On April 2, 2025, President Trump signed an executive order imposing reciprocal tariffs on most trading partners. The president declared a national emergency posed by large and persistent trade deficits, relying on his authority under the International Emergency Economic Powers Act of 1977 to impose a baseline tariff rate of 10% as well as higher rates for identified countries.
The executive order (EO) specifies that the “trade deficit reflects asymmetries in trade relationships that have contributed to the atrophy of domestic production capacity, especially that of the U.S. manufacturing and defense-industrial base. These asymmetries also impact U.S. producers’ ability to export and, consequentially, their incentive to produce.” It highlights both tariff and nontariff barriers as contributing to the identified trade deficits and justifying the reciprocal tariffs.
The president relies not only on his statutory authority under the International Emergency Economic Powers Act (IEEPA), but also interagency assessments ordered under his America First Trade Policy and America First Investment Policy memoranda.
No tariff will apply to goods loaded onto a vessel at the port of lading and in transit on the final mode of transit prior to the effective date and entered for consumption or withdrawn from warehouse for consumption in the United States after the effective date.
There is no announced end date to the tariffs, which will remain in effect until the president determines “that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated.” The president may also adjust the tariff rates in response to actions taken by foreign governments, leaving open the administration’s ability to negotiate with individual trading partners.
The announced reciprocal tariffs are imposed under IEEPA and apply to all imported merchandise other than:
Goods identified in Annex II are either currently or expected to become subject to specific tariff regimes based on their industry and pursuant to different authorities. For instance, steel, aluminum, and derivative articles and, more recently, automobiles and automobile parts are subject to tariffs under separate presidential proclamation and pursuant to Section 232. Similar tariff regimes are expected to affect the pharmaceutical, semiconductor, copper, and lumber industries, but have not yet been announced, though investigations involving copper and lumber are ongoing.
US Content
The EO includes another unique exception for articles that contain at least 20% by value of US content, which is defined as “the value of an article attributable to the components produced entirely, or substantially transformed in, the United States.” If an article contains 20% or more of US content, the reciprocal rates apply only to the non-US content. If an article contains less than 20% by value of US content, the reciprocal rates apply to the total value of the article.
The EO authorizes US Customs and Border Protection (CBP) to collect information necessary to verify the US content value of an imported article as well as whether an article is substantially finished in the United States.
Interaction with Other Tariffs
While the reciprocal tariffs do not apply to goods addressed now or in the future by Section 232, they do apply to articles affected by other tariff measures, including normal customs duties, antidumping and countervailing duties, and Section 301 of the Tariff Act of 1974 (currently affecting only Chinese-origin merchandise).
As an example, merchandise imported from China would be subject to:
Goods from China (including Hong Kong) are also no longer eligible for de minimis treatment, as discussed below.
Countries (and continental unions in the case of the EU) that have been enumerated in the EO as having large trade deficits are identified in Annex I of the EO. The highest announced rates affect some key and emerging US trading partners:
Note that these values reflect only the value of the reciprocal tariffs and do not account for interaction with other tariff regimes.
As noted above, these reciprocal tariffs do not impact Canada and Mexico, which continue to be subject to the fentanyl and migrant-related IEEPA tariffs that became effective in early March and for which an exclusion is granted for products that qualify for preferential treatment under the United States-Mexico-Canada Agreement (USMCA). Should those IEEPA tariffs be suspended or terminated, Canada and Mexico would be subject to 12% reciprocal tariffs, with the exemptions for USMCA-qualifying products, energy and energy resources, potash, and USCMA-qualifying articles substantially finished in the United States.
The reciprocal tariffs also do not affect countries not covered by normal trade relations, which currently include Cuba, North Korea, Russia, and Belarus.
The president also signed an executive order removing de minimis treatment for imports from China (including Hong Kong). This follows an executive order issued February 1 imposing a 10% duty on all imports of Chinese-origin merchandise following the declaration of an emergency concerning the synthetic opioid crisis, also under IEEPA. These tariffs were later raised to 20% on all Chinese-origin imports.
The February 1 order provides that entries from China valued at $800 or less would no longer be eligible for de minimis treatment under 19 USC § 1321, which allows for entry into the United States without formal entry, with less data required, and without the payment of duty. Shortly thereafter, this suspension was paused pending notification that adequate systems are in place to process and collect duties on de minimis entries.
The April 2 order announces that such adequate systems are now in place to fully and expediently process and collect tariff revenue on de minimis entries from China, including Hong Kong, and eliminates the de minimis process for such goods effective 12:01 am ET on May 2, 2025. The order also directs the secretary of commerce to provide a report within 90 days of the order regarding the impact of this order on US industries, consumers, and supply chains.
Entries valued at $800 or less will be subject to all applicable duties and must be entered under the appropriate entry type. Postal items containing goods that are mailed through the international postal network will be subject to a duty rate of either 30% of their value or $25 per item (increasing to $50 per item at 12:01 am ET June 1, 2025), in lieu of other duties (including the 20% IEEPA duties and Section 301 duties).
Carriers are instructed to report to CBP the total number of postal items containing goods and, if electing the duty rate of 30% rather than the flat fee, the value of each item. CBP may request documentation from the carrier verifying such information. Any carrier that transports international postal items containing goods from China must have an international carrier bond in place to ensure payment of these duties, subject to CBP’s determination of adequacy. CBP may also require formal entry for such packages at its discretion.
In our January 7 LawFlash, we discussed the various measures that importers can take to mitigate the imposition of tariffs (see also our March 31 LawFlash), and many of those apply here as well. It is important to understand the classification of your products and especially whether goods qualify for USMCA preferential treatment or if you can take advantage of any of the special classification provisions in Chapter 98.
For instance, evaluate whether you are importing US origin goods or goods that have already been imported and duties paid—even if you typically would not separately identify such merchandise on entry, such as packing materials. Doing so can lower the dutiable value of the merchandise declared on your customs entry.
As the reciprocal tariffs emphasize, understanding the country of origin of your products can be critical in determining whether the baseline rate of 10% or a higher rate applies. Supply chain adjustments that result in a substantial transformation in a country with a lower rate may decrease your overall obligations.
Valuation is an additional consideration. Importers will want to accurately transmit to CBP the value that reflects the commercial realities of the transaction, though there are certain amounts that can be excluded from transaction value, including international freight, insurance, duties and other federal taxes, and transportation in the United States. It would be worthwhile to review your invoices to ensure that these items are separately listed and not included in a bulk price reflected to CBP.
Contractual terms allocating risk and responsibility for export and import of merchandise remain crucial, and whether existing authority for risk sharing or economic price adjustments is present can establish a foundation for mitigating these new expenses.
Additionally, importers of goods identified on Annex II of the EO should not breathe a sigh of relief just yet. The categories of goods on Annex II align with sectors the president has indicated will be addressed by specific tariff actions, including pharmaceuticals, semiconductors, copper, lumber, and shipping/shipbuilding. Section 232 investigations into copper and lumber are ongoing, as are Section 301 investigations into Chinese semiconductors and shipbuilding, and additional investigations are to be expected.
The president has also announced tariffs against countries that import Venezuelan oil, imposing an additional 25% as “secondary” tariffs. Such tariffs became effective April 2, though the secretary of state was given discretion as to the practical application of such measures, and no such measures have yet been announced as affecting a particular country. Secondary sanctions have long been used to exert international pressure, though secondary tariffs are a new trade policy tool introduced by this administration. While Russia was also noticeably absent from the reciprocal tariff announcement, the president has indicated that secondary tariffs on countries that import Russian oil may be forthcoming in addition to increased Russian sanctions.
As with the other tariff measures implemented since January 2025, there has been no announced exclusion or exemption process on either a country- or product-wide basis. The EO does, though, provide modification authority to the president to increase or expand the scope of the duties or to decrease or limit the scope of the duties based on responses from identified trading partners. Several trading partners have indicated that retaliatory tariffs are imminent—including digital taxes and tariffs on services.
Trading partners and industry representatives will work to negotiate suspensions, waivers, and exemptions, though it remains to be seen if any will be effective and, if so, the timeline for such modifications. The lack of certainty only increases the supply chain planning challenges businesses are experiencing.
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