President Trump Unveils New Reciprocal Tariffs on 'Liberation Day'

Introduction

On April 2, 2025, President Trump issued an Executive Order (EO) to implement the much-anticipated "reciprocal tariffs" on US trading partners. The President also amended previous trade actions related to imports from China and low-value shipments.

To issue the new tariffs, President Trump invoked the International Emergency Economic Powers Act (IEEPA) to declare a national emergency related to persistent US trade deficits as a critical issue impacting the US economy. The EO imposes a global 10% tariff on imports from essentially all US trading partners on April 5, 2025. However, higher tariff rates, ranging from 11-50%, will apply to imports from certain countries beginning on April 9, 2025.

This alert breaks down the key elements of the new declaration, the tariffs being imposed, the products being excluded, and the potential impacts on businesses and consumers.

Background: President Trump is Making Good on a Long-standing Promise to Achieve "Reciprocity"

The pursuit of fairness and reciprocity for US businesses and workers in the global trading system has been a consistent trade policy priority for President Trump. The President has long criticized large deficits in goods trade with major partners and differential tariff treatment of US exports and companies operating abroad. To that end, on February 13, 2025, President Trump signed a memorandum to lay the groundwork for the negotiation of reciprocal trade terms with US trading partners, with the specific goal of reducing the US trade deficit. The President directed the US Department of Commerce (Commerce) and the Office of the United States Trade Representative (USTR) to conduct whatever investigations are required to address non-reciprocal trade arrangements, and report back to the President the results of their findings and their proposed remedies by April 1. Additionally, on March 31, 2025, USTR released the 2025 National Trade Estimate, an annual report that details foreign trade barriers faced by US exporters. Although this report must be released annually, it is assumed the barriers identified served as another basis for imposing "reciprocal" tariffs.

Legal Authority: The International Emergency Economic Powers Act (IEEPA)

The IEEPA, enacted in 1977, grants the President broad powers to regulate international commerce in response to unusual and extraordinary threats to the United States. Under this authority, President Trump is implementing a series of tariffs designed to address the declared national emergency posed by the US trade deficit and non-reciprocal trade practices.

President Trump's EO identified large and persistent US trade deficits as a critical issue undermining the country's manufacturing base and economic security. In justifying the emergency declaration, the EO explains that these deficits have weakened the manufacturing base, undermined supply chains, and increased reliance on foreign adversaries. The deficits are attributed to so-called non-reciprocal trade practices, including higher tariffs and non-tariff barriers imposed by trading partners, and economic policies that suppress domestic wages and consumption (e.g., currency manipulation). The EO clarifies that it aims to address the threat to US economic and national security that these negative economic trends pose by imposing reciprocal tariffs to counteract unfair practices and encourage fairer trade relationships, in order to rebalance trade flows and restore domestic production capabilities.

In a non-traditional articulation of a national emergency under IEEPA, the EO relies on trade deficits to find a deterioration of US national security. Courts have historically deferred to the President's identification of a national emergency, particularly where the factual predicate connects foreign-originating conditions to domestic vulnerabilities. President Trump has already invoked IEEPA as the basis for imposing tariffs on China, Canada, and Mexico stemming from a crisis related to the imports of fentanyl into the United States. However, no prior EO has framed a persistent macroeconomic condition like trade deficits as a discrete national emergency under IEEPA.

While the President has identified a number of "non-reciprocal" and "unfair" foreign trade practices – ranging from allegations of currency manipulation to intellectual property theft to high tariff rates – the approach taken here is quite broad and blunt. USTR published its methodology for calculating the reciprocal tariffs, but the reciprocal tariff rates are roughly the country's goods exports to the US divided by the country's trade balance with the US divided by two. Yet, all reciprocal tariff rates are at least more than 10%.

Key Tariff Rates and Implementation Dates

• Global Tariff: A 10% tariff will be imposed on all imported goods from all countries.
  • These tariffs apply in addition to other applicable tariffs (e.g., antidumping/countervailing duties, duties imposed under Section 301 of the Trade Act of 1974, etc.) unless otherwise provided an exemption under the EO (as detailed in the following section).
  • This tariff will take effect on April 5, 2025, at 12:01 a.m. EDT.
  • Goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before 12:01 a.m. EDT on April 5, 2025, will not be subject to the additional duty.
• Country-Specific "Reciprocal" Tariffs: Higher, individualized tariffs will be imposed on countries with which the United States has the largest trade deficits.
  • These tariffs apply in addition to other applicable tariffs (e.g., antidumping/countervailing duties, tariffs imposed under Section 301, etc.) unless otherwise provided an exemption under the EO (as detailed in the following section).
  • These tariffs will take effect on April 9, 2025, at 12:01 a.m. EDT.
  • Goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before 12:01 a.m. EDT on April 9, 2025, will not be subject to these country-specific duties.

• • These duties apply to all articles imported under existing US trade agreements, except as specified in the EO.
  • Key country-specific rates include:
    • China: 34%
    • European Union: 20%
    • Vietnam: 46%
    • Japan: 24%
    • India: 27%
    • Taiwan: 32%
    • South Korea: 26%
    • Indonesia: 32%

For a complete list of country-specific rates, see Annex I.

Exemptions and Special Cases

Product-Specific Exemptions

Certain goods will not be subject to the new tariffs, with respect to both the 10% global tariff and the higher country-specific reciprocal tariffs, as applicable. 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 II to the EO. These products include, among others, copper, semiconductors, lumber, pharmaceuticals, bullion, certain critical minerals, and energy and energy products.
  • • Notably, copper and lumber are the subject of ongoing investigations under Section 232 of the Trade Expansion Act of 1962; while semiconductors are the subject of an ongoing investigation under Section 301.  
• Goods that may become subject to future Section 232 tariffs.
• All articles from a trading partner subject to the rates set forth in Column 2 of the Harmonized Tariff Schedule of the United States (HTSUS) (i.e., imports from the Republic of Belarus, Cuba, North Korea, and the Russian Federation).

Canada and Mexico

For Canada and Mexico, existing IEEPA orders related to fentanyl and migration remain in effect. Accordingly, goods compliant with the US-Mexico-Canada Agreement (USMCA) will continue to see preferential treatment (or a 0% tariff), while non-USMCA-compliant goods will face a 25% tariff. Non-compliant energy and potash will be subject to a 10% tariff.

If those separate IEEPA orders are terminated, then non-USMCA-compliant goods from Canada and Mexico would be subject to a 12% tariff. Energy or energy resources, potash, and USMCA-compliant goods would be exempted from the 12% tariff.

It is worth noting that, under the terms of the USMCA, the rules for certain products to qualify as USMCA-compliant will become more stringent over time. (See HTSUS General Note 11). This will make it more difficult for affected products to qualify as USMCA-compliant as time goes on.

US Content Exemption

Tariffs "only apply to the non-US content of the imported item, provided at least 20% of the value of the item is US-origin. "US content" refers to the value of an article attributable to the components produced entirely, or substantially transformed, in the United States.

The EO clarifies that US Customs and Border Protection (CBP) is authorized to collect necessary information to verify US content and substantial transformation.

De Minimis Exception

Typically, merchandise imported into the United States valued at less than $800 can be imported duty and tariff-free under the so-called de minimis exemption. However, this policy space is rapidly evolving, with some policymakers keen to reduce the $800 de minimis threshold or eliminate it altogether.

The EO maintains de minimis treatment for goods subject to these actions (i.e., imports subject to the 10% baseline tariff and/or reciprocal tariffs) for the time being, until the Secretary of Commerce notifies the President that adequate systems are in place to process and collect duty revenues for low-value or de minimis imports. In a separate action, however, the President removed the de minimis exemption for imports from China, which will go into effect on May 2, 2025.

Modification Authority

The EO explicitly provides authority for the President to raise or lower the tariffs set out in the EO, including:

• Raising the tariffs in response to retaliation from other countries;
• Raising the tariffs if US manufacturing capacity and output continue to worsen; and
• Lowering or reducing the scope of the tariffs if any trading partner takes "significant steps" to remedy non-reciprocal trade arrangements and "align sufficiently with the United States on economic and national security matters." This seems to suggest that reduction of tariffs on a given country may depend on both addressing trade irritants and broader strategic alignment with the United States in other policy domains.

Retaliation and Reactions

Foreign governments worldwide reacted swiftly on April 2, voicing opposition and planning countermeasures. Key US allies and trading partners uniformly expressed concern, though their intended 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. Chinese officials also denounced the new "reciprocal" tariffs as protectionist and unwarranted.

Domestically, large industry and trade associations reacted with grave concern at the tariff announcement. The National Association of Manufacturers, the US Chamber of Commerce, and the National Retail Federation have argued that these tariffs will ultimately raise costs for US consumers and disrupt supply chains, undercutting the competitiveness of American firms in global markets.

Considerations for Businesses

The EO will have a significant impact on foreign businesses that export to the United States, as well as US business and consumers that import goods from abroad. With the varying tariff rates applicable to different countries, understanding the country of origin of a product will be critical going forward. Moreover, having a detailed understanding of the national-origin of the content within an item that is imported into the United States will also be important, since goods with a meaningful amount of US content (i.e., at or above the 20% by value threshold) would have lower tariff liability under the system imposed by the EO. Accordingly, businesses whose activities stand to be affected by the EO should consider undertaking efforts to better understand their supply chains and enhance their internal trade compliance systems.

It is possible that legal challenges to the EO may be forthcoming. However, the timing and prospects for success for any such challenges are uncertain at this stage. Consequently, affected companies should begin planning how they can best comply with, and adjust their activities to mitigate any adverse impact from, these new tariffs.

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.