Pursuant to a presidential executive order signed on April 2, 2025, effective April 5, 2025, all articles imported into the United States will be subject to a 10% ad valorem duty. On April 9, 2025, all goods, except those identified in Annex II, and imported from the countries identified in Annex I of the Reciprocal Tariff Executive Order, will be subject to the identified, country-specific reciprocal tariffs.
Impact on earlier sector/country-specific executive orders. Sector products identified in earlier executive orders, such as steel, aluminum, automobiles, and automobile parts, along with products listed in Annex II of this executive order, aren’t subject to these ad valorem tariffs. Companies need to be vigilant as to how the reciprocal tariffs are coordinated with these earlier executive orders and provisions created in the April 2 executive order. For example, the April 2 executive order states if a product is at least 20% U.S.-content originating, companies can apply the reciprocal country tariffs to only the non-U.S. product value. Taking advantage of this provision is a viable tariff mitigation strategy.
USMCA-compliant material. The April 2 reciprocal tariff order carries over the duty-free provision of USMCA-compliant goods from Canada and Mexico. Noncompliant goods follow the previous executive order provision of a 25% tariff (with certain exceptions for energy and potash from Canada at 10%). If the original executive orders covering Canada and Mexico are terminated or suspended, the tariff rate will revert to 12% for noncompliant USMCA content (except energy, energy resources, or potash from Canada).
Duty-free de minimis provisions. De minimis provisions from earlier executive orders remain in place until the Secretary of Commerce deems processes are in place to collect the duties of packages with declared values less than $800. This includes the accompanying executive order (see below) that eliminated the de minimis provisions for the People’s Republic of China, including Hong Kong and the Macau Special Administrative Region.
Time period of tariffs. The executive order states that the president may reduce imposed tariffs for countries making remedies to “non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters.”
What we’re tracking
- Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits – The White House; posted April 2, 2025, to whitehouse.gov.
- Annex-I.pdf; posted April 2, 2025, to whitehouse.gov as part of the “Regulating Imports with a Reciprocal Tariff” executive order.
- Annex-II.pdf; posted April 2, 2025, to whitehouse.gov as part of the “Regulating Imports with a Reciprocal Tariff” executive order.
- Further Amendment to Duties Addressing the Synthetic Opioid Supply Chain in the People's Republic of China as Applied to Low-Value Imports – The White House; posted April 2, 2025, to whitehouse.gov.
Legal basis. The reciprocal tariffs included in this executive order are established under the Trade Expansion Act of 1962, section 232, with references to the original Jan. 20, 2025, Department of Commerce report, stating threats to national security due to imported goods and actions since 2019 have not alleviated the underlying conditions and threats.
Why it’s important
Immediately, as of April 5, 2025, companies need to assess their bills of material (BOMs) for specific materials and countries of origin to manage their tariff liability. Generally, all goods from all countries are assessed at a 10% tariff except the products in Annex II, as noted above. Generally, Annex II products are inputs to industrial production and the construction trade that may not be readily available from U.S. sources. However, companies need to validate their BOMs against the Harmonized Tariff Schedule, the countries of origin, and, where applicable, USMCA provisions to calculate the additional tariffs laid out in this executive order.
Domestic manufacturers with domestic supply chains will be impacted less, but the cost impacts will ripple throughout their supply chain creating the potential for financial distress. This financial distress will show up either through reduced revenues or compressed margins due to the increased costs of tariffs. For many, it will come down to an issue of timing — how quickly the market can absorb price increases — and commercial leverage — what power a manufacturer has to pass along cost increases versus absorbing this shock.
How it impacts you
These tariffs create the potential for greater production schedule volatility in the short term and reduced demand in the longer term. There’s potential for greater commercial tension between buyers and sellers at every level concerning cost recovery strategies.
Additionally, it’s important to understand the potential impact of tariffs compounding on your cost structure. Manufacturers must know where the reciprocal tariffs are additive on imported product and how previous steel, aluminum, Canadian, Mexican, and Chinese tariffs are coordinated to determine tariff exposure.
Manufacturers must also monitor the retaliatory actions by other countries, or potentially import restrictions, that may increase costs and prices and stay current on the effect those actions may have on demand and revenue projections.
There will be greater demands to understand and document the country of origin and accurately apply trade terms such as “substantially transformed.” It’s clear in this proclamation and previous executive orders that there will be an increased level of enforcement associated with this administration.
What to expect next
Companies need to monitor the Federal Register (federalregister.gov) as Annex I and Annex II are open to potential revisions and the White House’s official website for continued trade-related announcements. For example, the executive order states that the Secretary of Commerce shall provide for including additional automotive parts at the request of a domestic producer within 90 days (July 2, 2025). More broadly, the Secretary of Commerce needs to issue a determination within 60 days of receiving a request from an association or company, that, “in the Secretary’s opinion, might indicate the need for further action under Section 232 with respect to such imports.” In the first Trump administration, there was a comprehensive and public disclosure and public opinion structure. It’s not known how public the second Trump administration will be. Companies should keep in close contact with their customs brokers and lawyers, and trade associations for this type of intelligence.
