In two recent actions, the Trump administration has further roiled the international trade world with new tariff announcements focusing on oil imports and the automotive industry:
- An Executive Order (EO) signed on March 24, 2025 targets third-party entities engaging in transactions with entities or individuals that are themselves subject to U.S. sanctions (see also the accompanying Fact Sheet). Starting on April 2, 2025, a 25% tariff may be levied on all goods imported into the U.S. from any country that directly or indirectly imports Venezuelan oil.
- A Presidential Proclamation signed on March 26, 2025 centers on the automotive industry and imposes a 25% tariff on all imports of passenger vehicles, light trucks, etc. and certain parts used in assembling vehicles (see also the accompanying Fact Sheet), with a temporary exclusion for parts imported under the United States-Mexico-Canada Agreement (USMCA). The tariffs on vehicles become effective on April 3, 2025 and those on automotive parts no later than May 3, 2025.
Venezuelan EO
The Venezuela EO, issued pursuant to the International Emergency Economic Powers Act (IEEPA) and other authorities, focuses on the “national emergencies” posed by the “actions and policies of the regime of Nicolás Maduro in Venezuela [which] continue to pose an unusual and extraordinary threat to the national security and foreign policy of the United States.” The EO notes that “[t]he activities of the Tren de Aragua gang, a transnational criminal organization originating in Venezuela and designated as a Foreign Terrorist Organization and a Specially Designated Global Terrorist organization, have intensified this threat.”
The EO provides that on or after April 2, “supplemental” duties of 25% may be imposed on goods originating in “any country that imports Venezuelan oil, whether directly from Venezuela or indirectly through third parties.” China is the largest global consumer of Venezuelan oil, so the clear thrust of the new supplemental tariff is imports from China. This tariff will be in addition to the current 20% IEEPA tariffs (imposed in two tranches of 10%, one on February 4 and the second on March 4), as well as any Section 301 tariffs, antidumping/countervailing duties, and Normal Trade Relations (NTR) duties (for prior coverage, see the trade alert dated March 10, 2025).
The EO vests the Secretary of State (in consultation with other cabinet officials) with the discretion and authority to determine the countries to which such tariffs will apply. The new supplemental tariffs will lapse one year after a country ceases to import Venezuelan oil—or earlier if U.S. officials deem it appropriate.
Auto Tariffs
The proclamation issued under Section 232 of the Trade Expansion Act of 1962 imposes new “national security” tariffs of 25% on all imports of motor vehicles and certain parts used in assembling vehicles. This measure is the first “sectoral tariff” (i.e., a tariff based on industry instead of country of origin) to be announced by the administration. Sectoral tariffs for the pharmaceutical industry and the timber/lumber industry are expected to follow.
The 25% automotive tariffs go into effect on April 3 for imports of sedans, SUVs, crossovers, minivans, cargo vans and light trucks, and will be in addition to any other tariffs that apply, e.g., the 2.5% NTR duties on passenger vehicles and the 25% NTR duties on light trucks.
Relief from the 25% tariff on imports of passenger vehicles and light trucks eventually will be available if an Original Equipment Manufacturer (OEM) can certify that a certain percentage of content is attributable to the U.S., i.e., the 25% tariff will only apply to the value of the non-U.S. content. Such content refers to the value of the automobile represented by parts wholly obtained, produced, or “substantially transformed” in the U.S.
As with many of the other trade remedy tariffs already in effect, the tariff code under the Harmonized Tariff Schedule of the United States (HTSUS) is of paramount importance given that an incorrect HTSUS code could needlessly subject imports to this new tariff. While the tariff codes for imports of passenger vehicles and light trucks are fairly straightforward, they are anything but for imports of parts.
According to the proclamation, a 25% duty will apply to imports of automotive parts falling into the broad categories of engines, transmissions, powertrain parts, and electrical components. An Annex appended to the proclamation (which should appear in the forthcoming Federal Register notice) lists the HTSUS codes to which the new duties will apply. Companies should make sure their parts are properly classified to ascertain whether or not the new duties apply (historically, this has been an area where company sometimes mis-classify auto parts under other tariff codes).
However, assessment of the 25% duty will be paused on any imported auto parts that are backed by a Certification of Origin under the USMCA confirming that the part meets the product-specific rule of origin (corresponding to the HTSUS code of the finished part) such that duty-free entry into the U.S. is allowed.
The pause is intended to allow the Commerce Department, in consultation with U.S. Customs & Border Protection, time to devise a process by which importers can calculate the percentage of U.S. content of each part such that the 25% tariffs will only apply to the non-U.S. content. The new process and effective must be published in the Federal Register no later than May 3, 2025. While almost all companies have processes in place to calculate the regional value content (content originating in Canada, Mexico, and the U.S) of any given auto part for USMCA qualification, measuring domestic U.S. content in isolation could require changes to those processes.
Finally, certain categories of auto parts imports (i.e., “knock-down” kits and “parts compilations”) are excluded from the ambit of the proclamation. Knock-down kits reflects a scenario where a complete passenger vehicle is imported disassembled for assembly in the country of import into a finished passenger vehicle. Parts compilations were not explained in the proclamation or Fact Sheet.
BDO Insight
As President Trump continues to ratchet up U.S. tariffs under various trade remedy statutes (including IEEPA, which has never before been used to impose tariffs in response to “national emergencies”), the world is waiting on the April 2 deadline for the Trump administration to announce the “reciprocal tariffs” that will apply to imports from many of the U.S.’s major trading allies, as well as potential other sectoral tariffs on, for example, pharmaceuticals, semiconductors, etc.
President Trump recently confirmed that not only will the U.S. factor in the foreign duty rate on imports of U.S. goods, but VAT will be added into the mix to determine an appropriate new equivalent “reciprocal” tariff rate via which the current U.S. duty rate will be increased to match the foreign duty and VAT rate for goods imported from each of the targeted countries.
The overriding question still facing U.S. companies (and nonresident companies, which include entities that import into the U.S.) is whether the cost of any new tariffs that might ultimately be paid by the U.S. importer of record can be passed on to U.S. consumers in whole or in part.
In sum, many view these potential new tariffs (including the new sectoral tariffs) as further escalation of a new global trade war in which all major trading nations will ultimately become enmeshed. Multinational companies trading in goods should consider mitigation strategies to lessen 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.