Policy Alert: Trade & Tariffs Update

Mexico & Canada: Yesterday, the President imposed a new set of tariffs under the International Emergency Economic Powers Act (IEEPA) on Canadian and Mexican goods. The duties, which went into effect at midnight, are levied at a rate of 25%, with Canadian energy resources serving as the reported lone exception to that threshold at a lower 10% rate. President Trump has cited a lack of action by the Canadian and Mexican governments in tackling fentanyl and human migration flows emanating from both the southern and northern borders. In response, the Canadian government announced its own set of tariffs covering more than $20 billion in American products, with the threat of future expansion to that figure if the U.S. tariffs are still in place in the near future. The Mexican government is expected to announce its plans for retaliatory action today. In the coming weeks, it is expected that the U.S. government – through the interagency process and led by U.S. Customs and Border Protection (CBP) – will issue a Federal Register notice containing additional details regarding the exact products (via the Harmonized Tariff Schedule) covered under the orders. Any subsequent exclusion mechanism or process related to the imposition of Canada and Mexico tariffs would also likely be covered under the Federal Register notice. It is also worth noting that under the President’s orders, duty drawback and duty-free de minimis treatment are not available.

China: Separately, President Trump signed yesterday an order doubling the duties that went into effect last month on Chinese imports from 10 percent to 20 percent. In escalating the tariff level on Chinese imports, the President cited the sustained influx of synthetic opioids, including fentanyl, and the PRC’s inadequate steps to alleviate the crisis. In response, China announced that it will impose additional tariffs on U.S. goods, primarily focused on agricultural products, at rates ranging from 10-15%. The Chinese duties are expected to take effect on March 10. The Chinese government also added several U.S. entities to additional export control lists and is filing a new proceeding at the World Trade Organization.

EU: President Trump has indicated that new tariffs on EU trading partners may be forthcoming due to existing tariff and non-tariff trade barriers, including value added taxes (VAT). EU leaders have vowed to retaliate if the U.S. moves forward with tariff action against its members.

What’s Next:

• On March 12, all imports of steel and aluminum products will be subject to 25% import tariffs under Section 232.
• By April 1, federal agencies covered under President Trump’s America First Trade Policy EO will submit their findings and recommendations to the White House. Pursuant to the EO, federal agencies have been tasked with the following:
  • Commerce shall investigate the causes of the U.S. annual trade deficit.
  • Treasury shall investigate the feasibility of creating an External Revenue Service (ERS) for the purpose of collecting duties.
  • USTR shall identify unfair and non-reciprocal trade practices (note that USTR is currently seeking public input from the general public, due March 11).
  • USTR shall commence the public consultation process as it relates to the USMCA, effectively kicking off the renegotiation process.
  • Treasury shall assess currency rates of exchange and currency manipulation.
  • Commerce shall review antidumping and countervailing duty laws and consider modifications.
  • Multiple agencies shall assess trade relations and practices employed by the People’s Republic of China.
  • Commerce and State shall review current existing export control authorities and ICTS rulemakings.
• By April 2, the President may announce new tariffs on automobile, semiconductor, and pharmaceutical imports, at a rumored rate of 25% or higher.
• By November 22, the Commerce Department will complete its investigation into copper imports under a new Section 232 directive, signed by the President last week.

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