President Trump Announces World-Wide Reciprocal Tariffs

Time 10 Minute Read
April 3, 2025
Legal Update

In a “Liberation Day” speech on April 2, 2025, President Trump announced the imposition of world-wide reciprocal tariffs on the United States’ trading partners. The White House shortly thereafter released an Executive Order entitled “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits“ (the Reciprocal Tariffs E.O.). The President also issued a supplemental Executive Order titled “Further Amendment to Duties Addressing the Synthetic Opioid Supply Chain in the People’s Republic of China as Applied to Low-Value Imports“ that removes the $800 de minimis exception for goods sent to the US from China or Hong Kong (the China De Minimis E.O.).

According to the President, the Reciprocal Tariffs E.O. is aimed at addressing the US goods trade deficit through the imposition of reciprocal tariffs on imports from various trading partners. The order seeks to rebalance trade by enforcing higher tariffs on foreign goods, while also encouraging US manufacturing and protecting national security interests. The Administration has asserted that the tariffs are a response to long-standing trade imbalances, where foreign economic policies and non-reciprocal trade practices have contributed to deficits and undermined US industrial capacity.

Both Executive Orders utilize the International Emergency Economic Powers Act (IEEPA) to impose tariffs, a move that was unprecedented prior to this Administration. As this represents a novel use of IEEPA, the courts have yet to directly address the legal implications of imposing tariffs under this authority.

This alert outlines key provisions of the new Executive Orders and the potential implications for businesses and trade practices moving forward.

Reciprocal Tariff Rates

  1. Global 10% Tariff on All Imports: A 10% additional tariff will apply to all imports from all trading partners, unless specifically exempted.
  2. Higher Tariffs for Certain Countries: Higher country-specific tariff rates will apply to imports from certain trading partners listed in Annex I of the Reciprocal Tariffs E.O. The country-specific tariffs range from 11% (Democratic Republic of the Congo) to 50% (Lesotho).

    China is assessed a 34% tariff, while countries in the European Union have a 20% tariff. Tariff lists separately released on the White House X account include many smaller countries not included on Annex I, meaning Annex I could be subject to change. Neither Annex I nor the X account lists specify tariffs for Canada, Mexico, or Russia.
  3. Tariffs Are Additional to Other Duties: The new tariffs do not replace existing duties, fees, taxes, or charges. They stack on top of any other applicable trade measures, unless subject to specific exceptions.

Timing of Implementation

  • General 10% Tariff Implementation (April 5, 2025)
    • The 10% additional tariff will apply to all imported goods entering the US starting at 12:01 a.m. (EDT) on April 5, 2025.
    • This tariff applies to goods that are either entered for consumption (formally brought into the US market) or withdrawn from a warehouse for consumption on or after this date.
    • However, there is an exception: Goods that were already loaded onto a vessel at the port of origin and were in transit as of 12:01 a.m. on April 5, 2025, will not be subject to the additional tariff, even if they arrive and clear customs after this date.
  • Country-Specific Tariff Implementation (April 9, 2025)
    • The separate set of country-specific tariffs (as detailed in Annex I of the order) will take effect at 12:01 a.m. (EDT) on April 9, 2025.
    • These country-specific tariffs apply only to goods from specific trading partners listed in Annex I.
    • Like the general 10% tariff, these new duties apply to goods that are either entered for consumption or withdrawn from a warehouse for consumption on or after April 9, 2025.
    • Again, there is an exception: Goods that were already loaded onto a vessel and were in transit before 12:01 a.m. on April 9, 2025, will not be subject to the country-specific tariff, even if they arrive and clear customs after this date.

Goods Exempt From the New Tariffs

  1. National Security Exemptions: Goods covered under 50 USC. 1702(b), which generally includes essential humanitarian items such as food, medicine, and medical devices.
  2. Steel and Aluminum Products: Any steel or aluminum products (and their derivatives) that are already subject to Section 232 tariffs under previous Presidential proclamations, including:
  3. Automobiles and Auto Parts: Any automobiles and automotive parts that are already subject to Section 232 tariffs under Proclamation 10908 (2025).
  4. Future Section 232 Actions: Any goods that may be subjected to future Section 232 tariffs, meaning additional exemptions could apply if new trade restrictions are enacted under national security grounds.
  5. Specific Product Exemptions: Various goods explicitly exempted in Annex II of the Reciprocal Tariffs E.O., including:
    • Copper;
    • Pharmaceuticals;
    • Semiconductors;
    • Lumber articles;
    • Certain critical minerals; and
    • Energy and energy products, including electricity (note that electricity was already exempt from merchandise entry requirements, including paying import duties and fees).
  6. Goods Subject to Column 2 Tariffs: Any goods imported from a country that falls under Column 2 of the Harmonized Tariff Schedule of the United States (HTSUS), which applies to nations without normal trade relations with the US (i.e., Cuba, North Korea, Russia, and Belarus).

US Content Limitation

  1. Tariffs Apply Only to Non-US Content: If an imported product contains at least 20% US content, the new tariffs will apply only to the non-US portion of the product’s value. This means that products with significant US components or processing will have a lower effective tariff burden.
  2. Definition of US Content: “US content” includes materials or components that are: (1) entirely produced in the United States, or (2) substantially transformed in the United States, meaning they undergo a significant change in form, function, or character within the US.

Interaction Between New Tariffs and Existing Canada, Mexico and China Tariffs

  1. China: The new tariffs are added on top of the recent China IEEPA tariffs. The China De Minimis E.O. also confirms that the Secretary of Commerce now has adequate systems in place to collect tariff revenue and ends the duty-free de minimis treatment for goods from China and Hong Kong valued at or under $800, subjecting them to applicable duties.

    Postal items shipped to the US valued at or under $800 will face a duty rate of either 30% of their value or $25 per item, increasing to $50 after June 1, 2025. US Customs and Border Protection (CBP) may also require postal packages to go through formal entry procedures, in which case they will be subject to all applicable duties, taxes and fees.
  2. Canada and Mexico: The new tariffs will not be applied on top of the recent Canada and Mexico IEEPA tariffs.
    • If those tariffs are terminated, then: (1) United States Mexico Canada Agreement (USMCA) goods originating from Canada and Mexico will not face additional tariffs and (2) non-USMCA-originating goods will be subject to a 12% tariff (instead of 25%).
    • The new tariffs will not apply to: (1) energy, energy resources, and potash from Canada and (2) US-manufactured products that incorporate duty-free Canadian or Mexican parts under USMCA.

Tariff Mitigation Strategies

  1. Foreign Trade Zones (FTZs): Goods must be admitted as “privileged foreign status” under 19 CFR 146.41. This means the duty rate is locked in at the time of FTZ admission, and the product will be taxed at that rate even if its classification changes later. Goods that qualify for “domestic status” under 19 CFR 146.43 (typically US-origin goods or goods that have cleared customs duties) are not subject to this restriction.
  2. Duty-Free De Minimis Treatment: Goods qualifying under 19 U.S.C. 1321(a)(2)(A)-(B) will continue to receive duty-free de minimis treatment.

    With the exception of goods covered by the China De Minimis E.O., goods qualifying under 19 U.S.C. 1321(a)(2)(C) (i.e., small-value shipments under $800) will continue to receive duty-free treatment until the Secretary of Commerce determines that US systems can efficiently process and collect duties on them. Once the Secretary of Commerce notifies the President that enforcement systems are ready, duty-free de minimis treatment will be revoked for affected goods under 19 U.S.C. 1321(a)(2)(C).
  3. Duty Drawback: The Reciprocal Tariffs E.O. does not specifically prohibit duty drawback, unlike some of President Trump’s other recent tariff actions, including the IEEPA tariffs on Canada, Mexico and China. The absence of an explicit prohibition suggests that, unless CBP determines otherwise, businesses may still be eligible to claim duty refunds on imported goods that are offset by exported goods – including exports of items manufactured from imported components, export of items similar but not identical to imported goods, and even items exported by different companies. This leaves open the possibility for importers to recover duties paid on qualifying goods, which could provide some relief for businesses engaged in re-exporting operations. However, as with previous tariff regimes, it is important for companies to stay informed and monitor CBP guidance for any additional clarifications or restrictions that may be issued regarding duty drawback under this order.
  4. Customs Valuation: Certain costs can be excluded from the customs valuation of imported goods to help reduce the tariff burden, such as expenses for transportation, insurance, and related services incurred during the international shipment process. These exclusions can provide a opportunity for businesses to lower their overall import costs. However, it’s important to note that customs valuation rules are stringent, and with the recent implementation of new tariffs, these practices are likely to be subject to increased scrutiny by CBP—particularly since the President noted during his Liberation Day speech that “we’re going to be very severe on the people at the gate that watch tariffs and watch the products coming in . . . we’re going to treat them so good, but if they cheat the repercussions are going to be extremely strong.” Companies should exercise caution and fully comply with the applicable regulations to avoid potential penalties or adjustments.

Potential Tariff Modifications

  1. Additional Action if Current Tariffs Are Ineffective: The Secretary of Commerce and the United States Trade Representative, in consultation with other key officials, will recommend additional actions to the President if the current tariffs do not effectively address the emergency conditions, such as: (1) the increase in the overall trade deficit; and (2) the expansion of non-reciprocal trade arrangements by US trading partners that threaten US economic or national security.
  2. Response to Retaliation: If a trading partner retaliates by imposing tariffs on US exports or taking other countermeasures, the President may choose to modify the HTSUS to increase or expand the scope of duties to counteract such actions and ensure the tariffs remain effective.
  3. Adjustment Based on Positive Developments: If a trading partner takes significant steps to align with the US on trade and national security issues, the President may modify the HTSUS to reduce or limit the duties imposed under the order, as a sign of goodwill and to encourage further cooperation.
  4. Impact of US Manufacturing Conditions: Should US manufacturing capacity and output continue to worsen, the President may decide to increase the duties under the order to further protect domestic manufacturing.

The International Trade Controls team at Hunton will continue to monitor these rapidly evolving developments closely. Please contact us if you have any questions or would like further information about the tariffs being imposed.

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