On February 1, the Trump administration announced additional tariffs of 25% on all imports from Mexico and Canada (“energy resources” from Canada will be subject to a lower 10% tariff) as well as 10% duties on imports from China. The tariffs will take effect on February 4.

Notably, Mexican President Claudia Sheinbaum said on Monday morning that the country has reached an agreement with the Trump administration to delay the tariffs by one month as it ramps up security on the U.S.-Mexico border, starting with immediately deploying 10,000 members of its national guard. 

Here’s what we know so far about the tariffs and the laws governing them:

‘Emergency Economic Powers’

Citing undocumented immigration and the transnational illicit drug trade, President Trump has declared a national emergency, thereby utilizing his authorities under the International Emergency Economic Powers Act in order to levy the tariffs. The statute gives the president broad powers to take economic actions upon declaring a national emergency to “deal with any unusual and extraordinary threat… to the national security, foreign policy or economy” of the U.S.

IEEPA has been used by past presidents to impose sanctions, export controls, restrict outbound investments and more, although the law has never been invoked to levy tariffs. Here’s how IEEPA works:

  • The president must consult with Congress before declaring an emergency.
  • The president must inform Congress and the public of a proclamation.
  • The emergency must be renewed annually by the president.
  • The emergency can be terminated by a joint resolution of Congress.

Product Exclusions

Unlike the president’s other tariff authorities, IEEPA does not provide for a formal product exclusion or exemption process. Therefore, President Trump could try to exercise full discretion on if and which products get excluded. However, there is no mention of any such process in the executive orders that the White House has published thus far.

De Minimis

The new tariffs also halt the treatment of goods from Canada, Mexico and China under the de minimis provision, which allows the importation of goods worth less than $800 into the U.S. without duties and lowered documentation and inspection standards by U.S. Customs and Border Protection.

Energy Resources

The term “energy resources,” imports of which from Canada are subject to a 10% duty, is defined Section 8 of this executive order to include electricity as well as “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals.”

Retaliatory Tariffs

In a speech, Canadian Prime Minister Justin Trudeau announced that his country will retaliate with 25% levies on a range of U.S. imports, particularly those from Republican-led states. Mexico has similarly threatened to impose its own tariffs if the U.S. follows through. China has instead vowed “necessary countermeasures.” Trump’s tariff orders include retaliation provisions allowing him to increase or expand the tariffs further if the targeted countries respond in kind.

Context

While President Trump has invoked IEEPA and levied the tariffs under the pretext of addressing border security issues, there is some speculation that he is levying the tariffs in order to bring the countries to the negotiating table and force trade-related concessions. For instance, Trump has expressed his desire to renegotiate provisions in the U.S.-Mexico-Canada (USMCA) trade agreement, which is up for its six-year review.

Additionally, reporting suggests that China is already prepared to negotiate with the president with the initial proposal of restoring the Phase One trade deal, which had required China to increase purchases of U.S. goods and services by $200 billion over a two-year period.

In general, congressional Republicans have expressed support for the new tariffs, whereas Democrats are voicing opposition. Therefore, there is insufficient support for a joint resolution to terminate the national emergency, since that would ultimately require two-thirds votes in both the House and Senate to override a presidential veto.

Legal Action

Given the legally untested nature of levying tariffs under IEEPA, it is possible that legal actions could be brought against the new tariffs and thereby litigated in U.S. courts. However, such legal action would likely be drawn out.

Internationally, China’s Ministry of Commerce has indicated that it will file a legal case against the U.S. at the World Trade Organization in response to the tariffs, although the body has largely lost its ability to try legal cases since Trump blocked the appointment of judges in his first term.

Further Tariffs

On January 31, Trump renewed his commitment to levy tariffs against the European Union and said they could come “pretty soon,” and EU member nations have already begun preparing for possible scenarios and responses. However, the White House has yet to provide any details regarding timeline and the scope of the tariffs.

For questions or suggestions on regulatory or government affairs issues, please contact Rachel Zoch at RachelZ@ppai.org.