New Trump Administration tariffs on Canada, Mexico, and China

On February 1, 2025, President Donald Trump signed three Executive Orders (EOs) instituting sweeping new tariffs on all goods imported from Canada, Mexico, and China. President Trump enacted the tariffs pursuant to the International Emergency Economic Powers Act (IEEPA), based on his determination that illegal immigration and drug trafficking, particularly fentanyl, constitute an extraordinary threat and national emergency under the National Emergencies Act (NEA). 

The EOs impose an additional 25-percent duty on all imports from Mexico, an additional 25-percent duty on all imports from Canada – except energy and energy resources from Canada, which will be subject to a lower 10-percent additional duty – and an additional 10-percent duty on all imports from China. Canada, Mexico, and China have all announced retaliatory measures, detailed below. These tariffs were slated to take effect February 4, 2025 and to continue indefinitely; however, on February 3, 2025, the Trump Administration announced it would delay the imposition of tariffs on Mexico and Canada for one month, following Mexico’s commitment to send 10,000 soldiers to its US border to address drug trafficking and Canada’s commitment to do the same, along with appointing a fentanyl czar, listing cartels as terrorists, and creating a US-Canada Joint Strike Force to police the border.

Scope and duration of US tariffs

As noted above, the new tariffs would affect all imports from the targeted countries. The new tariffs, like all tariffs, are the responsibility of the importing party, who pays the applicable duty. The US-based importer may then either pass this increased cost on to the consumer via higher prices or negotiate prices with the foreign manufacturer to offset the tariff costs. Notably, these new tariffs are in addition to any existing duties on imports from the targeted countries. The EOs also state that the section 321 de minimis exemption that currently allows most imports valued at under USD800 to enter duty-free will not be available for products from Mexico, Canada, and China that are subject to these new tariffs. The EOs do not include any mechanism for seeking exemptions to the new tariffs, though it is possible that the Trump Administration may create such a mechanism at a later date. Additionally, no drawback will be allowed on these duties.

The EOs contain a so-called “retaliation” provision that signals that the President may increase or expand the tariffs in response to retaliatory measures by the targeted country. If they are ultimately imposed, the duration of the tariffs will likely depend on whether there are further concessions or progress towards a deal addressing the immigration and drug trafficking concerns the Trump Administration has raised. 

Impacts

The new tariffs would impose blanket duties on the US’s three largest trading partners, accounting for over 40 percent of US foreign trade totaling over USD1.6 trillion, and, as such, many anticipate significant economic impacts on a number of key industries in both the US and target countries. Some of these key industries are highlighted below:[1] 

• Automotive: US automakers import hundreds of billions of dollars’ worth of finished automobiles, equipment, and components into the US from Mexico and Canada. Several major automakers manufacture up to 40 percent of their North American cars and trucks in Canada and Mexico, making them particularly vulnerable to tariffs.[2] In addition, some vehicle components may cross the borders between the US and Mexico or Canada multiple times before being incorporated in a fully assembled final vehicle.[3]
  
  
• Energy: The US imports roughly 40 percent of its crude oil, with Canada and Mexico supplying more than 70 percent of US crude oil imports – Canada accounts for nearly 60 percent alone.[4]
  
  
• Food: Mexico is the largest source of fresh produce for the US, supplying over 60 percent of US vegetable imports and nearly 50 percent of US fruit and nut imports.[5]
  
  
• Agriculture: The three largest importers of US agricultural products are China, Mexico, and Canada, totaling nearly USD100 billion annually.[6] Retaliatory tariffs could impact exports to these key US trade partners.
  
  
• Electronics and technology: The US imports a significant amount of its consumer electronics – including roughly 80 percent of smartphones, video game consoles, and laptops – and other technological components from China.[7] In recent years, many electronics manufacturers have moved their production facilities to Mexico to avoid policies targeting Chinese imports. 

Response from Canada, Mexico and China

While Mexico and Canada have already struck deals to delay the implementation of tariffs, China has promised to challenge Trump’s tariffs at the World Trade Organization but stopped short of imposing retaliatory tariffs at this point.[8]

Canada’s retaliatory tariffs

In a statement released on February 3 following a call with President Trump, Canadian Prime Minister Trudeau announced that: Proposed tariffs will be paused for at least 30 days while we work together. While the development does not specify which tariffs will be paused, it is presumed that both countries will pause their planned tariffs during the 30-day period.

In response to the EOs, on February 2, 2025, Canada’s Minister of Finance and Intergovernmental Affairs, Dominic LeBlanc, announced a 25-percent tariff on goods imported from the US, originally planned to go into effect on February 4, 2025, in the United States Surtax Order (2025).[9] These tariffs would have been effective as long as the tariffs made in the US EOs continue.

The first phase of Canadian tariffs, originally planned to be effective February 4, 2025, target approximately CAD 30 billion (~USD21 billion) in US goods. A second phase was also planned to target an additional CAD125 billion (~USD86 billion) in goods and would have been implemented following a 21-day public comment period. The first phase of tariffs on US goods includes a range of consumer goods both durable and foodstuffs, such as orange juice and coffee, poultry, fruit, alcoholic products, appliances, motorcycles, apparel, and cosmetics. The second phase is set to include even more consumer goods in addition to commercial goods and raw materials, such as passenger and commercial vehicles; steel and aluminum products; aerospace products; additional fruits and vegetables; and beef, pork, and dairy products.

The Canada Border Services Agency, which is responsible for the administration of tariffs, issued a customs notice, which contains additional details as to how these tariffs would be enforced. Like their US counterparts, these tariffs would be addition to any other duties owed on the goods and would be paid by the importing party.

While the initial phase of tariffs was planned to be effective February 4, 2025, it was not set to apply to goods that were in transit to Canada or were in a sufferance warehouse in Canada on the day the tariffs came into effect. The tariffs originally planned to come into effect on February 4 tariffs would apply to goods classified under chapter 99 of the Schedule to Canada’s Customs Tariff Schedule – special classification provisions, except for goods temporarily exported to Canada or exported for repair. However, these tariffs would not apply to most goods classified in Chapter 98. 

Canada’s duties relief and duty drawback programs would have remained available for tariffs paid or payable, subject to the provisions of the United States-Canada-Mexico Agreement (USMCA).

Impacts of Canadian retaliatory tariffs

These measures, if implemented, are likely to have impacts on Canadian businesses and consumers alike. In its original  announcement of the tariffs, the Canadian government added that it would be taking measures to reduce the impact felt by workers and businesses, including a remission process for businesses to request exceptional relief from tariffs on US products in certain specific circumstances, where, for example, inputs cannot be reasonably sourced from outside the US or where such tariffs would have severe adverse effects on the Canadian economy. 

What to expect in Canada

Considering the possible impact on Canadian businesses and consumers, the Canadian government may implement other forms of economic relief; however, this will depend on the duration and effect of the measures already taken. 

Like the federal government, provincial governments have denounced the tariffs imposed by the US and may take economic measures of their own. For example, Quebec and Ontario have already removed alcoholic products imported from the US from the shelves of their provincially run liquor stores.[10] The governments of British Columbia and Quebec government have also taken measures to reduce the likelihood of contracting with US suppliers, either by introducing additional financial burdens for US contractors or by reducing the barriers to entry for their Canadian counterparts.[11] Provincial governments may hold off on future action and reverse current measures while the tariffs remain suspended.

In addition, it was expected that Canada will challenge the imposition of these tariffs with the World Trade Organization.

Going forward

These new tariffs on Canada, Mexico, and China will have significant impacts on a broad range of US entities and consumers, as well as their counterparts in the targeted countries. As these countries unveil additional retaliatory measures, and the Trump Administration responds in turn, we could see an escalation in global trade tension – the extent of which will depend on the length of time the tariffs remain in place. Entities with exposure to cross-border supply chains are encouraged to take measures to assess their tariff liability, determine how these additional tariffs will affect their businesses, and identify potential duty mitigation methods. The future of a US–Canada–Mexico Agreement and similar-multilateral trade agreements between Canada, the US, and Mexico also remain uncertain at this time and may depend on the outcome and impacts of the trade measures that have been implemented and may be implemented in the future. 

Please reach out to DLA Piper’s team of trade and policy attorneys in its National Security and Global Trade, and Government Affairs and Public Policy practice groups – in the United States, Mexico, and Canada – to assist you in responding to these and other trade policy developments from the Trump Administration.

^{[1] https://www.usnews.com/news/best-countries/articles/which-countries-are-the-biggest-u-s-trade-partners
[2] https://www.nytimes.com/205/02/01/business/economy/tariffs-trump-automakers-canada-mexico.html
[3] Id.
[4] https://crsreports.congress.gov/product/pdf/IN/IN12488#:~:text=Canada%20and%20Mexico%20supplied%20more,and%20Mexico%20starting%20February%201. 
[5] http://www.ers.usda.gov/amber-waves/2024/october/growth-in-mexico-s-horticultural-exports-to-the-united-states-continued-even-as-new-u-s-food-safety-laws-took-effect#:~:text=Mexico%20is%20the%20largest%20single,U.S.%20fruit%20and%20nut%20imports.
[6] http://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/agricultural-trade#:~:text=The%20top%205%20markets%20for,and%20Canada%20at%20%2427.9%20billion.
[7] https://www.cnbc.com/2025/01/27/trump-tariffs-could-raise-prices-on-laptops-smartphones-and-ai-.html
[8] https://www.aljazeera.com/news/2025/2/2/global-alarm-condemnation-as-trump-tariffs-hit-mexico-canada-and-china
[9] https://www.canada.ca/en/department-finance/news/2025/02/government-of-canada-announces-next-steps-in-its-response-plan-to-unjustified-us-tariffs.html
[10] https://www.ctvnews.ca/toronto/article/lcbo-halts-us-liquor-sales-to-all-stores-restaurants-grocery-and-bars/ https://www.cbc.ca/news/canada/montreal/tariffs-quebec-legault-canada-us-1.7448404
[11] https://www.cbc.ca/news/canada/montreal/tariffs-quebec-legault-canada-us-1.7448404; https://news.gov.bc.ca/releases/2025PREM0014-000077}