President Trump Imposes Far-Reaching “Reciprocal” Tariffs, Implements Tariffs on Automobiles and Closes De Minimis Loophole for Chinese Imports

On April 2, 2025, President Trump signed a sweeping Executive Order (EO) imposing tariffs designed to address what the Trump administration has characterized as persistent trade imbalances allegedly caused by unfair trade practices. Invoking the International Emergency Economic Powers Act (IEEPA), the Administration declared trade deficits a national emergency and is adopting tariffs based on its view of what would be required to drive the U.S. trade deficit in goods with each country to zero.

Universal Tariffs and Country-Specific Tariffs
Effective April 5, 2025, at 12:01 a.m. EST, the United States will impose an additional 10% tariff rate on imports from virtually all countries other than Canada and Mexico (and subject to limited exceptions outlined below).

Effective April 9, 2025, at 12:01 a.m. EST, the United States will impose higher tariff rates on certain countries. Those higher rates are set out in Annex I to the EO. The USTR’s description of its methodology for arriving at each reciprocal tariff rate suggests that the calculations were based on a comparison of each country’s trade deficit with the United States and its annual exports, which USTR describes as a proxy for each country’s trade barriers.

See Annex I for a complete chart of countries and their respective reciprocal tariff rates. For tariffs on products from China, the individualized reciprocal tariffs will apply in addition to the 20% tariffs imposed under IEEPA and tariffs on products subject to existing duties under Section 301.

Treatment of Canada and Mexico Unchanged
Canada and Mexico are presently excluded from the new tariffs. Pursuant to prior executive orders imposing duties, goods that comply with the U.S.-Mexico Canada Agreement (USMCA) rules of origin will remain duty free, while a 25% tariff will continue to apply to goods from Canada and Mexico that are not USMCA compliant, with non-USMCA origin energy and energy resources from Canada and potash from Mexico and Canada subject to a reduced 10% tariff. These tariffs were imposed pursuant to a national emergency declared on February 1, 2025.

The EO on reciprocal tariffs provides that in the event the prior orders declaring the national emergency for Canada and Mexico are terminated, a tariff rate of 12% will apply to goods from Canada and Mexico, although exceptions for USMCA-origin goods and energy or energy resources and potash would continue.

Scope of Exclusions
The following are excluded from the new tariffs (both for countries subject to 10% baseline tariffs and those with higher country-specific tariffs).

• Existing Section 232 Tariffs: The tariffs do not apply to articles or derivatives of steel and aluminum or autos and automotive parts already subject to duties under Section 232 of the Trade Expansion Act of 1962 (“Section 232”).
• Certain Critical Products: Copper, pharmaceuticals, semiconductors, lumber, certain critical minerals, energy products and other products that become subject to Section 232 investigations are excluded.
• U.S. Content Requirement: For products with at least 20% U.S.-origin content, the tariffs will only apply to the non-U.S. content.
• Exclusions under IEEPA: As required by the IEEPA, articles covered by 50 U.S.C. 1702(b)—including information and informational materials such as publications, books and films.
• Goods in Transit: Any goods loaded onto a vessel and in transit to their final U.S. destination before 12:01am EST on April 5, 2025, and entering U.S. commerce, thereafter, will not incur the new 10% tariff. Similarly, goods loaded onto a vessel and in transit to their final U.S. destination before 12:01am EST on April 9, 2025, will not be subject to the stepped-up country-specific tariffs.

The EO does not provide for an individual product-exclusion mechanism beyond the specified exemptions.

New Tariffs on Auto Imports
On March 26, President Trump issued a Proclamation, effective April 3, 2025, at 12:01 a.m. EST, imposing a 25% duty on imports to the United States of automobiles (covering sedans, SUVs, crossovers, vans and light trucks) and core auto parts (including engines, transmissions and powertrains). The Department of Commerce is tasked with establishing a process within 90 days to evaluate whether more parts should be included. Automobiles meeting USMCA-origin requirements may only be charged the 25% duty on their non-U.S. content. Auto parts meeting the USMCA-origin requirements will be exempt from the duties until the Department of Commerce establishes a process to apply the tariff to the value of the non-U.S. content of such auto parts.

De Minimis Exemption Terminated for PRC and Hong Kong
Effective May 2, 2025, the United States will end the de minimis exemption for goods originating from the People’s Republic of China (PRC) and Hong Kong valued at or below $800. Key features include:

• Non-Postal Shipments: No longer duty-free; applicable duties apply in full.
• Postal Shipments: Initially subject to a duty rate of 30% or $25 per item (whichever is higher), with the per-item fee rising to $50 after June 1, 2025.
• Carrier Obligations: Carriers must file comprehensive shipment details, maintain a customs bond, and remit duties on set schedules.

Looking Ahead
With results from Section 232 investigations on lumber and copper looming and potential tariffs on pharmaceuticals and semiconductors under active consideration, companies across all sectors are evaluating how these measures could affect their global operations and supply chains. Pending Section 301 investigations may broaden the scope of tariffs even further, raising the stakes for businesses reliant on international supply chains. At the same time, U.S. trading partners are likely to adopt additional countermeasures, increasing the risk of retaliatory duties and a possible escalation of trade frictions.

The EO contemplates that the reciprocal tariff rates will be modified either up or down depending on whether trading partners relax their perceived trade barriers or retaliate. We expect U.S. trade policy and applicable tariff rates to remain in flux as countermeasures by and/or negotiations with other nations play out.