On February 27, 2025, President Trump announced on his Truth Social media account that he was imposing new tariffs of 25% ad valorem that will apply to all merchandise imported into the U.S. from Canada and Mexico starting on March 4, 2025. These duties were originally announced on February 4, 2025 but then granted a 30-day suspension (click here for prior coverage). Only Canadian oil and gas exports will receive a “reprieve”—tariffs on those goods (depending on the imported item’s classification code under the Harmonized Tariff Schedule of the United States (HTSUS)) will be facing new duties of 10%. All of the duties will be imposed in addition to any Normal Trade Relations or other trade remedy tariffs that may apply.
China is also targeted in the Truth Social post, with additional tariffs of 10% ad valorem to be imposed starting on March 4 on top of the first round of 10% tariffs that have applied since February 4. As with the new duties on goods of Canadian and Mexican origin, these 20% cumulative duties on goods of Chinese origin will be in addition to any other tariffs that may apply, such as the Section 301 “China tariffs” already in place at 100%, 50%, 25%, or 7.5% (again, depending on the imported item’s classification code under the HTSUS).
Finally, in his social media post, President Trump declared that the “reciprocal tariffs” at the center of his plan to combat persistent trade deficits and unfair trading practices are still on schedule for an early April rollout (find prior coverage here).
The cited reasons for these new tariffs center on the importation of illegal drugs: “[d]rugs are still pouring into our country from Mexico and Canada at very high and unacceptable levels. A large percentage of these Drugs, much in the form of Fentanyl, are made in, and supplied by, China.” Absent from the President’s social media post is any reference to what progress has been made over the past month since the new tariffs were first announced on February 4, and then paused for Canada and Mexico but not China, in combatting the importation of illegal drugs by America’s two largest trading partners.
Retaliatory Tariffs and Other Measures
Canada announced on February 1 that it will impose retaliatory tariffs of 25% on C$30 billion worth of imports should the U.S. tariffs proceed, which they now will. Canada is expected to resurrect the list covering Florida orange juice, Kentucky peanut butter and bourbon, Tennessee whiskey, coffee, appliances, apparel, cosmetics, motorcycles, and pulp and paper. It is anticipated that Canada will add an additional C$125 billion more of targeted U.S. merchandise categories that will be subject to the 25% tariffs. This second wave of tariffs will target products such as passenger vehicles and trucks (including EVs), recreational vehicles, steel and aluminum products, aerospace products, designated produce, beef and pork, and dairy products. The Canadian government is also considering other countermeasures—including non-tariff options—in response to the new U.S. tariffs on Canadian goods.
Mexico’s President Sheinbaum previously announced that if the U.S. chose to proceed with the 25% tariffs, Mexico would retaliate with similar tariffs on a wide range of products imported from the U.S. Following the original announcement of the U.S. tariffs, the Mexican president ordered the economy minister to respond with proposals for both tariff and non-tariff measures. Retaliatory tariffs of 25% on U.S. goods are expected.
The Chinese government previously responded to the first 10% tariffs effective February 4 by imposing new tariffs of 15% on U.S. exports to China of coal, coke, and liquified natural gas, and new tariffs of 10% on U.S. exports of crude oil, agricultural machinery, large-displacement vehicles, pick-up trucks, and others. It also announced tightened export controls to the U.S. on five critical minerals.
China also filed a complaint on February 5 at the World Trade Organization (WTO) on the grounds that the blanket 10% tariff constitutes a “serious violation” of international trade rules. Even if a panel is convened to hear the dispute and reaches a decision, the U.S. has blocked further appointments to the WTO’s Appellate Body, thus rendering any appeals from a panel decision impossible until such time as a quorum of Appellate Body members exists. Practically then, no relief at the WTO is available for the foreseeable future.
BDO Insight
As President Trump seeks to stop the flow of undocumented immigrants and illicit narcotics into the U.S. (such as fentanyl and its precursor agents), uncertainty abounds not only about the legal authority (IEEPA) he used to impose the previous tariffs (which will likely be stated as the legal basis for these new additional tariffs once Presidential Proclamations are issued), but about the retaliatory measures that Canada and Mexico will actually adopt, and about further retaliation that China will take in addition to the measures taken on February 5.
The overriding question facing U.S. companies (and nonresident companies, which include many Canadian entities that import into the U.S.) is whether the cost of the new tariffs which are paid by the U.S. importer of record can be passed on to U.S. consumers in whole or in part. Canada, Mexico, and China account for more than 40% of all U.S. imports and include motor vehicles, pharmaceuticals, shoes, electronics, lumber, steel and aluminum and a host of other products ultimately purchased by American retail consumers.
In sum, many view these further new tariffs as the escalation of a new global trade war in which all major trading nations will ultimately become enmeshed. Multinational companies trading in goods should consider strategies to mitigate or eliminate the impact of these significant new tariffs for merchandise imported into the U.S.
How BDO Can Help
The BDO Customs and International Trade team is closely monitoring the rapidly evolving trade landscape relating to the newly announced U.S. tariffs and the expected responses from the targeted countries.
For further assistance and detailed analysis tailored to your business needs, please contact our team of international trade experts at BDO. We are here to help you assess key vulnerabilities, ensure compliance with new measures, and identify opportunities for tariff relief and supply chain diversification moving forward.
Please visit BDO’s International Tax Services page for more information on how BDO can help.