-origin goods valued at $30 billion, and classifiable under tariff provisions found in the order;
• A promise to impose 25% tariffs on an additional $125 billion of US goods effective February 21, 2025, the extra time being granted to allow companies additional time to adjust their supply chains;
• The origin of goods for purpose of applying these levies will be determined using the Determination of Country of Origin for the Purposes of Marking Goods (CUSMA Regulations);
• Canada did not place limits on the eligibility of these duties for drawback.

Canada is also considering several non-tariff measures, including some related to critical minerals, energy, and other partnerships. Nova Scotia announced that it was doubling the cost of tolls at the Cobequid Pass for commercial vehicles entering from the U.S., removing all U.S. alcohol from provincial liquor stores, and promising to cancel existing contracts with U.S. firms and limiting access for provincial procurement for American businesses. British Columbia announced similar measures on U.S. alcohol and provincial procurement opportunities.

The United States did not announce a specific rule of origin for identifying imported goods as having Canadian, Mexican or Chinese origin. Presumably, it will use the traditional “substantial transformation” test of a change in name, character or use, as it has done with the Section 301 retaliatory tariffs on China. Nor has the United States announced any limitations on the use of special tariff measures provided in Chapter 98 of the Harmonized Tariff Schedule.

Canada this evening released a more detailed list of the products subject to the new tariffs. It can be accessed here:

List of products from the United States subject to 25 per cent tariffs effective February 4, 2025 – Canada.ca

For a Canadian perspective on the new tariffs, read the comments of our colleagues Dominion Customs Consultants Inc., published on that company’s blog:

US Imposed Tariffs and Canada’s Response: What you need to know – Dominion Customs Consultants Inc.

 

MEXICO

The text of the Executive Order imposing additional tariffs on products of Mexico can be found here:

Imposing Duties to Address the Situation at Our Southern Border | White House Pool | Forth

The measures being taken against goods from Mexico are similar to those taken against Canada. Specifically:

• Imposition of 25% ad valorem rate on products of Mexico, in addition to any other duties, taxes or fees owed, beginning for goods imposed on and after 12:01 AM February 4^th;
• Goods en route to the United States on or before 12:01 AM February 1^st will not be subject to the taxes;
• Mexican-origin goods entered into FTZs on/after February 4^th must be entered with “privileged foreign status” to lock in the higher tariff;
• The new duties will not be eligible for duty drawback;
• Mexican-origin goods are no longer eligible for entry using the “de minimis” tariff exemption for commercial packages valued $800 and under 19 U.S.C. § 1321;
• The tariffs may be increased if Mexico retaliates (which it has already done). As of this writing, Mexico has indicated that it will impose both tariff and non-tariff retaliatory measures against United States products. But Mexico’s President Sheinbaum said that the United States needed to do a better job of controlling its citizens’ demand for fentanyl and controlling the money laundering through United States institutions that accompanies it.

 

CHINA

The full text of the Executive Order targeting China can be found here:

Imposing Duties to Address the Synthetic Opioid Supply Chain in the People’s Republic of China | White House Pool | Forth

The actions taken against Chinese imports largely match those taken against Canadian and Mexican products. Specifically:

• Imposition of 10% ad valorem duties on products of China, in addition to any other duties, taxes or fees owed, beginning for goods imposed on and after 12:01 AM February 4^th;
• Goods en route to the United States on or before 12:01 AM February 1^st will not be subject to the taxes;
• Chinese-origin goods entered into FTZs on/after February 4^th must be entered with “privileged foreign status” to lock in the higher tariff. They are already required to be entered as “privileged foreign” if they are subject to Section 301 tariffs;
• The new duties will not be eligible for duty drawback;
• Chinese-origin goods are no longer eligible for entry using the “de minimis” tariff exemption for commercial packages valued $800 and under 19 USC § 1321.

Neither the Treasury or Homeland Security Departments have proposed regulations to implement these measures. In past cases, the government has created new Tariff numbers to be placed in Chapter 99 of the Harmonized Tariff Schedule of the United States and are used when making entry. Creating a new higher duty rate in the Chapters 1-97 of the HTS seems unlikely.

 

CAN THE PRESIDENT LAWFULLY TAKE THESE MEASURES?

Considerable research is being done regarding possible legal challenges to the President’s authority to take these measures. As noted above, IEEPA has never been used to impose tariffs.

IEEPA allows the President to declare a “national emergency” “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part, to the national security, foreign policy or economy of the United States. The new executive orders appear to deal more with health and crime control issues than national security, foreign policy, or the economy, but reviewing courts are not likely to overrule the President on what he considers a “national emergency”. They simply have no standard to apply.

The Act gives the President the power to “regulate” imports. It does not contain an express delegation of Congress’ power to levy taxes or tariffs. But we’ve been here before.

In 1971, President Nixon appeared on national television on a Sunday night, and announced (1) that the United States would cease exchanging gold for dollars, and (2) that he was announcing a 10% “import surcharge” on dutiable goods. The economic emergency was real; foreign countries holding United States dollars had overvalued their currencies, and were holding more dollars redeemable for gold than the United States held in gold reserves. Nixon believed the surcharge would bring certain trade partners to the negotiating table. After four (4) months, the Smithsonian Agreement restored a system of floating currency exchange rates, and the surcharges were terminated.

Nixon had not identified the legal authority under which he had imposed the surcharge. Importers sued for refunds. The United States Customs Court held that none of the statutes offered by the government – The Tariff Act of 1930, the Trade Expansion Act of 1962, or the Trading with the Enemy Act (the forerunner of IEEPA) authorized the President to impose the surcharge.

The Court of Customs and Patent Appeals (CCPA), in United States v. Yoshida International Inc., 63 CCPA 15 (1975), agreed that neither the Tariff Act nor the Trade Expansion Act authorized the tariffs, but held that the grant of authority in the Trading With the Enemy Act (TWEA) was broad:

The express delegation in § 5(b) of the TWEA is broad indeed. It provides that the President may, during “any” period of national emergency declared by him, through “any” agency he designates, or “otherwise,” and under “any” rule he prescribes, by means of instructions, licenses, “or otherwise,” “regulate,” “prevent” or “prohibit” the importation of “any” property in which “any” foreign country or a national thereof has “any” interest, and that the President may, in the manner provided, take “other and further measures,” not inconsistent with the statute, for the “enforcement” of the Act.

The CCPA’s approval of the surcharge was largely based on its limited nature. It was temporary in nature, and did not affect all imported goods. It respected rates of duty which had been set by the Congress.

The Court also noted that “the President’s choice of means of execution must also bear a reasonable relation to the particular emergency confronted”. It held that imposing a tariff surcharge was reasonably connected to an economic balance of payments problem. In this regard, reasonable minds could certainly ask how raising tariffs on legitimate trade bears a reasonable relationship to curtailing illegal activities such as the illicit drug trade and illegal immigration.

In closing, however, the Yoshida court noted that while the TWEA’s grant of authority to the President was broad, it had been exercised in the surcharge proclamation in a limited way not inconsistent with Congressional intent. “Though such a broad grant may be considered unwise, or even dangerous, should it come into the hands of an unscrupulous, rampant President, willing to declare an emergency when none exists, the wisdom of a congressional delegation is not for us to decide. But the specific acts of a President can certainly be put under judicial scrutiny.

It remains to be seen how these new powers will be used. We will be following and reporting on developments closely. If you have questions or concerns, please don’t hesitate to reach out to a Neville Peterson professional.