Overview -- what is happening today, March 4, 2025?

• On February 1, President Trump issued two Executive Orders (EOs) announcing the imposition of a 25% tariff on products of Canada (10% on energy products) and Mexico, effective February 4. On February 3, the President postponed these tariffs until March 4, in part because both Mexico and Canada made concessions to the President to buy themselves more time. On March 3, President Trump decided to allow the tariffs to enter into force rather than postpone them any further. As such, the tariffs on Canada and Mexico went into effect at 12:01 a.m. on March 4.
• On February 1, President Trump also issued an EO announcing an additional 10% tariff on China, which went into effect on February 4. On March 3, President Trump issued a new EO imposing an additional 10% tariff – doubling the increase in duties. The increased tariff went into effect at 12:01 a.m. on March 4.
• President Trump cited the International Emergency Economic Powers Act (IEEPA) as the authority for all these tariffs, citing Canada’s, Mexico’s, and China’s failures to address immigration and fentanyl. IEEPA is a national security statute that has historically been used as the legal authority for the US sanctions regime and similar purposes. This is the first time a President has used IEEPA to impose tariffs.

What is the rate of duty for products from Canada, Mexico, and China, respectively?

• The rate of duty for products of Canada is 25%, except for a lower 10% duty for “energy and energy resources,” which is defined 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, as defined by 30 U.S.C. 1606 (a)(3).”
• The rate of duty for products of Mexico is 25%.
• The rate of duty for products of China is 20%.
• These new duties are in addition to other existing duties, such as AD/CVD duties, the existing Section 301 duties on products from China, etc.

Which specific products are subject to the EO?

• The Federal Register Notices implementing the new tariffs state that the additional duties apply to all products of [Canada/Mexico] with very limited exceptions for certain donations, “informational materials” (see below), and products for personal use included in accompanied baggage of persons arriving in the United States.
• We do not yet have a Federal Register Notice implementing the second round of increased tariffs on products of China; however, we expect that the scope will be similar.

How do the EOs handle de minimis shipments and duty drawback?

• The de minimis program allows shipments worth $800 or less to enter the US duty-free and with minimal customs checks.
• The President intends to end duty-free de minimis treatment for all imports from China, Canada, and Mexico covered by the EOs. However, the implementation of this change is delayed because the US government needs to develop adequate systems to process and collect the relevant tariff revenue.
• Duty drawback on the additional duties imposed by the EOs will also not be available.

What happens if companies have goods en route to the United States at 12:01 a.m. on March 4, but they haven’t landed yet?

• All goods of Canada or Mexico that are entered for consumption, or withdrawn from warehouse for consumption, at or after 12:01 a.m. EST on March 4 are subject to the additional tariffs, even if they were already in transit when the new tariffs were officially announced.
• The rules on goods from China stay the same. Goods in transit as-of 12:01am on February 1, 2025 are exempt provided the goods are entered by 12:01am on March 7, 2025.

How long will the increased duties last?

• The EOs state that the duties “shall continue in effect until such actions are expressly reduced, modified, or terminated.” Practically speaking, this means they will remain in effect until President Trump decides to terminate them.
• Mexico and Canada (and possibly China) may seek to negotiate an end to the duties.

Will there be an exclusion process to enable specific products to be exempted from the tariffs?

• The EOs do not reference an exclusion process, and there are reports that the Trump Administration will not be providing exemptions to the tariffs. See, e.g., here. With that said, the Trump Administration will certainly come under pressure to create an exclusion process, and it would be within the President’s authority to direct one. There is nothing in IEEPA on this issue, so it would be discretionary.

What is the informational materials exception?

• Because the President has imposed tariffs under IEEPA, he does not have the authority to tariff everything, including:
  • any postal, telegraphic, telephonic, or other personal communication, which does not involve a transfer of anything of value;
  • donations, by persons subject to the jurisdiction of the United States, of articles, such as food, clothing, and medicine, intended to be used to relieve human suffering, with certain exceptions; or
  • the importation from any country, or the exportation to any country, whether commercial or otherwise, regardless of format or medium of transmission, of any information or informational materials, including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds; or
  • any transactions ordinarily incident to travel to or from any country, including importation of accompanied baggage for personal use, maintenance within any country including payment of living expenses and acquisition of goods or services for personal use, and arrangement or facilitation of such travel including nonscheduled air, sea, or land voyages.

• These IEEPA exceptions have been the subject of much regulatory analysis, review, and discussion over the years in the OFAC/sanctions context (as IEEPA forms the basis for the vast majority of US sanctions actions). Thus, what is and is not covered by the IEEPA exception in this context will likely be a realm of contention.

Will Canada/Mexico/China retaliate?

• Canada and Mexico have already announced that they will impose retaliatory tariffs on imports of US goods.
• With respect to retaliatory tariffs, on March 3, Prime Minister Trudeau said that Canada would impose tariffs of 25% affecting CA$155 billion of US goods. Trudeau added that the tariffs would arrive in two stages. The first stage, on CA$30 billion of US goods, would take effect on March 4 (see product list, here), followed by a second stage in 21 days affecting another CA$125 billion of US goods. Canada is also threatening to pursue as-yet unidentified non-tariff measures.
• Mexico has not yet publicly revealed the scope of its retaliatory tariffs.
• After the February tariffs were imposed, China announced certain retaliatory measures, including export controls on critical minerals, the addition of US companies PVH and Illumina to China’s “Unreliable Entity List” (UEL), new antitrust investigations against US companies, and additional tariffs on US coal, liquefied natural gas, crude oil, agricultural machinery, and certain automobiles. China announced additional retaliatory measures on March 4, effective on March 4, including the addition of 10 US companies to China’s UEL, the imposition of export controls impacting 15 US companies, and placing additional restrictions on Illumina. China also plans to impose 15% tariffs on a range of US agricultural products, effective March 10.

What happens if Canada/Mexico/China retaliates?

• The EO states that if the targeted countries retaliate, “the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.” Thus, it is possible that we will see a cycle of retaliation and counter-retaliation similar to what occurred when President Trump imposed the Section 301 duties on China in his first term. This was not sufficient to spur an agreement between the United States and China to eliminate their respective tariffs. It seems more likely there will be agreements reached with Canada and Mexico at some point.

WilmerHale is closely monitoring these developments and is prepared to advise clients on how to anticipate and respond to events as they occur.