Message from the IFSA Government Affairs Team: Update on Tariffs

The U.S. trade policy agenda, including imposition of tariffs, continues to be a very fluid situation. Starting March 4, the U.S. has imposed a 25% tariff on most imported goods from Canada and Mexico and increased the measure on Chinese imports from 10% to 20%. As noted in a statement from the White House on the planned implementation of tariffs for Canada and Mexico, “President Trump is proceeding with implementing tariffs on Canada and Mexico under the International Emergency Economic Powers Act (IEEPA) to combat the extraordinary threat to U.S. national security, including our public health posed by unchecked drug trafficking. While President Trump gave both Canada and Mexico ample opportunity to curb the dangerous cartel activity and influx of lethal drugs flowing into our country, they have failed to adequately address the situation.” During his campaign trail and since his election victory, President Trump highlighted his plans to utilize imposition of tariffs as a means to negotiate with trading partners and address issues such as trade deficits, immigration, and national security. Trump had announced plans to impose tariffs on Canada and Mexico in February which were set to go into effect February 4, but then announced a 30-day delay following commitments from Canada and Mexico to address border security concerns. However, the statement from Trump and the White House this week appear to indicate that demands from the Administration were not met, and therefore the tariff measures have been put into place. Details of the tariff measures on Canada and Mexico, as posted in the Federal Register, can be found here and here, respectively. In addition to the new measures on Canada and Mexico, the U.S. has increased the tariff rate for Chinese imports from 10% to 20% as noted in the amended executive order. Like the duties on Canada and Mexico, Trump invoked the IEEPA to impose the tariffs on China, citing “the failure of the Government of the People’s Republic of China (PRC) to act to blunt the sustained influx of synthetic opioids, including fentanyl, flowing from the PRC to the United States.”

Leaders of all three nations reacted swiftly to the new and updated tariff measures. Canadian Prime Minister Justin Trudeau issued a statement on March 3 claiming there is no justification for the U.S. tariffs, stating, “While less than 1 percent of the fentanyl intercepted at the U.S. border comes from Canada, we have worked relentlessly to address this scourge that affects Canadians and Americans alike.” He further noted that if the U.S. measures were to go into effect, “Canada will…respond with 25 percent tariffs against $155 billion of American goods – starting with tariffs on $30 billion worth of goods immediately, and tariffs on the remaining $125 billion on American products in 21 days’ time. Our tariffs will remain in place until the U.S. trade action is withdrawn, and should the U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures.” Last month, Canada issued a list of planned targets for retaliatory tariffs, which appear to be the same targets which will be included in the current response. This list includes many food and agricultural products. As noted in ongoing updates posted by NBC News, Trump noted that any retaliatory increase in Canadian tariffs on U.S. goods would trigger a reciprocal increase on measures from the U.S. Further, Trudeau alleged that the 25% tariff on imports of Canadian goods into the U.S. is intended to destroy the Canadian economy. Trudeau also mentioned plans to file a dispute resolution claim with the World Trade Organization and via the mechanism as part of the U.S.-Mexico-Canada Agreement (USMCA).

Additionally, on March 4, Mexican President Claudia Sheinbaum issued a press conference in which she noted that “retaliatory tariffs on American imports into Mexico, as well as non-tariff measures” would be announced on March 9, as noted in this CNN article. According to the article, Sheinbaum plans to speak with Trump on March 6, likely with the intent to roll back the U.S. tariffs. In her press conference, she stated, “The unilateral decision made by the United States affects national and foreign companies operating in our country, as well as our people. No one benefits from this decision.”

Following the increased tariff measure on China, the country announced that “an additional 15% tariff will be imposed on chicken, wheat, corn, and cotton” and “an additional 10% tariff will be imposed on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products.” As noted in the CNN article, China has also “added 15 companies…to its export control list” and imposed additional measures including “stopping lumber imports from the United States, suspending the permits of three US companies to export soybeans to the country and an anti-dumping investigation into some imports of American fiber optic products.” Of note, following the initial 10% measure placed on Chinese imports on February 4, China had announced retaliatory tariffs primarily targeting energy products, agricultural machinery, and cars, as well as plans for an antitrust investigation against Google and an investigation with the World Trade Organization. In addition to the measures on Canada, Mexico, and China, on March 12, a 25% tariff on steel and aluminum imports is set to go into effect, as outlined in a fact sheet and proclamation from the Administration. This action removes previous exemptions for several key U.S. trading partners, “clos[ing] existing loopholes and exemptions to restore a true 25% tariff on steel and elevate the tariff to 25% on aluminum.” Further, in February, Trump issued a memo directing U.S. officials to “investigate the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners” and report “proposed remedies in pursuit of reciprocal trade relations with each trading partner.” Trump has announced that reciprocal tariffs will go into effect on April 2 for those trading partners in which non-reciprocal trade arrangements are identified. Additionally, on March 3, on Truth Social, as noted in a Reuters article, he posted, “To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external product on April 2^nd. Have fun!” Trump has also mentioned the possibility of placing additional levies on products such as lumber, pharmaceuticals, semiconductor chips, copper, and auto imports, possibly as soon as April 2.