Yesterday, pursuant to the International Emergency Economic Powers Act of 1977 (IEEPA), President Trump set forth a new round of U.S. tariffs in an Executive Order (EO) titled Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits. In doing so, the President declared a national emergency with respect to the underlying conditions of the country’s trading relationships that he found constitute a “threat to the national security and economy of the United States.” Specifically, the EO points to a 40% increase in the U.S. goods trade deficits over the past five years, reaching $1.2 trillion in 2024, as a justification for the sweeping actions.
The announcement represents a major action under President Trump’s “America First Trade Policy.” In February 2025, the President tasked several agencies to propose new tariffs on a country-by-country basis to facilitate “reciprocal trade.” While details on the related reports remain limited — aside from a brief public comment period and the release of the 2025 National Trade Estimate Report on Foreign Trade Barriers two days ago — the administration continues to advance its trade agenda.
The New Tariffs
The announcement includes the imposition of two sets of tariffs:
(1) for products of certain countries with large trade deficits listed in a parallel Annex I release, a “reciprocal tariff” ranging from 11% to 50%, and
(2) for nearly all other countries, a “baseline tariff” of 10%.
As a practical matter, the EO provides that a 10% tariff will be applied to imports from nearly all countries effective April 5, 2025, at 12:01 a.m. EDT. For the countries set forth in Annex I, the country-specific reciprocal tariffs (from 11 to 50%) will be applied to imports effective April 9, 2025, at 12:01 a.m. EDT. The only countries exempted are those with which the U.S. lacks normal trading relations (Belarus, Cuba, North Korea, and Russia). Because all countries are either covered or expressly excluded, U.S. Customs and Border Protection expects all imports after the deadline to report at least one HTSUS Chapter 99 secondary classification related to the reciprocal tariffs, i.e., applying the tariffs or identifying an applicable exception.
Notably, Annex I includes a 34% reciprocal tariff on China, 20% on the European Union, 27% on India, 24% on Japan, and 26% on South Korea. Several Asian countries were assessed even higher tariffs, such as Cambodia (49%), Vietnam (46%), Bangladesh (37%), Thailand (37%), and Taiwan (32%). The United Kingdom, Turkey, and Brazil all received 10% tariff rates, despite the Executive Order and associated fact sheet pointedly highlighting various policies of each country. The Office of the U.S. Trade Representative (USTR) subsequently disclosed the Administration’s methodology for calculating “reciprocal tariffs,” which treats the “tariff level consistent with driving bilateral trade deficits to zero” as a proxy for the effect of policies abroad upon U.S. trade deficits.
Most significantly, in terms of implementation, these tariffs are additive in nature (with some exceptions discussed below), meaning that they are in addition to other tariffs previously implemented under, e.g., IEEPA, Sections 201 and 301 of the Trade Act of 1974 (Section 301), U.S. antidumping and countervailing duty law, or agricultural safeguards set forth under HTSUS Heading 9904. Customs guidance specifies that importers should report each type of duty individually within the entry summary line.
For example, in China’s case, this includes the original 25% Section 301 tariffs on certain goods from the first Trump Administration, plus the 20% fentanyl-IEEPA, and now a 34% reciprocal tariff, leading to a potential effective rate of 79% on April 9. This does not include any regular most favored nation duties or additional antidumping or countervailing duties that may also be in place.
The EO provides an “on the water” exemption from both the 10% baseline tariff and the reciprocal tariff rates. For the 10% tariff, the exemption encompasses goods that are “loaded onto a vessel at the port of loading and in transit on the final mode of transit before 12:01 a.m. eastern daylight time” on April 5, 2025 and enter between April 5, 2025, and May 26, 2025. For good subject to reciprocal tariff rates, the exemption encompasses goods that are loaded and in transit on the final mode of transit before 12:01 a.m. eastern daylight time on April 9, 2025. Entry must occur no earlier than April 9, 2025, and CBP will likely specify a cutoff date as well. For countries subject to reciprocal tariff rates, implementing HTSUS language indicates that products able to use the “on the water” exemption will avoid all the new tariffs.
Another important exemption applies to goods entered under Chapter 98 of the HTSUS. Provided, however, that articles entering the United States after repair, alteration, processing, or assembly under Subheadings 9802.00.40, 9802.00.50, 9802.00.60, or 9802.00.80, will incur the duties on the value of such repair, alteration, processing, or assembly (with certain deductions).
Guidance published by U.S. Customs and Border Protection (CBP) confirms that drawback will be available for these duties. However, similar to other recent trade actions, any covered merchandise entered into a U.S. foreign trade zone (FTZ) on or after 12:01AM ET on April 9, 2025, must be admitted as “privileged foreign status” as defined in 19 C.F.R. § 146.41, which generally locks in place the duty amount owed regardless of if a product is transformed within the zone.
For now, importation under 19 U.S.C. § 1321(a)(2)(C) allowing for duty-free de minimis treatment remains available for all countries other than imports that are the product of China and Hong Kong and shipped through commercial channels or from China and Hong Kong and shipped through international postal channels. The EO states that once the administration receives notification by the Secretary of Commerce that “adequate systems are in place to fully and expeditiously process and collect duty revenue applicable” to the goods subject to the EO, such de minimis treatment will no longer be available for shipment from and/or of any foreign country.
Canada/Mexico Treatment
As a general matter, implementing HTSUS language explicitly applies the newest tariffs to goods otherwise eligible for special tariff treatment under existing U.S. free trade agreements. But for Canada and Mexico — both members of the United States-Mexico-Canada Agreement (USMCA) — the EO established that the existing fentanyl/migration IEEPA orders remain in effect, are unaffected by this order, and the reciprocal duties are not to be applied in addition to the IEEPA duties. USMCA compliant goods will not be subject to the additional 10% baseline tariff. Non-USMCA compliant goods will continue to have a 25% tariff (10% for potash as well as energy and energy resources) imposed. In the event that the prior IEEPA orders are terminated, however, non-USMCA compliant goods would be subject to a 12% reciprocal tariff. The EO and implementing HTSUS language provide that under those circumstances the relief for USMCA compliant goods would remain.
“U.S. Content” Determination
The EO also provides that the reciprocal tariffs only apply to the non-U.S. content of a subject article, provided that at least 20 percent of the value of that article is U.S. originating. U.S. content is defined as the “value of an article attributable to the components produced entirely, or substantially transformed in, the United States.”
To determine this, CBP has been delegated authority to collect information necessary to verify the U.S. content value of an imported article and whether it is substantially finished in the United States. CBP’s most recent guidance specifies that importers claiming this exemption must break the article into two entry summary lines, the first for U.S. content and the second for non-U.S. content.
Product Exemptions
There are a number of product exemptions in the EO, including the following:
- articles such as donations, personal effects, informational materials in various formats, and postal communications, subject to 50 U.S.C. § 1702(b) IEEPA exclusions;
- steel/aluminum articles and derivatives as well as autos/auto parts, already subject to Section 232 tariffs;
- other products enumerated in Annex II at the 8-digit subheadings of the Harmonized Tariff Schedule of the United States (HTSUS), including copper, pharmaceuticals, semiconductors, lumber articles, energy, and other certain minerals not available in the United States; and
- all articles that may become subject to future Section 232 tariffs.
The exemption for any future products subject to Section 232 tariffs signals a likely possibility for future tariff actions by the Administration based on specific industries, beyond those it has already undertaken.
Modification Authority
During the press conference, President Trump emphasized that the announced reciprocal tariffs are intended to be “kind.” The EO specifically permits an increase in tariff rates if trading partners retaliate, or a decrease in tariff rates if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters. In practice, however, if reciprocal tariff rates are tied to trade-in-goods deficits, then obtaining a decrease may have as much to do with purchasing U.S. goods as with policy changes.
Given the recent announcements from U.S. trading partners, including the European Union and China, there is a real possibility of a further escalation of the trade wars if retaliatory actions invite further increases in reciprocal tariffs.
Actions to Ensure Compliance
Importers are responsible for ensuring that their customs documentation appropriately and accurately reflects the tariff classification, country-of-origin, customs valuation, documentation and recordkeeping, particularly pertaining to any claims made under USMCA or determination of U.S. content value. In particular, importers relying on de minimis entry or other forms of e-commerce shipment methods must closely examine their supply chains and shipment methods to determine potential duty impact.
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Cassidy Levy Kent’s attorneys, compliance professionals, economists, and licensed customs brokers are particularly adept at guiding clients through the constantly and quickly changing trade landscape. Our team works with companies to develop and execute creative and effective solutions to trade issues that make sense for their business. We expect further developments on these and other tariffs and will continue to provide updates. Please contact us with any questions.
Note: this Insight was updated April 4, 2025, to reflect newly available guidance set forth in Annex III to the Executive Order, as well as CBP Cargo Systems Messaging Service No. 64649265.