This is a rapidly changing environment. Our team will continue to monitor developments and share updates as negotiations continue.
February 4 Update: The U.S. and Mexico reached a deal to delay a 25% tariff on Mexican imports for one month, with Mexico agreeing to deploy 10,000 National Guard troops to its northern border to combat drug trafficking, including fentanyl. Mexican President Claudia Sheinbaum announced the security measures, while Trump confirmed ongoing negotiations led by senior U.S. officials. The situation mirrors Trump’s previous tariff threats against Mexico during his first term, resolved after Mexico agreed to bolster border security.
Canada will also see a one-month delay in tariff implementation, with Prime Minister Justin Trudeau posting to X to summarize his productive conversation with President Trump. Continued discussions follow Prime Minister Trudeau’s announcement of retaliatory tariffs on $155 billion goods, with a public comment period for remission requests to provide relief on American exports.
Beijing responded to President Trump’s 10% tariffs by imposing up to 15% tariffs on select U.S. imports, including liquefied natural gas and coal, and 10% tariffs on imports, including crude oil, pickup trucks, agricultural machinery, and large-displacement cars. The response also includes tightening export controls on rare metals and launching an anti-monopoly probe into Google and other American firms. China’s measures, set to take effect on February 10, were framed as targeted and measured. Trump has stated that he expects to speak with President Xi Jinping in the next few days, leaving room for negotiation similar to that of Canada and Mexico.
Additionally, Beijing filed a WTO complaint, criticizing the U.S. tariffs as violations of trade rules and detrimental to economic cooperation. Details on the duties were posted with the Federal Register related to China.
February 3 Update:
President Trump announced a 25% tariff on Canadian and Mexican goods, citing concerns over illegal immigration and fentanyl. Energy products are also subject to the increase but at a reduced 10% tariff rate. All imports to the United States from the three countries outlined will see an increase in their tariff rate. Additionally, Trump imposed an additional 10% tariff on Chinese imports, aiming to address issues such as illegal immigration and drug trafficking, particularly the influx of fentanyl. This action marks the beginning of a renewed trade conflict with China, following similar disputes during his first term.
When Do Tariffs Go Into Effect?
A White House official announced that tariffs would take effect on Tuesday, February 4. The Executive Order implementing the US tariffs includes an explicit escalatory mechanism for the further increase in the tariff rates in the event retaliatory measures are adopted by trading partners. It is not immediately apparent that there will be any process by which a company can apply for an exclusion. According to the EO, de minimis exemptions will not be eligible under these orders.
The duty rate starts for goods entered or withdrawn for consumption on or after 12:01 a.m. ET, February 4, 2025. Goods already in transit or loaded onto a vessel before 12:01 a.m. ET, February 1, 2025, are exempt, and importers must certify eligibility for the exemption to CBP.
What Executive Authority Is Being Used?
The Executive Order memorandum states that “The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA).” Under IEEPA, the president can impose tariffs or other trade measures by declaring a national emergency related to an unusual or extraordinary foreign threat, bypassing the investigation process required under Section 301 or Section 232.
Unlike Section 301, which mandates a detailed investigation by the U.S. Trade Representative into unfair trade practices, IEEPA allows the president to act immediately upon declaring an emergency. Similarly, Section 232 requires a Commerce Department investigation to assess whether imports threaten national security, which can delay implementation. In contrast, IEEPA’s lack of an investigation requirement enables faster imposition of tariffs or restrictions, making it a quicker tool for addressing economic or security threats.
Notably, these IEEPA authorities have never been used before. Therefore, legal challenges will likely arise from the novel exercise of the authorities.
Public Responses
Outgoing Prime Minister Justin Trudeau previously warned that if the U.S. imposes tariffs on Canadian exports, Canada will retaliate with dollar-for-dollar matching tariffs. Trudeau acknowledged that while Trump’s tariff threat may be part of a negotiation strategy, Canada is prepared to respond. He also noted that Canada has already planned a $1.3 billion investment in border security to address U.S. concerns about illegal immigration and fentanyl.
Mexican President Claudia Sheinbaum urged a measured approach and a retaliation plan in response to the plans laid out on Friday. On Saturday, Canada’s Minister of Energy and Natural Resources, Jonathan Wilkinson, posted to X that “Canada has done nothing to provoke tariffs.”
Prime Minister Trudeau and President Sheinbaum will discuss this evening ahead of Trudeau’s press conference at 8:30 p.m. Eastern.
House Ways and Means Committee Chairman Jason Smith (R-MO) praised President Trump’s tariffs on imports from Canada, Mexico, and China, highlighting their role in protecting American communities and addressing illegal drug and immigration crises. Smith emphasized the tariffs' potential to generate billions in revenue, citing previous Chinese tariffs that brought in over $40 billion annually. In contrast, Senate Democratic Leader Chuck Schumer (D-NY) criticized the tariffs, warning that they would increase the costs for American consumers of essentials like groceries, cars, and gas. Schumer called for targeted actions against unfair competitors like China rather than measures that could harm American families and strain relations with allies.
The United States Chamber of Commerce commented on the impact of the increased tariffs, stating that "The President is right to focus on major problems like our broken border and the scourge of fentanyl, but the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains.”
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Are you impacted by the tariffs levied on Canada and Mexico? Please contact Sarah Helton, Michael Best Strategies’ Trade Practice Lead at sarah.helton@michaelbest.com for assistance.