On February 1, 2025, the new administration announced additional tariffs on imports from Canada, Mexico, and China, citing an extraordinary national emergency under the International Emergency Economic Powers Act (IEEPA). The tariffs initially expected to be effective February 4th have been suspended for at least 30 days. The new tariffs include:
- 25% additional duty on imports from Canada (energy resources are subject to a 10% duty).
- 25% additional duty on imports from Mexico.
- 10% additional duty on imports from China.
These tariffs will be applied on top of existing duties such as Section 301 tariffs on Chinese goods and Section 232 tariffs on steel and aluminum. The administration has justified the measures by linking them to the national security threat posed by illegal narcotics, particularly fentanyl, entering the U.S. through these countries.
Presidential Authority Under IEEPA
The International Emergency Economic Powers Act (IEEPA), enacted in 1977, grants the President authority to regulate economic transactions during an “unusual and extraordinary” national emergency. This can include trade restrictions, financial sanctions, asset freezes, and limitations on foreign investments and technology transfers.
Historically, IEEPA has been used to combat terrorism, cyber threats, and foreign interference. However, this marks the first instance of the law being invoked to justify tariffs. The administration argues that China has not curbed the export of precursor fentanyl chemicals, Mexico is harboring drug cartels, and Canada’s fentanyl production is increasing—posing direct threats to U.S. security and public health.
Business Impact and Next Steps
The administration has indicated that further trade measures may be introduced against countries believed to contribute to the fentanyl crisis and illegal immigration. In response, Canada has already announced retaliatory tariffs of 25% on $155 billion worth of U.S. goods, raising the likelihood of escalating trade tensions.
As of now, government agencies have not released official guidelines on import processing or possible exemptions. The Presidential Proclamation specifies that:
- Drawback claims are not permitted for these duties.
- De minimis treatment under 19 U.S.C. 1321 does not apply (meaning small-value shipments are still subject to tariffs).
Further guidance is expected through Federal Register Notices, but businesses should consider seeking professional advisory support to navigate these evolving trade regulations.
Preparing for the New Tariffs
Companies affected by these tariffs should anticipate higher costs and potential supply chain disruptions. Industry trade groups and organizations are likely to contest the legality and economic consequences of these measures.
Contact your Boyum Barenscheer CPA for additional guidance.