Overview
Introduction
On April 2, 2025, President Trump issued an Executive Order (EO), under which he invoked the International Emergency Economic Powers Act (IEEPA) to declare a national emergency related to persistent US trade deficits, and to impose "reciprocal tariffs" on a wide range of US trading partners. Our Client Alert on this announcement is available here.
The EO imposed a baseline 10% tariff on imports from essentially all US trading partners, and even higher reciprocal tariff rates, ranging from 11-50%, on imports from nearly 60 countries. Neither Canada nor Mexico is covered by these reciprocal tariffs, as both countries are covered by separate Executive Orders which were described in our prior post.
However, before these above-baseline tariff rates went into effect, President Trump delayed their implementation for all countries except for China. This pause was reportedly granted to give the administration time to negotiate new economic relationships with US trading partners to achieve “reciprocity,” a long-standing goal of the President. By contrast, after a number of adjustments, the current reciprocal tariff currently applicable to imports from China was raised to 125%.
This alert provides a summary of the changes to the reciprocal tariffs since their announcement, a discussion of certain exemptions and exclusions to these reciprocal tariffs, and an explanation of the potential impacts of the new actions on businesses and consumers.
Updates to the Reciprocal Tariff Plan
The April 2 Executive Order imposed a 10% tariff on imported goods from virtually all US trading partners, effective April 5, 2025. This tariff applies in addition to other applicable tariffs (e.g., normal customs duties, antidumping/countervailing duties, tariffs imposed under Section 301 of the Trade Act of 1974, etc.) unless otherwise exempted under the EO, as discussed below. These duties apply to all articles imported under existing US trade agreements, except as specified in the EO.
Higher, country-specific tariffs were set to be imposed on nearly 60 countries with which the United States has the largest trade deficits. However, on April 9, 2025, President Trump delayed the imposition of these higher duties for 90 days, i.e., until July 9, 2025. This means that during the 90-day delay, other than for imports from China, the only applicable reciprocal tariff is the 10% baseline tariff that went into effect on April 5. The President claimed that the country-specific reciprocal tariffs were being paused in response to expression of interest by US trading partners in addressing the “lack of trade reciprocity” in the respective bilateral trade relationships. Indeed, several countries are reportedly seeking negotiations with the administration to avoid facing higher tariff rates.
China Faces an Even Higher Reciprocal Tariff
In response to the initial EO, which imposed a 34% reciprocal tariff on imports from China (including Hong Kong and Macau), China announced on April 4, 2025, that it would impose a 34% tariff on all US imports beginning on April 10, 2025. President Trump countered on April 8, 2025, by announcing an increase of the tariff to 84% to be imposed the following day. China responded in kind on April 9, 2025, announcing an 84% tariff on imports of US goods to be imposed on April 10, 2025. Later that day, President Trump announced that the tariff on imports from China would increase to 125% effective on April 10, 2025. China then imposed a 125% tariff on all imports from the United States, which went into effect on April 12, 2025.
The 125% tariff imposed by the United States applies in addition to other applicable tariffs (e.g., normal customs duties, antidumping/countervailing duties, tariffs imposed under Section 301). Importantly, it also applies on top of the 20% tariff imposed under IEEPA earlier this year in connection with China’s alleged role in the fentanyl trade. However, as discussed below, certain imports from China have been exempted from this 125% tariff.
Exemptions and Special Actions
Existing Exemptions
As explained in our prior post, certain goods are not subject to the reciprocal tariffs imposed under the April 2 EO (as amended). These exceptions apply with respect to both the 10% global tariff, and also the higher reciprocal tariff on Chinese goods. These exclusions will also likely be applicable if and when the 90-day pause is lifted on the higher country-specific reciprocal tariffs. These exemptions include:
- Articles subject to 50 U.S.C. 1702(b)––i.e., donations, goods in personal effects/baggage, information transfers, postal, and other transactions that do not involve the transfer of anything of value.
- Steel, aluminum, and derivative steel and aluminum articles, and automobiles and automobile parts already subject to Section 232 tariffs.
- Products listed in Annex IIto the EO. These products include, among others, copper, semiconductors, lumber, pharmaceuticals, bullion, certain critical minerals, and energy and energy products.
- Notably, copper, lumber, semiconductors and derivative electronics products, pharmaceutical ingredients and products, and critical minerals are the subject of investigations under Section 232 of the Trade Expansion Act of 1962; legacy semiconductors are also the subject of an ongoing investigation under Section 301.
New Exemptions
As of April 11, 2025, certain tech-related products have been excluded from the reciprocal tariffs The excluded products include smartphones, computers, and semiconductor devices and parts, and are defined by their specific HTSUS numbers.
- CBP has clarified that for any products covered by these exclusions that were entered for consumption or withdrawn from warehouse for consumption on or after April 5, 2025, where an importer paid the additional tariffs set out under the EO, the importer should take appropriate action to correct the entries to receive a refund of those duties paid. CBP encouraged effected importers to take appropriate corrective action as soon as possible within 10 days of the cargo’s release from CBP custody.
Tariffs Imposed on Low-value Imports
On April 2, 2025, the President eliminated the de minimis exemption for imports from China, effective for entries as of May 2, 2025. In the interim, the President increased the tariff rate for de minimis imports to 120%.
International Reactions and Legal Challenges
Foreign governments worldwide reacted swiftly on April 2, voicing opposition and planning countermeasures. Key US allies and trading partners uniformly expressed concern, though their responses varied. In North America, Canada and Mexico vowed to respond with tariffs. Reactions across the Atlantic were also resolute. European Union leaders across the board condemned the tariffs and hinted at retaliation, even as they left the door open for negotiation. Still, many countries have so far foregone retaliation, perhaps in hopes of reaching agreement with the administration to eliminate the possibility of additional tariffs. No such deals have yet been announced.
Legal challenges have also been brought in US federal courts by several different plaintiffs against the April 2 reciprocal tariffs. However, the timing and prospects for success for any challenges are uncertain at this stage.
Considerations for Businesses
Changes in reciprocal tariffs have caused substantial uncertainty in the global business community, making future planning difficult.
Given the significant tariff burden on imports from China, and the possibility that country-specific reciprocal rates could be imposed after the pause ends, companies should be taking a careful look at the country of origin of the products they are importing. Issues of tariff classification (for exclusion purposes) and entered value calculation (for overall duty liability) should also be closely considered.
For more information on these actions, assistance with compliance, or questions on how the tariffs may impact your business, please contact a member of Steptoe's Trade Policy practice.
