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New tariffs on Canada and Mexico take effect immediately, with a 25% duty on most imports and a 10% tariff on Canadian energy products, framed by the Trump Administration as a measure to curb fentanyl trafficking; negotiations with both countries were declared closed.

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Customs and trade compliance rules are tightened, requiring Canadian and Mexican goods entering U.S. Foreign Trade Zones to take “privileged foreign status,” eliminating eligibility for duty drawback on the new tariffs and, for Canada, revoking the de minimis exemption effective February 4.

Retaliation from trading partners is underway, with Canada announcing 25% counter‑tariffs on CAD 30 billion of U.S. exports (with plans to expand further), while Mexico signaled forthcoming retaliatory measures following public condemnation of the tariffs.

China-related tariffs also escalate, as the 10% tariff on Chinese imports increases to 20%, alongside continued restrictions on duty drawback and de minimis treatment, raising concerns among lawmakers and industry groups about higher costs and broader economic impacts.

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President Trump announced that tariffs on&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/sWG5Co2ArDh5VmlQF1fxUpSA92?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">Canadian</a>&nbsp;and&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/6axqCpY9vEcq0ZQ7hDhpUGSsiD?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">Mexican</a>&nbsp;imports will go into effect today,&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/GZpOCqxA0GTnyvLVFQiEUEhtcQ?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">with no further room for negotiation</a>. These tariffs, aimed at curbing fentanyl flow, are set at 25% for most goods from these countries, with Canadian energy exports facing a 10% duty. The 10% tariff on Chinese imports will also rise to 20% on the same date. The Executive Order and CBP notice require that products from Canada and Mexico admitted into U.S. foreign trade zones after their respective dates must have "privileged foreign status," making them subject to duties upon entry for consumption. No duty drawback is available for the additional tariffs imposed under the Executive Order. While Mexico’s de minimis exemption remains available for eligible goods, Canada’s exemption was revoked effective February 4, requiring applicable duties and taxes on affected shipments.

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In response to U.S. President Donald Trump's imposition of 25% tariffs on Canadian imports, Prime Minister Justin Trudeau announced that, starting Tuesday,&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/AKH4CrkgxJh7ROwWuys7U4Aa94?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">Canada will enforce 25% tariffs on C$30 billion worth of U.S. goods</a>, with plans to extend these tariffs to an additional C$125 billion in 21 days.&nbsp;Similarly, Mexican President Claudia Sheinbaum has condemned the U.S. tariffs and stated that&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/YqpRCv2mBNhqnZORhotvUQxzR5?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">Mexico will implement retaliatory measures</a>, with specific details to be announced on Sunday during a public event in Mexico City's central plaza.&nbsp;

Read the guidance for the Mexico tariffs&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/sKfQCwpnDOskEn02u8ulUJoZ0T?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">here</a>&nbsp;and the guidance for the Canada tariffs&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/tKNWCxkoEPhD5jmzH2ClUyTjmQ?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">here</a>. The CBP guidance for Canada can be found&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/Jln2CyPpG0cKP36puyFnUxZMvz?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">here</a>&nbsp;and the CBP guidance for Mexico can be found&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/sKfQCwpnDOskEn02u8ulUJoZ0T?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">here</a>.

However, China has not made a formal offer to address the fentanyl issue, which has stalled direct talks with President Xi. The tariff moves have sparked concerns from lawmakers, business groups, and trade experts, warning of potential economic harm, including increased costs for consumers and businesses. The&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/5sDfCzpqJRsEYz87uVHBU9vLeg?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">previously released CBP notice</a>&nbsp;confirms that additional duties on Chinese imports are not eligible for duty drawback, meaning importers cannot claim refunds on these tariffs for re-exported goods. Products subject to these tariffs also do not qualify for the de minimis exemption, preventing duty-free entry for shipments under $800. Additionally, goods entering U.S. Foreign Trade Zones (FTZs) must be admitted under privileged foreign status, ensuring they are subject to the additional tariffs upon entry for U.S. consumption.

United States Trade Representative Jamieson Greer&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/BqvQCAD8GwFBK5r8HXI6UGCX1c?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">presented the 2025 Trade Policy Agenda</a>, the 2024 Annual Report, and the "WTO at Thirty" report to Congress. The Trade Policy Agenda outlines the Trump Administration's vision for trade, addressing economic and national security challenges and advocating for rebalancing trade through the "America First Trade Policy." The 2024 Annual Report summarizes the USTR's activities in the past year, while the "WTO at Thirty" report discusses the challenges facing the World Trade Organization and the need for reform.&nbsp;

Greer emphasized the importance of President Trump's trade policies in boosting American workers and businesses, focusing on strategies to tackle trade deficits, promote manufacturing, and strengthen national security. The agenda highlights the goal of fostering a "Production Economy," increasing wages, creating jobs, and boosting innovation, addressing unfair trade practices and leveraging tariffs to protect U.S. interests.

New Section 232 Investigations on Lumber and Copper

President Donald Trump has&nbsp;<a href="https://url.us.m.mimecastprotect.com/s/MJYgCBB1Jxs0XNPyUPSRU2EE86?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noreferrer noopener">initiated Section 232 investigations into imports of timber, lumber, and copper</a>&nbsp;to assess their impact on U.S. national security. The timber and lumber investigation, launched on March 1, 2025, aims to evaluate the effects of imports on domestic production capabilities and national defense, with a report due within 270 days. Concurrently, an investigation into copper imports was started on February 25, 2025, to determine their national security implications, and findings were expected within 270 days. Both investigations may lead to recommendations for trade remedies, including tariffs, export controls, or measures to bolster domestic production.

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Do the outlined trade issues impact you?&nbsp;Please contact Sarah Helton, Michael Best Strategies’ Trade Practice Lead at&nbsp;<a href="mailto:sarah.helton@michaelbest.com" target="_blank" rel="noreferrer noopener">sarah.helton@michaelbest.com</a>&nbsp;for assistance.&nbsp;

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Trump Trade 2.0: Canada-Mexico Tariffs, USTR Report, and Section 232 Action

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