What we’re tracking
- Mexico: The original Feb. 1, 2025 Executive Order Imposing Duties to Address the Situation at Our Southern Border imposes a 25% ad valoreum rate to the imports of articles that are products of Mexico. It was paused on Feb. 3, 2025 for 30 days.
- Canada: The original Feb. 1, 2025 Executive Order Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border imposes a 25% ad valoreum rate to the import of all articles that are products of Canada, except for energy products which have a 10% ad valoreum rate. It was paused on Feb. 3, 2025 for 30 days.
- China: The original Feb. 1, 2025 Executive Order Imposing Duties to Address the Synthetic Opioid Supply Chain in the People's Republic of China which is currently in place, is amended to read 20% ad valoreum in place of 10% ad valoreum.
The tariffs created through these executive orders are authorized under the International Emergency Economic Powers Act and relate specifically to these countries primarily to address opioid drug imports into the United States, and immigration issues on the Mexican and Canadian borders.
We assume the final language will include a statement such as “such rate of duty shall apply with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern Time on March 4, 2025.”
Why it’s important
These tariffs, paid on customs-declared value, are inclusive across all products (along with the energy breakout for Canada). In 2023, the U.S. imported $485 billion of goods from Mexico, $428 billion of goods from China, and $427 billion of goods from Canada. Imported material from these countries that are converted into your company’s final goods directly by you or through U.S. suppliers will incur this added cost on the value of the imported good. You need to know your bill of material and your direct and sub-tier suppliers’ country of origin to calculate your exposure to these incremental tariffs. We note that these tariffs are additive to the 25% tariffs on steel and aluminum announced in February, and they’ll go into effect on March 12, 2025.
How it impacts you
Similar to the other tariff rules coming from the administration, we assume there will be no duty drawback preventing you from reclaiming these tariff costs if you export your final good. You may not be in a position contractually or through negotiation leverage to recover these additional costs to your cost structure from customers or suppliers.
What to expect next
The duration of these tariffs are unknown. There’s no clear definition of a national emergency or metrics the administration would use to declare these trading partners have succeeded in helping the U.S. stem, as noted in the executive order, its public health crisis associated to fentanyl and other illicit drugs.
In addition, your products may incur retaliatory tariffs if you export finished or intracompany goods to Canada, Mexico, or China. Canada has announced it’s prepared to place tariffs on up to $155 billion worth of U.S. goods. These are primarily agricultural goods, but also include motor vehicle tires, motorcycles, apparel, cosmetics, and other products. The Canadian government published this list covering $30 billion of goods at “List of products from the United States subject to 25 per cent tariffs effective March 4, 2025” The Mexican government has yet to disclose the details of its retaliation plan or provide a list of goods as of early February, and no documents have been released so far. Mexico has indicated its plan for retaliatory measures will be announced on March 9, 2025.
China has implemented various responses including tariffs and export controls. The tariffs target agricultural goods such as corn and soybeans. Exports were reported to target specific companies as well as critical materials.
