Trump Uses IEEPA to Impose Tariffs on China, Mexico and Canada—Analysis and Summary
See all Insights

Trump Uses IEEPA to Impose Tariffs on China, Mexico and Canada—Analysis and Summary

Brownstein Client Alert, Feb. 3, 2025

Current State of Play

UPDATED, FEB. 7, 6:00 P.M. EST

On Friday, Feb. 7, President Trump issued a further executive order (EO) that temporarily allow goods from China to enter the United States under the “de minimis” provision. Under this EO, “de minimis” treatment will be available for imports of goods from China until the secretary of commerce notifies the president that “adequate systems are in place to fully and expediently process and collect tariff revenue” form such goods. The new EO does not revoke the 10% tariff on Chinese goods that are not eligible for “de minimis,” which went into effect on Feb. 4. While it originally appeared dated Feb. 7, this new EO now appears on whitehouse.gov dated Feb. 5.

The new EO does not impact Canada or Mexico. Goods produced in Mexico and Canada remain eligible for “de minimis” treatment as part of the 30-day pause in tariffs on those countries.

Also on Feb. 7, President Trump stated that he will announce additional “reciprocal” tariffs on Monday and Tuesday of next week. Speaking alongside Japanese Prime Minister Shigeru Ishiba, he emphasized that the trade deficit with Japan must be eliminated but did not specify whether Japan or other nations would be subject to these additional tariffs. President Trump has previously raised concern with trade and tariff imbalances between the U.S. and the European Union, as well as other countries.

 

China

In a statement released on Feb. 4, the Ministry of Finance of the People’s Republic of China (PRC) announced that tariffs ranging from 10% to 15% would be imposed on select American exports beginning on Feb. 10. The announcement does not specify a time on Feb. 10 or outline whether the tariffs will apply to goods already in transit. The tariffs include:

  • A 15% tariff on coal and liquefied natural gas, specifically: unformed anthracite; coking coal; other unformed bituminous coal; briquettes, coal balls and similar solid fuels made from coal; unformed lignite (Annex 1Eight total items).
  • A 10% tariffs on “crude oil, agricultural machinery, large-displacement automobiles, and pickup trucks.” This includes pure electric trucks and a range of passenger, off-road and other vehicles with hybrid and traditional engines, among other goods. (Annex 272 total items)

Chinese President Jinping took several additional retaliatory measures, including filing a complaint at the World Trade Organization (WTO), initiating an antitrust investigation on Google, expanding export controls on critical minerals, and designating several American companies to its Unreliable Entity List.

China’s retaliatory actions are narrower than President Trump’s blanket 10% tariff on all Chinese goods.

 

Mexico

In a social media post on Feb. 3, President Trump confirmed that tariffs on Mexico will be paused for one month as negotiations continue between the two countries. According to President Trump’s post and a statement from President Sheinbaum, Mexico will also deploy 10,000 National Guard troops to the two countries’ border.

 

Canada

In a social media post on Feb. 3, President Trump confirmed that tariffs on Canada will be paused for one month as negotiations continue between the two countries. According to President Trump’s post and a statement from Prime Minister Trudeau, Canada will dedicate $1.3 billion to enhance border security and drug enforcement. The plan will include:

  • deployment of an additional 10,000 border patrol agents;
  • appointment of a “Fentanyl Czar,” whose duties are not yet defined;
  • designation of drug cartels as terrorist organizations;
  • constant border patrol; and
  • establishment of a “Canada-U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering”

Additionally, Prime Minister Trudeau signed an intelligence directive authorizing $200 million to combat organized crime and the importation of fentanyl.

In his post, President Trump mentioned that the pause would enable his administration to “see whether or not a final Economic deal with Canada can be structured.” This reinforces the possibility that an agreement between the two countries to resolve the tariff threat could go beyond issues related to border security to redefine, or begin to redefine, the two countries’ economic relationship.

 

Tariffs on China, Canada and Mexico

On Saturday Feb. 1, President Donald Trump issued three executive orders (EOs) to impose tariffs on imports from China, Mexico and Canada effective 12:01 a.m. eastern time on Feb. 4, 2025.

  • The EO targeting China imposes a 10% tariff on all goods. It applies on top of the existing tariffs on a range of specific goods imported from China that were imposed during President Trump’s first term as well as during the Biden administration.
  • The EO targeting Canada imposes a 25% tariff on all imports other than energy resources, which are subject to a 10% tariff.
  • Energy resources that are covered by the 10% rate include: 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, as defined by 30 U.S.C. 1606 (a)(3), and as otherwise included in the Federal Register

Additionally, under the EOs, all Chinese, Mexican and Canadian imports will be ineligible for “de minimis” treatment, which allows imports valued at $800 or less to enter the United States duty-free.

 

No Exclusion Process

Unlike existing tariff authorities, the EOs do not provide for an “exclusion” process through which specific imports could be exempted. On their face, these tariffs are not intended to address trade imbalances but to combat the influx of illicit drugs, notably fentanyl, through the northern and southern borders, as well as illegal immigration. The EOs note that the president will withdraw the tariffs when he determines that the countries have “taken adequate steps to alleviate” the crises. However, the EOs do not specify goalposts for the countries to meet.

Each EO also allows the president to increase the new tariffs in response to the targeted countries imposing retaliatory tariffs on American exports.

 

Canada, Mexico and China Respond

Canada’s Prime Minister Justin Trudeau announced he will impose a 25% tariff on approximately $20 billion worth of U.S. goods including beer, wine, fruits, vegetables, perfume, clothing and shoes, and an expanded list of $85 billion worth of goods in the coming weeks. Mexico’s President Claudia Sheinbaum also announced she would implement “tariff and non-tariff measures” in response to the action. China announced it will challenge the tariffs at the World Trade Organization, a largely symbolic move, and take unspecified countermeasures.

 

Relation to “America First Trade Policy” Memorandum and Potential Impact on USMCA

Many observers in the United States and abroad have characterized the Trump administration’s action as the first “shot” in a new “trade war,” the ultimate goal of which is to rebalance the United States’ relationships with key trading partners. Such a goal was central to the president’s campaign and was the focus of an the “America First Trade Policy Memorandum” issued on his first day back in office. The memorandum sets up April 1 as a deadline for key agencies to report recommendations on how to transform U.S. trade policy.

President Trump appears eager to move forward more quickly. As recently as the night after the three EOs were announced, he responded to a reporter’s question by stating that Canada, Mexico and China “…have to balance out their trade, number one,” in order to have the tariffs lifted—before simultaneously calling for action on illicit immigration and fentanyl. In the same exchange with reporters, the president repeated his threat to impose tariffs on imports from the European Union in response to trade imbalances.

Despite the comments pertaining to addressing the trade imbalance from President Trump, in issuing the three EOs the administration formally cited to the three countries’ failure to stop illicit immigration and shipments of deadly drugs such as fentanyl into the United States as the reason for imposing the tariffs. President Trump’s social media post announcing the action, a White House Fact Sheet, and the EOs themselves, focus solely on these issues and not on other issues discussed in the memorandum, such as rebalancing trade deficits.

This distinction is potentially significant with regard to the tariffs’ impacts on the United States-Canada-Mexico Agreement (USMCA) that the three countries reached during President Trump’s first term. By pointing to the threats from illicit immigration and fentanyl, the Trump administration could claim that the tariffs are within the bounds of a provision of USMCA allowing for signatories to take action to protect “essential security.” If the three countries are able to reach a resolution before retaliatory tariffs escalate, this could enable the trade agreement to remain intact. After this, the Trump administration could still seek to secure changes to the agreement through its review mechanism, as contemplated in the “America First Trade Policy Memorandum.”

 

Novel Use of IEEPA

In imposing the tariffs, President Trump invoked several statutes, including the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), Section 604 of the Trade Act of 1974 and Section 301 of title 3, United States Code. This is the first time that IEEPA has been used to impose tariffs. Given the unprecedented nature of the president’s actions, it is unclear what role Congress will play in this process. IEEPA does require the president to consult with Congress “in every possible instance” before exercising any of the authorities granted under the statute. After the declaration of a national emergency, the president must transmit a report to Congress specifying:

  • “the circumstances which necessitate such exercise of authority;
  • why the President believes those circumstances constitute an unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States;
  • the authorities to be exercised and the actions to be taken in the exercise of those authorities to deal with those circumstances;
  • why the President believes such actions are necessary to deal with those circumstances; and
  • any foreign countries with respect to which such actions are to be taken and why such actions are to be taken with respect to those countries.”

After submitting the initial report, the president must submit additional information every succeeding six-month period that the authorities are exercised. However, emergencies declared under IEEPA do not automatically sunset and other emergencies declared under the act have been in place for decades. The emergency may be terminated in one of three ways: (1) by the president, (2) by a privileged joint resolution of Congress, or (3) automatically, if the president does not publish a notice in the Federal Register stating that the emergency is to continue in effect on the anniversary of its declaration. Additionally, this novel use of the authority will likely prompt legal challenges, but courts have often deferred to the president on the use of such national security authorities.

 

Congressional Reaction

The three EOs have been met with mixed reactions from lawmakers. Democrats, led by Rep. Greg Stanton (D-AZ) have called on the administration to rescind the EOs imposing tariffs on Canada and Mexico, they were noticeably silent on the EO imposing tariffs on China. Republicans, such as Sen. Lindsay Graham (R-SC) focused primarily on the EOs targeting China and Mexico, not Canada, telling Fox News Sunday that "these tariffs are designed to get these countries to change their behavior" saying that if this happens, "I think the tariffs probably go away."

There is bipartisan concern among lawmakers regarding China’s role in fentanyl production as well as the country’s ability to undermine the U.S. economy and national security through unfair trade practices. House Select Committee on the Chinese Communist Party (CCP) Chairman John Moolenaar (R-MI) and Rep. Tom Suozzi (D-NY) recently reintroduced the Restoring Trade Fairness Act (H.R.694). The bill would establish new China-specific tariffs that would phase in over five years, beginning with a 10% duty that would increase to a minimum 35% tariff on all “non-strategic goods” and 100% tariff on the products included in the Biden administration’s Critical and Emerging Technologies List. Like the EO, the legislation would also exclude China from de minimis treatment. The legislation goes one step further and revokes China’s Permanent Normal Trade Relations (PNTR) status.

Unlike the EOs on China and Mexico, the tariff on Canada has been met with more criticism. We expect concerns from U.S. producers and exporters, who will be harmed by the retaliatory tariffs as well as rising costs for importing goods from Canada and Mexico. Border states in particular will be negatively impacted, with lawmakers such as Michigan Sen. Gary Peters (D-MI) raising concerns about how these tariffs will impact Michigan-Canada economic ties and the U.S. auto industry, which has substantial manufacturing facilities in Mexico. Energy prices are also of top concern to stakeholders, explaining why Trump imposed a separate tariff structure for all Canadian energy and energy resource imports.

 

The alert below includes a section-by-section summary of the three EOs.

 

Section-by-Section Analysis

The three EOs share the same basic structure. This document provides a section by section analysis of the China EO before highlighting relevant differences in the Canada and China EOs.

 

China EO

The preamble outlines President Trump’s rationale for imposing tariffs on China, including that:

  • the sustained importation of synthetic opioids is a threat to the United States.
  • the Chinese Communist Party (CCP), which exerts complete control over the government and enterprises of the People’s Republic of China (PRC), has subsidized and otherwise incentivized PRC chemical companies to export fentanyl and its precursor chemicals to the United States.
  • the PRC supports Chinese Transnational Criminal Organizations (TCOs) that create a profit from the exportation of illicit drugs.
  • PRC-based chemical companies go to great lengths to evade law enforcement by concealing the contents of the parcels and hiding the identity of the re-shippers in the United States. More than 500,000 pounds of drugs have been seized at the southern border in the last three fiscal years, as well as 42,000 pounds at the northern border. The PRC plays a central role in the influx of illicit drugs entering the United States and has failed to take decisive actions to stem the flow of illicit drugs. The CCP has the capacity to combat this threat as it implements extensive domestic surveillance and law enforcement and exerts extraterritorial reach across the globe to suppress political dissent.

For these and other reasons detailed in the order, the president concludes that the public health crisis caused by the importation of illicit drugs is a national emergency and immediate action is necessary to combat the threat.

Sec. 1. Background.

Pursuant to the NEA, the president expands the previously declared national emergency at the southern border (Proclamation 10886) to include the PRC’s failure to prevent the production and exportation of fentanyl, its precursor chemicals and other illegal drugs. The influx of illegal drugs entering the United States threatens national security, foreign policy and the economy. Other tariff authorities will not adequately address the threat outlined in the order, and Section 1702 (a) (1) (B) of IEEPA is invoked to impose tariffs that will combat the threat of illicit drugs.

Sec. 2.

(a) All Chinese imports that “entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am eastern time on February 4, 2025” will be subject to a 10% tariff. Chinese products 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. Eastern time on Feb. 1 will not be subject to the additional tariffs if the importer certifies to U.S. Customs and Border Protection.

(b) The 10% duty imposed by this EO will be applied in addition to all other applicable duties, fees, exactions or charges that are currently imposed on Chinese imports, including existing Sec. 301 tariffs.

(c) If the PRC imposes retaliatory tariffs in U.S. imports, the president may unilaterally increase or expand the tariffs imposed under the EO.

(d) The Secretary of Homeland Security is directed to modify the Harmonized Tariff Schedule of the United States (HTSUS) to account for the additional 10% duty. A notice of the modification should be made through the Federal Register. The tariffs shall remain in effect unless ordered to be reduced, modified or terminated.

(e) Chinese products that are eligible for admission under “domestic status” (19 CFR 146.43) and entered into a U.S. foreign trade zone (FTZ) on or after 12:01 a.m. Eastern time on Feb. 4, 2025, will be admitted in the United States under “privileged foreign status” (19 CFR 146.41) and not be subject to the 10% duty.

(f) Duty drawback will be unavailable for the imports subject to the 10% duty.

(g) Imports described in subsection (a) will no longer be eligible for the de minimis exemption.

(h) Any prior presidential action related to trade with the PRC that is inconsistent with this order is terminated, suspended or modified to the extent necessary to give full effect to this order.

(i) Articles outlined under 50 U.S.C. 1702 (b), such as postal communications, humanitarian donations and luggage related to travel, will not be subject to the 10% tariff. It is unclear if such items will be subject to the de minimis exception.

Sec. 3.

(a) The Secretary of Homeland Security is directed to regularly consult with the Secretary of State, the Attorney General, the Assistant to the President for National Security Affairs and the Assistant to the President for Homeland Security on the outlined threat posed by the PRC. The Secretary of Homeland Security shall inform the president of PRC actions that seek to alleviate the illicit drug crisis. The president will determine if the PRC government has taken sufficient action to alleviate the crisis and warrant the termination of the additional 10% duty.

(b) The Secretary of Homeland Security, in coordination with the Secretary of State, the Attorney General, the Assistant to the President for National Security Affairs and the Assistant to the President for Homeland Security, shall recommend additional action should the PRC fail to take adequate steps to alleviate the illicit drug crisis.

Sec. 4.

The Secretary of Homeland Security, in consultation with the Secretary of the Treasury, the Attorney General and the Secretary of Commerce, is directed to take all appropriate actions, including adopting rules and regulations, to implement the order pursuant to IEEPA. The Secretary of Homeland Security may delegate action to the Department of Homeland Security. All executive departments and agencies are directed to take appropriate action within their authority to implement this order.

Sec. 5.

The Secretary of Homeland Security, in coordination with the Secretary of the Treasury, the Secretary of Commerce, the Assistant to the President for National Security Affairs, the Attorney General and the Assistant to the President for Homeland Security, is directed to submit a recurring report to Congress on the national emergency declared in this order, consistent with section 401(c) of the NEA (50 U.S.C. 1641(c)) and section 204(c) of IEEPA (50 U.S.C. 1703(c)).

Sec. 6. General Provisions.

(a) Nothing in this order shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department, agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget.

(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents or any other person.

 

Key Differences in Canada and Mexico EOs

Sec. 1. Background.

President Trump emphasizes the national emergency he previously declared on the southern border in the preambles of both the Canada and Mexico EOs, highlighting in particular the threat posed by fentanyl and other forms of drug trafficking occurring on the border. He goes into further detail in the Mexico EO, stating that this executive action is designed to expand the previous national emergency declaration and address inaction on the part of the Mexican government. The EO notes the outsized role of Mexican drug cartels and other international organized crime groups operating in Mexico in contributing to the massive flow of fentanyl, methamphetamine, cocaine and other drugs into the United States.

The Mexico EO also references the issue of illegal migration facilitated by human trafficking organizations operating on the southern border, stating that this flow helps gang members and other individuals tied to organized crime enter the country and fuel domestic criminal activity.

The Canada EO states that the northern border is also not exempt from serious issues that threaten American security. In particular, it highlights the processing of nitazenes in Canadian labs as well as the growing presence of Mexican cartels operating in Canada. It references a study published by the Canadian Financial Transactions and Reports Analysis Centre that brings attention to rising activity of illegal synthetic opioid producers in the country and the increased use of Canada as a waypoint for international drug distribution. The order also expands the previously declared national emergency pertaining to the situation on the Mexico-U.S. border to include the northern one.

Sec. 2.

This section is identical between the Canada and Mexico EOs, outlining the tariff actions that will be undertaken, save for an additional paragraph outlining the different tariff rate for Canadian energy exports.

Sec. 3.

In the Mexico EO, illegal immigration is mentioned as one of the issues that needs addressing for the recission of these new tariffs. This is omitted in the China and Canada versions.

 

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING TARIFFS INSTITUTED BY THE TRUMP ADMINISTRATION. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.

Recent Insights