US tariffs on Mexico and Canada take effect, with some temporary exceptions – and are met with retaliatory action
Just after midnight on March 4, 2025, President Donald Trump began to implement new tariffs on goods imported from Mexico, Canada, and China – the three largest trading partners of the US, accounting for over 40 percent of US foreign trade totaling over USD1.6 trillion. 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 Trump Administration imposed 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. The President quickly paused the tariffs on goods from Canada and Mexico that qualify for preferential treatment under the United States-Mexico-Canada Agreement (USMCA).
Canada and Mexico have initiated their own set of retaliatory measures against the US; we expect more details to develop in the coming days. This alert describes the actions taken by all three countries.
Background
Back on February 1, 2025, the President signed three Executive Orders (EOs) targeting the three countries based on his determination that they were not doing enough to halt illegal immigration and drug trafficking, particularly fentanyl, and that this constituted an extraordinary threat and national emergency under the National Emergencies Act.
On February 3, 2025, President Trump agreed to suspend the tariffs on Canada and Mexico for 30 days after speaking with those nations’ leaders and securing commitments to address the Administration’s concerns that prompted the new duties. These included 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.
That pause has now expired, and, according to a White House fact sheet, despite President Trump giving both countries “ample opportunity to curb the dangerous cartel activity and influx of lethal drugs flowing into our country, they have failed to adequately address the situation.”
Effective March 7, 2025, President Trump paused the additional 25-percent tariffs for one month on goods from Canada and Mexico that qualify for preferential treatment under USMCA. He also lowered the tariff from 25 percent to 10 percent on potash from Mexico and Canada that does not qualify for the pause under USMCA.
An additional 10-percent tariff on China went into effect as scheduled on February 4, 2025. The latest action by the White House adds another 10 percent on China effective March 4, 2025 – on top of preexisting levies that were imposed in the first Trump presidency and expanded during the Biden Administration.
Scope and duration of US tariffs
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.
Some observers, noting President Trump’s long-time negotiating style, see the tariffs as a bargaining chip to advance his foreign policy goals and believe the full scope of the tariffs may not stay in place for an extended period of time.
On the day the new duties were imposed, Commerce Secretary Howard Lutnick stressed that the tariffs were being wielded on behalf of a “drug war” and “not a trade war.” He added with regard to Canada and Mexico: “If they can stop the flow of fentanyl, and they can prove to the president they can stop the flow of fentanyl, then of course the president can remove these tariffs.”
As noted above, the new tariffs affect all imports from the targeted countries. They are, like all tariffs, the responsibility of the importing party, who pays the applicable duty. The US-based importer may then pass this increased cost on to the consumer via higher prices, absorb the additional cost itself, negotiate for its foreign supplier to absorb the cost, or pursue some combination of those three choices. Notably, these new tariffs are in addition to any existing duties on imports from the targeted countries.
The EOs also state that, for products from Mexico, Canada, and China that are subject to these new tariffs, the section 321 de minimis exemption that currently allows most imports valued at under USD800 to enter duty-free will only be available until adequate systems can be put in place to process these low-value imports. Once the Secretary of Commerce notifies the President that these systems are in place, the de minimis treatment will not be available for such imports.
Further, the EOs do not include any mechanism for seeking exclusions from the new tariffs, though it is possible that the Trump Administration may create such a mechanism at a later date. Additionally, no duty drawback will be allowed on these duties.
Retaliation from Canada, Mexico, and China
The imposition of the tariffs has been met with strong condemnations from Ottawa, Mexico City, and Beijing, with those nations’ leaders announcing retaliatory tariffs. Trump’s EOs also 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. The President’s initial response to the Canadian counter-tariffs was to threaten to add reciprocal tariffs “by a like amount.”
Canada’s retaliatory tariffs
In response to the US tariffs on March 4, 2025, Dominic LeBlanc, Canada’s Minister of Finance and Intergovernmental Affairs, and Mélanie Joly, Canada’s Minister of Foreign Affairs, announced a 25-percent tariff on goods imported from the US, effective March 4, 2025, in the United States Surtax Order (2025-1). These tariffs will be effective as long as the tariffs imposed by the US EOs continue.
The first phase of Canadian tariffs, effective March 4, 2025, target approximately CAD 30 billion (approximately USD 21 billion) in US goods. A second phase is also planned to target an additional CAD 125 billion (approximately USD 87 billion) in goods and will be 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 additional consumer goods as well as commercial goods and raw materials, such as passenger and commercial vehicles; electronics; steel and aluminum products; aerospace products; additional fruits and vegetables; and beef, pork, and dairy products. Canada has stated that scope of these initial tariffs may increase if new tariffs are imposed by the US.
The Canada Border Services Agency, which is responsible for the administration of tariffs, issued a customs notice containing additional details about 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. These tariffs and any exemptions thereto must be accounted for by importers when making a Commercial Accounting Declaration with CBSA.
While the initial phase of tariffs is effective March 4, 2025, they do not apply to goods that were in transit to Canada on the day the tariffs came into effect or otherwise subject to exceptional treatment, such as those brought temporarily to Canada for repairs or alterations.
Canada’s duties relief and duty drawback programs remain available for tariffs paid or payable, subject to the provisions of the USMCA.
Impacts of Canadian retaliatory tariffs
These measures are likely to impact Canadian businesses and consumers alike. In its announcement of the retaliatory tariffs, the Canadian government confirmed that it would be taking measures to reduce the impact felt by workers and businesses, including through the introduction of a remissions process for businesses to request exceptional relief from tariffs on US products in certain specific circumstances, where inputs cannot be reasonably sourced from outside the US or where such tariffs would have severe adverse effects on the Canadian economy. Such exceptional relief is most likely to be granted where the primary rationale of the tariffs is outweighed by public policy reasons in the factual circumstances.
What else to expect in Canada
Considering the possible impact on Canadian businesses and consumers, the Canadian government has announced plans 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 non-tariff economic measures of their own. Many provincial governments have removed alcoholic products imported from the US from the shelves of their provincially run liquor stores. Provincial governments such as those of Ontario and Nova Scotia have stated that they intend to limit US companies’ ability to bid on procurement contracts and that current contracts with US companies may be terminated. Further, the governments of Quebec and Ontario have stated that they would considering surtaxes or limiting energy exports to the US. Many provinces have also announced plans to support businesses affected by tariffs, while Provincial Labour Market Ministers met in late February to discuss a coordinated response to US tariffs.
When the US tariffs were originally announced in early February 2025, the governments of British Columbia and Quebec took 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.
In addition, Canada will challenge these tariffs with the World Trade Organization and through USMCA mechanisms.
Mexico’s retaliatory tariff and non-tariff measures
In her daily press conference of March 4, 2025, Mexico President Claudia Sheinbaum Pardo read a press release criticizing the imposition of tariffs by the US and indicating that Mexico will respond “with tariff and non-tariff measures,” which will be announced on March 9, 2025 at a public rally. While Mexico’s future actions remain uncertain, the outcome of this week’s negotiations could define the country’s response. In her press conference, President Sheinbaum mentioned that “there is a permanent communication among the distinct areas including security and trade,” that she was going to “wait and see,” and that there is a “plan A, plan B, plan C and plan D.”
Impacts of Mexican retaliatory measures
While still undefined, any tariff or non-tariff restrictions that Mexico may impose will likely impact an array of industries and consumers in general. Alongside such restrictions, the country may announce certain relief measures to reduce their impact on consumers and businesses.
China’s response
China’s Ministry of Commerce announced retaliatory tariffs on some US goods and other countermeasures, and singled out 15 American companies for punitive trade measures, citing the need to “safeguard national security and interests.” Ten other US companies have been added to an “unreliable entities list,” preventing them from doing business in China. China’s customs agency also issued orders to curb imports of lumber and soybeans from the US into China.
Going forward
These new US tariffs on Canada, Mexico, and China will likely have significant impacts on a broad range of US entities and consumers, as well as on 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. If these tariffs prove durable, supply chain shifts may also implicate trade with other countries.
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 work with counsel to identify potential duty mitigation methods. The future of the USMCA and similar multilateral trade agreements between Canada, the US, and Mexico also remain uncertain, and may depend on the outcome and impacts of the trade measures that have been implemented or may be implemented in the future.
Please contact DLA Piper’s team of trade and policy attorneys in its National Security and Global Trade and Government Affairs and Public Policy practice groups – based in the US, Canada, and Mexico – to assist you in responding to these and other trade policy developments from the Trump Administration.
