Chips, drugs, and steel — how to prepare for Trump tariffs

Last updated on Tuesday, March 4, 2025, at 12:50 p.m. ET. We’re updating this blog post as new information becomes available.

On January 31, 2025, White House Press Secretary Karoline Leavitt confirmed that President Donald J. Trump would implement new 25% tariffs on Mexico, 25% tariffs on Canada, and 10% tariffs on China starting February 1, 2025.

On February 1, we learned the new tariffs would take effect on February 4. On February 3, the tariffs on Canada and Mexico were paused. On February 5, some of the tariffs on China were paused.

On February 10, President Trump issued a proclamation imposing a 25% ad valorem tariff on steel and aluminum articles from most countries. They’re set to take effect March 12, 2025 — unless he decides to revisit the determination. 

On February 13, President Trump signed a presidential memorandum ordering his administration to pursue reciprocal tariffs on U.S. trading partners.  

On February 25, United States Customs and Border Protection (CBP) announced that it will “reject entry summaries that are not in compliance with the requirements” set forth in the February 1 executive order, which imposed new duties on China. 

On February 26, President Trump told the press he was “not stopping the tariffs” on Canada and Mexico. He said the tariffs would take effect April 2, 2025, “not all of them but a lot of them.”

Upon further questioning, Trump said the 25% tariffs on Canada and Mexico would go into effect on April 2, as would the “reciprocal.” He later said he’d be announcing EU tariffs soon. “And it’ll be 25%, generally speaking, and that’ll be on cars and all other things.”

Secretary of Commerce Howard Lutnick added that the Canada and Mexico tariffs were paused for 30 days to allow the two countries to “prove to the president” that they’re doing enough to stop the flow of fentanyl into the U.S.

On February 27, the president announced via Truth Social that “the proposed tariffs scheduled to go into effect on March 4 will, indeed, go into effect as scheduled.” He added, “China will likewise be charged an additional 10% tariff on that date.”

Members of the administration indicated that the April date mentioned by President Trump on February 26 referred to reciprocal tariffs, not the 25% Canada and Mexico tariffs. Yet White House economic advisor Kevin Hassett reportedly said Trump would make a final decision on tariff policies for all countries, including Canada and Mexico, after April 1, when a study on tariffs will be released.

On March 2, President Trump issued two separate executive orders regarding de minimis exemptions for Canada and Mexico, which were scheduled to be eliminated effective March 4, 2025. For now, the de minimis exemptions for Canada and Mexico remain in effect.

The de minimis exemptions will cease to be available for Canada and Mexico once “adequate systems are in place to fully and expeditiously process and collect tariff revenue” for low-value imports.

On March 3, President Trump issued an amendment to the China tariffs. In this executive order, he communicates that the People’s Republic of China has not taken adequate steps to alleviate the illicit drug crisis. Instead of 10% tariffs, the U.S. will impose a 20% tariff on imports of products made in or shipped from China. No additional details, like an effective date, were provided.

U.S. Customs and Border Protection also released unofficial guidance on additional duties on imports from Canada and Mexico on March 3. The previously announced Canada and Mexico tariffs were set to take effect at 12:01 a.m. ET on March 4, 2025.

On March 4, Canada and China responded with retaliatory tariffs on U.S. goods. 

Canada implemented 25% retaliatory tariffs on $30 billion worth of American goods at 12:01 a.m. ET on March 4. Another $125 billion worth of American products will become subject to Canada’s 25% tariffs “in 21 days’ time.”

China announced 10% and 15% tariffs on roughly $21 billion worth of U.S. agricultural products. Goods subject to the 10% tariff include beef, dairy products, fruit, pork, seafood, sorghum, soybeans, and vegetables; the 15% tariff will affect products such as chicken, corn, cotton, and wheat. These tariffs are set to take effect March 10.

Mexico’s President Claudia Sheinbaum said Mexico will announce retaliatory tariffs on U.S. goods on March 9.

Keeping track of changing tariff requirements and being prepared to implement — and undo — them on a dime is challenging for businesses. Fortunately, automating compliance can help.

Here’s what we know about the tariff changes as of the date and time of publication.

On February 1, 2025, the White House issued an executive order imposing an additional 25% ad valorem rate of duty on all products of Mexico, effective 12:01 a.m. ET on February 4, 2025. 

Then, on the morning of February 3, 2025, President Trump delayed the tariffs on imports from Mexico. A post on Truth Social explained that the U.S. immediately paused the anticipated tariffs for one month to allow time for the two countries to negotiate a deal to stop the flow of fentanyl and illegal migrants into the U.S. 

According to a Truth Social announcement dated  February 27, the 25% tariffs on Mexico were set to take effect on March 4, 2025.

Unofficial guidance issued on March 3 confirmed this date. It explains that “products of Mexico that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on March 4, 2025,” are subject to an additional 25% ad valorem rate of duty. This affects HTSUS classification 9903.01.01.

The new tariffs represent a significant policy change.

Most products traded between Mexico and the U.S. have been free from tariffs under the United States-Mexico-Canada Agreement (USMCA), which President Trump spearheaded during his first term in office. Top U.S. imports from Mexico include cars and trucks, car parts, computers, crude oil, medical instruments, phones, and televisions. Mexico is also the largest single source of U.S. horticultural imports, according to the U.S. Department of Agriculture.

The February 1 executive order also eliminated the $800 de minimis exemption for Mexico. This was to take effect on February 4, 2025. However, with the pausing of the tariff changes, low-value imports from Mexico remained duty-free.

The de minimis exemption elimination for Mexico was then to take effect on March 4, 2025. But on March 2, a new executive order extended duty-free status for low-value imports until “adequate systems are in place to fully and expeditiously process and collect” the tariffs.

On February 1, 2025, the White House issued an executive order imposing an additional 25% ad valorem rate of duty on all products of Canada, effective 12:01 a.m. ET on February 4, 2025.

The 25% tariffs would be in addition to any other applicable duties, fees, exactions, or charges. The only exceptions would be for energy and energy resources imported from Canada, which would be subject to an additional 10% ad valorem rate of duty effective 12:01 a.m. ET on February 4, 2025.

Then, at around 4:30 p.m. ET on February 3, Canadian Prime Minister Justin Trudeau announced that after a “good call with President Trump,” the “proposed tariffs will be paused for at least 30 days.” Yet on February 27, President Trump announced via Truth Social that the 25% tariffs on Canada would take effect on March 4, 2025.

Unofficial guidance issued on March 3 confirmed this date. It explains that “products of Canada that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on March 4, 2025,” are subject to an additional ad valorem rate of duty.

U.S. Customs and Border Protection also shared guidance on the Canada tariffs by email. An additional 25% tariff applies to HTSUS classification 9903.01.10 (other than products classifiable under headings 9903.01.11, 9903.01.12, and 9903.01.13, and other than products for personal use included in accompanied baggage of persons arriving in the United States).

An additional 10% tariff applies to HTSUS classifications 9903.01.13.

These additional duties are in addition to all other applicable duties, taxes, fees, exactions, and charges. 

The tariff changes for Canadian imports represent a significant policy change. As with Mexico, most products traded between Canada and the U.S. are free from tariffs under USMCA. Top U.S. imports from Canada include cars, delivery trucks, motor vehicle parts, and petroleum products, as well as lumber.

Per the February 1 executive order, products subject to the new tariffs would no longer be eligible for duty-free treatment under de minimis provisions starting February 4, 2025. However, with the pausing of the tariff changes on February 3, low-value imports from Canada remained duty-free.

Canada’s de minimis exemption was set to end on March 4, 2025. But on March 2, a new executive order extended duty-free status for low-value imports until “adequate systems are in place to fully and expeditiously process and collect” the tariffs.

Before Trump and Trudeau’s February 3 phone call, the Canadian government responded with a “set of countermeasures designed to apply economic pressure on the U.S. to remove the tariffs as soon as possible.” 

Canada said it would impose retaliatory tariffs on $30 billion in goods imported from the U.S. effective February 4, 2025. Affected products include apparel, appliances, beer, coffee, cosmetics, footwear, motorcycles, orange juice, peanut butter, pulp and paper, spirits, and wine. 

Additionally, Canada said it would implement new tariffs on $125 billion worth of U.S. imports at a future date. 

On February 3, the Canadian government announced that Canada and the United States had agreed to delay the imposition of our respective tariffs on imported goods.

Nevertheless, several Canadian provinces responded to President Trump’s proposed tariff changes by pulling U.S. products off the shelves. At least one province, Ontario, paused its retaliatory measures after the tariff updates were delayed.

Per a White House executive order dated February 1, 2025, all articles produced by the People’s Republic of China are subject to an additional 10% ad valorem rate of duty effective 12:01 a.m. ET on February 4, 2025. 

The additional duty doesn’t apply to goods “that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12:01 a.m. ET on February 1, 2025,” provided the importer certifies to U.S. Customs and Border Protection (CBP) as specified in a Federal Register notice.  

The de minimis exemption for China was also suspended.  However, on February 5, President Trump signed an executive order temporarily reinstating duty-free de minimis treatment for the People’s Republic of China until “adequate systems are in place to fully and expediently process and collect tariff revenue.”

10% China tariffs increased to 20%

An executive order dated March 3, 2025, increased the 10% tariffs to 20%. The document did not provide an effective date. It simply says that because “the PRC has not taken adequate steps to alleviate the illicit drug crisis through cooperative enforcement actions,” Executive Order 14195 is amended by replacing the words “10 percent” with the words “20 percent.”

Duty-free de minimis exemption suspended for China, then reinstated 

With the February 5 executive order, imports from China valued $800 or less remain duty-free and eligible for an expedited entry process, like low-value imports from other countries. 

Once CBP can effectively process and enforce tariffs on low-value shipments, the U.S. will likely eliminate the de minimis exemption for products made in or shipped from China.  

At that time, any articles of China subject to the additional 10% duty (i.e., articles covered by heading 9903.01.20) will no longer be eligible for the administrative exemption from duty and certain taxes provided by 19 U.S.C. 1321(a)(2)(C). This change will likely affect all shipments containing one or more goods made in China or shipped by mail from China.

The Federal Register notice reminds that “products of China” include products of Hong Kong.

If and when de minimis is eliminated, a new entry process will be required for low-value products made in China or Hong Kong or shipped from China or Hong Kong. You can read about what that will look like here.  

The U.S. is inundated with low-value (de minimis) imports, and not just imports originating in China. In fact, in September 2024, the Biden administration announced a plan to “stop the abuse of the de minimis exemption,” and CBP began scrutinizing de minimis imports.

What’s challenging about the current situation — for businesses as well as CBP — is that tariff policy changes are happening practically overnight.

Retaliatory tariffs on U.S. exports to China ordered

On the afternoon of February 3, the New York Times reported that China’s ambassador to the United Nations was filing a complaint with the World Trade Organization over President Trump’s tariffs. 

On the morning of February 4, China announced counter tariffs: a 15% tariff on coal and liquefied natural gas products and a 10% tariff on crude oil, agricultural machinery, and large-engine cars. They took effect Monday, February 10, 2025.

CBP will reject noncompliant imports from China and Hong Kong 

CBP announced on February 25 that it will reject imports of goods made in or shipped from China or Hong Kong if they’re filed without the required additional 25% or 10% duties. See CSMS # 63988468 for a list of HTS numbers associated with the additional duties.

If an entry summary is rejected, it must be resubmitted along with the necessary payment within two business days. Should the updated entry summary not be submitted, the importer of record could be subject to liquidated damages.

Goods subject to the new China tariffs must be correctly classified. This means items must be assigned the appropriate HTS codes. Per CBP, “For entry summary lines that include multiple HTS numbers, CBP requires that the duty be appropriately associated to the correct HTS.”

The importer of record cannot combine several HTS numbers on one entry summary line or report only one HTS code when more than one code applies. See CSMS# 64018403 for additional guidelines.

Noncompliance will be taken seriously. CBP says it “will take enforcement action on patterns of noncompliance.”

U.S. announces additional 10% tariffs on China 

On February 27, President Trump announced via Truth Social that China would be charged an additional 10% tariff starting March 4. 

The executive order dated March 3, 2025, confirmed this announcement: It increased the China tariffs from 10% to 20%. The higher rate of duty took effect on March 4. 

On February 11, 2025, the White House issued a fact sheet restoring a true 25% tariff on most steel imports and increasing the tariff on aluminum imports from 10% to 25%, effective 12:01 a.m. ET on March 12, 2025. 

Alternative agreements that reduced or eliminated aluminum and steel tariffs for the following trading partners are revoked:

• Argentina
• Australia
• Brazil
• Canada
• Japan
• Mexico
• South Korea
• The European Union
• Ukraine
• The United Kingdom

A 25% tariff will also apply to certain derivative steel and aluminum articles. Details will be provided in a forthcoming Federal Register notice.  

Additionally, the product-specific exclusion process for steel and aluminum is terminated effective 11:50 p.m. ET on February 10, 2025.

The White House says the new tariffs on steel and aluminum are necessary for national security. Domestic production of steel and aluminum has declined in recent years, and the United States “does not want to be in a position where it would be unable to meet demand for national defense and critical infrastructure in a national emergency.”

That said, “the United States will monitor the implementation and effectiveness of these actions in addressing our national security needs.” Per President Trump’s February 10 proclamation, he “may revisit this determination, as appropriate.”

More details about the steel and aluminum tariffs can be found here. 

Avalara is ready to help businesses comply with these tariffs and any retaliatory tariffs impacted countries may implement.  

In addition to Canada, China, and Mexico, President Trump has talked about imposing tariffs on imports from Colombia, Denmark, and the EU. Steel and aluminum tariffs and new tariffs on chips, copper, pharmaceuticals, semiconductors, and things needed for the military are all on the docket.

Speaking to the press on February 26, the president said the U.S. would be imposing 25% tariffs on the EU, “and that’ll be on cars and all other things.” 

We know from the first Trump administration that more tariffs are likely — and likely to change quickly. The first Trump trade war gave us whiplash, and we’ve had a taste of that already this term with the proposed then discarded 25% emergency tariffs on Colombian imports (and Colombia’s proposed and discarded retaliatory tariffs), and now with the Canada and Mexico tariff changes.

We also know changing tariff policies will challenge businesses that import affected goods into the United States. Companies exporting goods into countries with retaliatory tariffs on U.S. exports will also face new hurdles.

Developing a proactive cross-border trade strategy and tax compliance plan is the best way for businesses to prepare for whatever new tariffs the future holds.

While the current uncertainty over tariffs may be unsettling, the truth is that businesses deal with changing tariffs all the time. In 2023 alone, there were 337 international rate updates and 6,779 international taxability updates.  

The key to handling all this change and streamlining international trade compliance is customs duty automation. 

For businesses engaged in international trade that are having trouble assessing and adapting to the changing dynamics of cross-border duties and tariffs, Avalara is here to help. Avalara Cross-Border connects all pieces of the global tax and tariff puzzle by delivering real-time calculation of customs duties and import taxes, and by automating tariff code classification. We stay on top of regulatory changes worldwide, so businesses don’t have to. It’s the ideal trade solution for online sellers seeking to establish a modular, best-of-breed platform to power their cross-border needs.

“Avalara’s suite of compliance services can help you stay on top of this rapidly changing environment, giving you peace of mind that you are keeping pace with the changes,” says Craig Reed, General Manager of Cross-Border at Avalara. 

Let us help you stay ahead of change and continue to grow globally. Contact us today to learn more.

This post was first published on January 31, 2025.