
Tariff Update.
U.S. Imposes New Tariffs…Retaliatory Tariffs Are Coming.
Authors
Sean Miner
North America Director,
DOJÖ Consulting Group.
5 minutes read
Last update: 02.02.2024
On February 1, 2025, President Donald J. Trump officially announced significant tariff measures under the International Emergency Economic Powers Act (IEEPA), citing national security concerns related to illegal immigration and drug trafficking.
The administration has imposed a 25% tariff on imports from Canada and Mexico, with a reduced 10% tariff on Canadian energy products. Additionally, imports from China are now subject to a 10% tariff. These measures mark a pivotal shift in U.S. trade policy, with significant implications for global supply chains and corporate financial planning.
Overview of Recent Developments
To understand the impact of these changes, we examine the key developments surrounding the new tariff measures and the resulting international responses.
Implementation of U.S. Tariffs:
Canada and Mexico: Effective February 4, 2025, a 25% tariff applies to imports from both countries. Canadian energy products, including oil, are subject to a reduced 10% tariff.
China: A 10% tariff has been implemented on all imports from China, effective February 4, 2025.
Justification for Tariffs:
The administration has framed these tariffs as a response to national security threats, specifically the flow of illegal drugs—particularly fentanyl—and unauthorized immigration. The tariffs aim to exert economic pressure on Canada, Mexico, and China to implement more stringent measures in addressing these concerns.
Retaliatory Actions:
The affected nations have announced some countermeasures that may further complicate trade relations.
Canada: Prime Minister Justin Trudeau has announced a 25% retaliatory tariff on $155 billion worth of U.S. goods.
Mexico: President Claudia Sheinbaum has pledged to impose reciprocal tariffs on U.S. imports, though specific details are still forthcoming
Potential for Additional Tariffs:
Looking ahead, businesses should prepare for potential new tariffs targeting critical industries. The administration has signaled the possibility of further tariff measures by mid-February, potentially targeting key industries such as:
Semiconductors,
Pharmaceuticals,
Metals (Steel, Aluminum, Copper) – Copper tariffs may be deferred,
Oil and Gas,
The European Union (EU) – The President’s recent remarks suggest potential tariff actions against the EU as well.
Strategic Recommendations for Businesses
Companies must proactively assess their risk exposure and identify strategies to mitigate financial and operational disruptions. Below are key recommendations to navigate the evolving trade landscape.
Assess and Mitigate Financial Exposure:
Businesses must evaluate the financial implications of these tariffs on their supply chains, cost structures, and pricing strategies.
Businesses must develop contingency plans for various escalation scenarios, including additional tariffs, expanded product categories, and supply chain disruptions.
Explore Duty Mitigation Strategies:
Companies should consider structured approaches to reducing tariff burdens and optimizing their trade operations:
First Sale for Export: You may be able to reduce your customs value through First Sale, depending on supply chain setup.
HTSUS Chapter 9802: This provides a duty-savings mechanism that allows for partial duty exemption on U.S. goods exported, processed, and returned
Value Reconciliation: It may be advisable to begin flagging for customs reconciliation for value if you may need to adjust your value later.
But it is absolutely essential to keep in mind that those strategies need careful attention as they have some limitations following President Trump's recent decisions:
No Duty Drawback: Drawback is explicitly forbidden for these specific tariffs. Drawback is still eligible for regular (MFN) tariffs and Section 301 tariffs (China tariffs from Trump's first administration).
Foreign Trade Zones: Goods entering an FTZ must enter U.S. Foreign Trade Zones (FTZs) under “Privileged Foreign Status”, meaning they’ll be taxed at the tariff in place at the time of entry into the FTZ, but paid only upon withdrawal. While FTZs can provide operational benefits, they will not offer duty mitigation advantages for these particular tariffs
Enhance Compliance and Monitoring:
With increasing trade restrictions, regulatory compliance and monitoring have never been more important for companies.
They must strengthen customs compliance programs and ensure adherence to evolving tariff regulations.
They must establish monitoring mechanisms to track enforcement actions, customs audits, and emerging regulatory changes.
Next Steps
To effectively navigate the evolving trade landscape, businesses must take decisive action and plan for long-term resilience.
Consultation and Strategy Development:
Companies must engage with DOJÖ US Duty Mitigation Advisors to develop customized strategies that mitigate risk and optimize operational efficiency in response to the new tariffs.
Ongoing Monitoring and Adaptation:
Businesses must stay ahead of evolving trade dynamics by monitoring policy developments and adjusting strategies accordingly.
Organizations should establish flexible supply chain frameworks to quickly adapt to shifts in trade policy and avoid potential disruptions.
Given the evolving trade landscape, businesses must adopt a proactive and strategic approach to mitigate risks while identifying opportunities for cost savings and operational resilience. Agility, compliance, and forward-looking planning will be critical in navigating this period of heightened trade tensions.
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