Tariff Whiplash in North America

On March 4, 2025, and pursuant to President Donald Trump's authority under the International Emergency Economic Powers Act (IEEPA), the U.S. proceeded with imposing IEEPA tariffs of 25 percent on products of Canada and Mexico, while also increasing IEEPA tariffs to 20 percent on products of China. Yet, in the two days that have passed since these IEEPA tariffs went into effect, we have already seen dramatic changes with respect to Canada and Mexico, exemplifying the fast-changing nature of negotiations between the U.S. and its North American trading partners. 

Here are the key aspects of these tariffs as originally imposed on March 4, their limited exemptions, and the latest announcements from the White House pausing certain IEEPA tariffs. 

IEEPA Duty Rates and Rules of Origin (Effective March 4, 2025)

• Mexico: 25 percent on all imports
• Canada: 25 percent on all imports, except on Canadian energy or energy products, which are subject to a lower 10 percent tariff. 
• China: 20 percent on all imports (previously 10 percent) 

These tariffs apply broadly to most imported goods that are “products of” those three countries.  For Canada and Mexico, the determination of whether merchandise is a “product of” those countries is based on two rules of origin: 1) United States-Mexico-Canada Agreement (USMCA) origin rules and 2) “substantial transformation,” which often involves a complex case-by-case analysis. For China, the non-preferential rules of origin apply, which includes the substantial transformation analysis. Thus, importers need to be wary that even imports coming from outside of Canada, Mexico, or China can be subject to these IEEPA tariffs, e.g., an unassembled Chinese-origin product that undergoes only simple assembly in a third country would remain subject to China tariffs. 

Importers should also keep in mind these tariffs are additive, and can stack on top of other existing tariffs, such as Section 301 and Section 232 duties. 

Limited Exemptions

Should all tariffs snap back into place in one month, importers should be aware that there are currently very few and limited exemptions from IEEPA tariffs. For instance, exemptions remain for certain “Chapter 98” importations, such as for temporary importations under bond (TIB) or goods that are exported and subsequently returned. And at the moment, the U.S. continues to allow shipments valued at or under the $800 de minimis threshold to avoid IEEPA tariffs, pending the Commerce Department’s report that “adequate systems” are in place to collect duties on these de minimis entries.  

Aside from Chapter 98 and de minimis shipments, the published instructions explicitly rule out the use of drawbacks and foreign trade zones (FTZ) to obtain refunds or avoid the tariffs. There is also no process established to request product-specific exclusions. 

One-Month Pause for Certain Imports from Mexico and Canada 

On March 5, 2025, the White House announced a one-month delay on the 25 percent tariffs for automotive imports from Canada and Mexico. To date, the White House has not published details regarding the scope of this pause, such as whether it would apply to all automotive-related goods including parts and components. It is also unclear whether the pause would apply only to certain U.S.-based automakers or if all automakers importing into the U.S. from Canada and Mexico would receive tariff relief for one month. 

On March 6, 2025, President Trump further announced in the media that he had reached an agreement with Mexican President Claudia Sheinbaum to delay the 25 percent tariffs for one month on nearly all goods from Mexico that “fall under the USMCA Agreement.” The White House has not published details regarding the scope of this one-month pause for Mexico.   

More Changes on the Way

Given the evolving nature of the administration’s trade policy, businesses affected by tariffs should closely monitor changes on the horizon.  Businesses should continue to look out for official publications regarding the one-month pause on certain IEEPA tariffs to assess the actual scope of the one-month reprieve. Businesses should also prepare for potential new tariffs under President Trump’s Fair and Reciprocal Plan that may go into effect as soon as April 2, the same time the one-month pause on IEEPA tariffs ends.