On April 2, 2025, President Donald Trump issued an executive order (the Reciprocal Tariffs Executive Order or Executive Order) imposing a 10% baseline reciprocal tariff on nearly all U.S. trading partners, effective April 5, and an additional reciprocal tariff on 57 countries, effective April 9. Seven of the United States’ top ten trading partners are among the 57 countries facing an additional reciprocal tariff: 34% for China (including the baseline tariff and the additional tariff), 20% for the European Union, 46% for Vietnam, 32% for Taiwan, 24% for Japan, 27% for India, and 26% for South Korea. Other than exemptions for duties imposed pursuant to Section 232 actions and for certain enumerated products, the tariffs are additive (with particular significance for U.S.-China trade).

Of the three other top U.S. trading partners, the United Kingdom will incur only the baseline reciprocal tariff, and Canada and Mexico will be exempt from all the new tariffs. The preexisting 25% tariff on Canada and Mexico is still in effect, and goods that comply with the U.S.-Mexico-Canada Agreement (USMCA) will continue to receive preferential treatment and are exempt.

Importantly, apart from Canada and Mexico, every U.S. trading partner is slated to be subject to additional tariffs.

President Trump also took steps to eliminate de minimis treatment for all low-value imports. Pursuant to a separate executive order, the President ended de minimis treatment for China and Hong Kong, effective May 2. De minimis treatment for low-value imports from the rest of the world will end at a date to be determined later.

Background

On February 13, 2025, President Trump issued an executive memorandum titled “Reciprocal Trade and Tariffs” (the Reciprocal Trade Memorandum). The Memorandum stated that the Trump Administration would introduce the “Fair and Reciprocal Plan” to reduce the large trade deficit in goods and address unfair and unbalanced trade with trading partners.

The Reciprocal Trade Memorandum provided that the Trump Administration would determine the reciprocal tariff rate by assessing each country’s “non-reciprocal trade arrangement,” which was broadly defined to include tariffs; unfair, discriminatory, or extraterritorial taxes, including value-added taxes; nontariff barriers, including subsidies and burdensome regulatory requirements in foreign markets; exchange rate policies; and any other practice that is judged to impose an unfair limitation on market access or any structural impediment to fair competition with the United States.

On April 2, President Trump announced a 10% across-the-board tariff on all countries and an individualized, higher tariff on countries with which the United States has large trade deficits. According to President Trump, the tariff rates were calculated based on an assessment of “approximately half of what they are and have been charging us,” or one-half of the tariffs and nontariff barriers (including currency manipulation) that the Administration believes each country maintains with respect to the United States.

Following the announcement, the Office of the U.S. Trade Representative (USTR) provided further detail on the tariff rate calculations. Per this guidance, the change in tariff rate that “results in a bilateral trade balance of zero” was calculated by dividing the U.S. trade deficit with a given country by the product of that country’s total imports to the United States, price elasticity of import demand (ε), and the pass-through from tariffs to import prices (φ). Based on the parameter values selected (ε = 4 and φ = 0.25), the equation can be simplified to the trade deficit with a given country divided by that country’s total imports to the United States.

Annex I of the Reciprocal Tariffs Executive Order, included below, provides the country-specific reciprocal tariff rates (inclusive of the 10% baseline duty). Conforming changes to the Harmonized Tariff Schedule are reflected in Annex III. We note that, as of April 3, these rates have been slightly revised from those released immediately following President Trump’s announcement.

“Stackable” Duties

The reciprocal tariffs are additive, meaning that they apply in addition to most existing tariffs – including, with respect to China, Section 301 duties and duties recently imposed under the fentanyl/migration orders pursuant to the International Emergency Economic Powers Act (IEEPA). The Executive Order provides that “the rates of duty established by this order are in addition to any other duties, fees, taxes, exactions, or charges, applicable to such imported articles.” 

U.S. Content Stepdown

The reciprocal tariffs are levied only on an article’s non-U.S. content provided that at least 20% of the article’s value is U.S.-originating. “U.S. content” is defined as “the value of an article attributable to the components produced entirely, or substantially transformed in, the United States.” The Executive Order directs U.S. Customs and Border Protection (CBP) to verify and ascertain an article’s U.S. content value and substantial transformation in the United States. This provision would give companies the opportunity to seek lower reciprocal tariff duties when importing a product that is partially U.S.-originating.

Duties on Canada and Mexico

The Reciprocal Tariffs Executive Order indicates that the prior fentanyl/migration IEEPA orders remain in effect, and the new reciprocal tariffs do not apply to Canada or Mexico for the time being. Specifically:

• The rate of duty for USMCA-originating goods will be 0%.
• The rate of duty for non-USMCA-originating goods will continue to be 25%.
• The rate of duty for non-USMCA-originating energy or energy resources and potash imported from Canada will be 10%.

Additionally, duties for USMCA-originating goods and non-USMCA-originating goods will be 0% and 12%, respectively, in the event that the previous executive orders imposing tariffs on Canada and Mexico are terminated.

Excluded Products and Modification

Section 3(b) and Annex II of the Reciprocal Tariffs Executive Order set forth certain categories of goods that will not be subject to the reciprocal tariffs:

• All articles under 50 U.S.C. 1702(b) that are subject to IEEPA’s exceptions:
  • postal, telegraphic, telephonic, or other personal communication that 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 exceptions)
  • 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 (with certain exemptions)
  • accompanied baggage for personal use and acquisition of goods or services for personal use
• All articles and derivatives of steel and aluminum subject to the Section 232 duties pursuant to Proclamations 9704, 9705, 9980, 10895, and 10896, as amended
• All automobiles and automotive parts subject to the Section 232 duties pursuant to Proclamation 10908
• Copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products
• All articles from a trading partner subject to the rates provided in Column 2 of the Harmonized Tariff Schedule of the United States (HTSUS) (g., Russia, North Korea)
• All articles that may become subject to duties pursuant to future Section 232 actions

Additionally, the Executive Order specifies scenarios in which the President may modify the reciprocal tariffs:

• The Secretary of Commerce and USTR may recommend additional action if the reciprocal tariffs are not effective in resolving the overall trade deficit or the U.S. trading partners’ nonreciprocal trade arrangements.
• If any trading partner retaliates against the reciprocal tariffs (through duties on U.S. exports or other measures), the President may modify the HTSUS to increase or expand the scope of the duties.
• If any trading partner takes “significant steps” to address nonreciprocal trade agreements and “align sufficiently with the United States on economic and national security matters,” the President may modify the HTSUS to decrease or limit the scope of the duties.
• If U.S. manufacturing capacity and output worsen, the President may modify the HTSUS to increase duties.

The Executive Order does not provide for an exclusion process. 

Legal Authority

President Trump used IEEPA as the legal authority to impose the reciprocal tariffs, describing “large and persistent annual U.S. goods trade deficits” as a national emergency. IEEPA is a national security statute that has historically been used as the legal authority for imposing U.S. sanctions, among other things. This is the second tariff action that President Trump has initiated based on IEEPA. The first action – and the first time ever that IEEPA was used for tariffs – was the President’s decision to impose tariffs on Canada, Mexico, and China, citing their failures to address immigration and fentanyl.

Hours after the President announced the reciprocal tariffs, the U.S. Senate passed a joint resolution that would block the tariffs on Canada by terminating the national emergency that President Trump invoked to justify the tariffs. Although it is highly unlikely that the joint resolution will pass in the House of Representatives (given that the House has changed its rules to preclude a vote on such a measure), the bipartisan support for the resolution in the Senate – with four Republican senators voting “yea” – signals potential uncertainty in the future political dynamics between Congress and the President on the Administration’s trade and tariff policy.

Changes to De Minimis Treatment

President Trump also took sweeping actions to end the de minimis program that allows shipments worth $800 or less to enter the U.S. duty-free and with minimal customs checks. The Reciprocal Tariffs Executive Order provides that de minimis treatment will be eliminated once the Secretary of Commerce notifies the President that “adequate systems are in place” to process and collect duties from such shipments. 

On the same day, President Trump signed another executive order that eliminates de minimis treatment for shipments from China and Hong Kong, effective May 2. Previously, President Trump signed an executive order eliminating de minimis treatment for shipments from China, but he delayed the measure until the Secretary of Commerce provided notification that the “adequate systems are in place.” 

Reactions from U.S. Trading Partners

It is expected that some U.S. trading partners will retaliate against these new tariffs. Many – including Taiwan, Korea, Japan, Thailand, Israel, and Australia – expressed disappointment in the initial hours after the tariffs were announced. China went a step further, urging the United States to “immediately cancel” the tariffs and vowing to take “resolute countermeasures” to safeguard its rights and interests. The European Union indicated that it is preparing countermeasures that will go into effect if negotiations with the United States fail.

WilmerHale is closely monitoring these developments and is prepared to advise clients on how to navigate and mitigate the effects of the tariffs.