President Trump Announces 10 Percent Global Tariff, 11 Percent to 50 Percent Reciprocal Tariffs

President Donald Trump on April 2, 2025, issued an executive order (EO), "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits" (Reciprocal Tariff EO). The Reciprocal Tariff EO applies a 10 percent global tariff on all imports into the U.S. (Global Tariff), pursuant to the International Emergency Economic Powers Act (IEEPA). This will take effect at 12:01 a.m. ET on April 5, 2025.

Additionally, the 10 percent Global Tariff will increase to 11 percent to 50 percent for countries identified in Annex I of the Reciprocal Tariff EO (Reciprocal Tariffs). These 57 countries will be subject to increased reciprocal tariffs (instead of the 10 percent Global Tariff), based on a Trump Administration determination of nonreciprocal or discriminatory trading practices. This will take effect at 12:01 a.m. ET on April 9, 2025. Global and Reciprocal Tariffs will apply to non-U.S. content of the imported product, provided that the U.S. content is at least 20 percent.

Canada and Mexico will not be subject to the Global Tariff or the increased Reciprocal Tariffs on United States-Mexico-Canada Agreement (USMCA) qualifying goods. Imports of Canadian and Mexican goods that do not qualify for duty-free treatment pursuant to USMCA will remain subject to the 25 percent tariffs imposed in March 2025 pursuant to IEEPA (IEEPA Tariffs).

President Trump noted in his tariffs announcement that the 25 percent tariffs on imported autos, authorized under Section 232 of the Trade Expansion Act of 1962 (Section 232 Tariffs), went into effect at 12:01 a.m. ET on April 3, 2025. The 25 percent Section 232 Tariffs on imported steel and aluminum, in effect since March 12, 2025, remain in effect. Additionally, goods subject to Section 232 Tariffs are not subject to the Global Tariff or increased Reciprocal Tariffs. It is unclear how this exception applies for steel and aluminum derivatives.

China will be subject to the Global Tariff and increased Reciprocal Tariffs of 34 percent. Reports indicate that the 20 percent tariffs imposed in February and March 2025 pursuant to IEEPA remain in place. Additionally, tariffs of 7.5 percent to 25 percent imposed on China pursuant to Section 301 of the Tariff Act of 1974 (Section 301 Tariffs) remain in place. However, the Global Tariff and increased Reciprocal Tariffs do not apply to products subject to Section 232 Tariffs. Navigating the applicability of tariffs to China demonstrate the difficulties for companies attempting to respond to the Trump Administration's tariff actions.

Countries targeted by the increased Reciprocal Tariffs will likely announce retaliatory tariffs in the coming days. Some may seek to negotiate reductions in reciprocal tariffs either before they enter into force or soon after. However, the April 9, 2025, implementation deadline does not leave much time for these negotiations.

The tables below provide a high-level summary of the status of tariffs for China, Canada and Mexico as of April 2025. Because the Global Tariff and increased Reciprocal Tariffs do not apply to products also subject to Section 232 tariffs, two tables illustrating these scenarios with respect to China are included. For a complete list of countries impacted by increased Reciprocal Tariffs, please refer to Annex I of the EO.

* These apply only to goods that do not qualify for duty-free treatment under USMCA.

** These totals assume that products will not be subject to Section 232 tariffs for both steel and aluminum and automobile and automobile parts. The scope of Section 232 tariffs for derivatives overlaps (e.g., 9403.20.00, HTSUS) but does not apply to the complete product.

These tables provide a useful reference point in conceptualizing the impact of tariffs imposed to date and potential avenues for the imposition of additional tariffs. This Holland & Knight alert is intended as a high-level summary and is not authoritative.

Exemptions

1. Articles subject to Section 232:

• All steel articles, steel derivative products, aluminum articles, aluminum derivative products, automobiles and automobile parts subject to Section 232 duties are exempt from both the Global Tariff and the increase to Reciprocal Tariffs. For details on the scope of covered articles and derivatives of steel and aluminum, please refer to Proclamation 9704 (March 8, 2018), Proclamation 9705 (March 8, 2018), Proclamation 9980 (Jan. 24, 2020), as amended by Proclamation 10895 (Feb. 10, 2025) and Proclamation 10896 (Feb. 10, 2025). For details on the scope of covered automobile and automobile parts, please refer to Proclamation 10908 (March 26, 2025).
• It is unclear how this exception applies for steel and aluminum derivatives. There appears to be two possible interpretations: 1) The value of the steel/aluminum derivative is exempt from Global Tariff or increased Reciprocal Tariffs, or 2) any product containing a component subject to Section 232 Tariffs as a steel/aluminum derivative is exempt from the Global Tariff or increased Reciprocal Tariffs. Given the Trump Administration's desire to maximize tariffs, it may be the former rather than the latter.
• Any article that may become subject to a Section 232 duty as a result of future action will then be exempt from both the Global Tariff and increase to Reciprocal Tariffs.

2. Donations and informational materials under 50 U.S.C. 1702(b)

3. Annex II of the EO:

• Additionally, all products listed in Annex II of this EO – including copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products – are also exempt from both the Global Tariff and Reciprocal Tariffs.

4. U.S. content of a subject article, provided at least 20 percent of the value of the subject article is U.S. originating (further detailed below)

America First Trade Policy Memorandum

The Trump Administration announced its intention to impose reciprocal tariffs through a memorandum on Feb. 13, 2025. To combat the trade deficit, the memorandum introduced the "Fair and Reciprocal Plan," which seeks to counter nonreciprocal trading arrangements by "determining the equivalent of a reciprocal tariff with respect to each foreign trading partner."

Though the memorandum did not explicitly define "nonreciprocal" trade arrangements, its references to and alignment with the America First Trade Policy Memorandum issued on Jan. 20, 2025, suggested a broad interpretation – likely encompassing any trade arrangement that results in the U.S. importing more than it exports.

To implement this policy, U.S. federal agencies have been reviewing the impact of foreign tariffs, taxes, nontariff barriers or measures, exchange rates, etc., on the U.S. economy. The results of these investigations concluded with the submission of reports to the Trump Administration on April 1, 2025. (For analysis on the America First Trade Policy, see Holland & Knight's previous alert, "An Overview of President Trump's Trade Policy to Date," Jan. 31, 2025.)

IEEPA

The Trump Administration applies the Global Tariff and increased Reciprocal Tariffs pursuant to IEEPA, which allows the president to "prohibit transactions" and "regulate" the importation and exportation of goods during a time of emergency presenting an "unusual and extraordinary threat … to the national security, foreign policy, or economy of the United States."

President Trump has interpreted IEEPA to authorize him to impose tariffs in response to an international economic emergency. The recent tariffs on Canada, Mexico and China were imposed under IEEPA, with fentanyl and illegal immigration cited as the justifications for the emergency declaration. (For analysis on the imposition of tariffs on Canada, Mexico and China, see Holland & Knight's previous alert, "An Overview of IEEPA Duties on Canada, Mexico and China," Feb. 4, 2025.)

Reciprocal Tariffs

Pursuant to IEEPA, President Trump on April 2, 2025, declared a national emergency based on what he identified an unusual and extraordinary threat to the national security and economy of the U.S. He identified the causes of this threat as a "lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and U.S. trading partners' economic policies that suppress domestic wages and consumption, as indicated by large and persistent annual U.S. goods trade deficits."

President Trump indicated that the April 2 trade actions were based on the April 1, 2025, policy reports submitted to the White House by the U.S. Department of Commerce, U.S. Department of the Treasury and U.S. Trade Representative (USTR), as well as comments from the public in response to a USTR request for comment on nonreciprocal and unfair trade practices.

Goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before the tariffs come into force (i.e., 12:01 a.m. ET on April 5 and April 9, 2025, respectively) and entered for consumption or withdrawn from warehouse for consumption after the tariffs come into force will not be subject to the Global Tariff or increased Reciprocal Tariffs.

Application Based on U.S. Content

The application of Reciprocal Tariffs may be adjusted based on whether the import contains at least 20 percent U.S. content. For goods with less than 20 percent U.S. content, the Reciprocal Tariffs are calculated based on the total value of the import. For goods with more than 20 percent U.S. content, the Reciprocal Tariffs are calculated based on the foreign (i.e., non-U.S.) value content.

U.S. content is determined based on the "value of an article attributable to the components produced entirely, or substantially transformed in," the U.S. These terms are not further defined in the Reciprocal Tariff EO.

"Produced entirely" tends to be a term used in the context of free trade agreements. It is generally understood to mean a good made in one country from materials of that country. "Substantial transformation" is a term used in the context of U.S. customs to determine the country of origin of a good. Pursuant to U.S. rules, "country of origin" means the "country of manufacture, production, or growth of any article of foreign origin entering the United States."

The country of origin is determined based on whether further work or material added to an article effects a "substantial transformation," which renders the country where the work and/or material was added the "country of origin." See 19 C.F.R. 134.1. A substantial transformation occurs "when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing." See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992).

Therefore, where the import contains at least 20 percent U.S. content, Reciprocal Tariffs will likely be calculated based on the value of the import, minus the value of components that have been produced in the U.S. from U.S. components or substantially transformed in the U.S.

The Reciprocal Tariff EO does not specify the valuation methodology to be applied in determining the value of U.S. content. Generally, valuation for U.S. imports is calculated based on the transaction value methodology, which is based on the price actually paid or payable made or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. This includes direct or indirect payments. The price actually paid or payable must be increased by the value of any assists not already included (e.g., selling commission, royalty or license fees, etc.). See 19 C.F.R. 152.102.

The Reciprocal Tariffs EO indicates that U.S. Customs and Border Patrol (CBP) may require the collection of information and documentation, including with the entry filing, as is necessary to enable CBP to ascertain and verify the value of the U.S. content of the article, as well as to ascertain and verify whether an article is substantially finished in the U.S.

Exception for De Minimis-Value Entries

The Global Tariff and increased Reciprocal Tariff permit the de minimis exemption for non-Chinese products, available to products valued under $800. For goods entering under the de minimis exemption via the international postal network and originating from China or Hong Kong, the exemption will not apply as of May 2, 2025. On that date, these items will be assessed a tariff equivalent to either 30 percent of the good's value or $25. The fee portion will double (to $50) on June 1, 2025. Items originating from China or Hong Kong and shipped via couriers will be subject to all applicable duties effective May 2, 2025.

The de minimis exemption will continue to be available to goods subject to IEEPA tariffs. The Commerce Department is working to develop a process for collecting IEEPA tariffs on exempted imports. Reports suggest that Congress is not interested in introducing legislation on the de minimis exemption until the process developed and implemented by the Commerce Department is allowed to work.

FTZs: Privileged Foreign Status Only

The Global Tariff and increased Reciprocal Tariffs limit the use of Foreign Trade Zones (FTZs). This limitation was previously placed on imports from Canada, Mexico and China subject to duties under IEEPA.

Use of an FTZ allows duty payment to be deferred until the import enters U.S. customs territory. FTZs are secure areas under CBP supervision that are generally considered outside of the customs territory of the U.S.

Foreign and domestic merchandise may be moved into zones for operations, including storage, exhibition, assembly, manufacturing and processing. Formal CBP entry procedures and payments of duties are not required on the foreign merchandise unless and until it enters the customs territory of the U.S. for domestic consumption. The importer generally has the choice of paying duties at the rate of either the original foreign materials or the finished product.

Pursuant to privileged foreign status, the merchandise is classified and appraised, and duties and taxes are determined as of the date the application is filed. When such merchandise is transferred from the zone for U.S. consumption, either in its original state or after manipulation or manufacture, the applicable duties and taxes would be paid based on the rate established when privileged foreign status was granted – that is, at the time the product was brought into the FTZ.

Duties are ultimately due at the time the goods are entered into the U.S. from the FTZ (but not at the time the goods are originally admitted into the FTZ). If the goods are exported from the FTZ rather than being entered into the U.S., no duties will need to be incurred.

U.S. Transit

For goods transiting within the U.S., duty drawback and temporary importations under bond appear to still be available.

To claim duty drawback, the exporter must demonstrate the following conditions, supported by documentation: Duty drawback is granted upon the exportation of imported merchandise upon which any duty, tax or fee imposed under federal law was paid because of its importation. Exporters may claim drawback where the merchandise is exported within three years of the date of importation and the merchandise is not used within the U.S. before the exportation. Upon exportation, 99 percent of the duty paid will be refunded as drawback. The performing of incidental operations does not constitute use for drawback purposes.

A Temporary Importation under Bond (TIB) is a temporary importation of goods under bond, not imported for sale or sale on approval, without payment of duty with the intent to export or destroy the goods within a certain period of time not to exceed three years from the date of importation. Failure to export or destroy the articles in accordance with the regulations within the appropriate period of time will result in liquidated damages. The only goods that qualify for TIB entry are those listed in the 14 subheadings, 9813.00.05 through 9813.00.75, of the Harmonized Tariff Schedule of the United States (HTSUS).

Retaliation

It is unclear, but also unlikely, that Canada and Mexico will respond with retaliatory tariffs. As noted above, Canada and Mexico will not be subject to either the Global Tariff or increased Reciprocal Tariffs.

On March 4, 2025, Canada imposed 25 percent tariffs in response to the IEEPA-based tariffs related to migration and fentanyl. Canada has indicated that it would impose additional countermeasures on CA$125 billion of U.S. goods if the U.S. "continue[s] to apply unjustified tariffs on Canada."

Mexican President Claudia Sheinbaum emphasized she would wait until April 3, 2025, to respond to any developments, cautioning against a retaliatory "eye for an eye" strategy. President Sheinbaum had previously made statements indicating her confidence that Mexico would not be subject to reciprocal tariffs, and it appears that her confidence was well placed. Mexico has instead continued to underscore its border enforcement efforts, as illegal crossings dropped to a new low in March.

The European Union (EU) is preparing a comprehensive response plan that could significantly escalate transatlantic trade tensions. European Commission President Ursula von der Leyen stated the bloc has a "strong plan" in place, which may include tariffs, restrictions on U.S. access to government procurement and digital advertising markets, and targeted regulatory measures aimed at American banks and tech firms. Additional proposals reportedly under consideration include new taxes on financial transactions and digital flows, delays in licensing approvals and increased landing fees for U.S. airlines.

Though there is internal division within the EU regarding how far to go, more concrete direction may emerge following the meeting of EU trade ministers on April 7, 2025.

In East Asia, China, Japan and South Korea held their first trilateral meeting in five years on March 30, 2025, aiming to restore regional diplomatic ties.

Though Chinese state media reported that the three nations agreed to a joint response in regard to reciprocal tariffs, South Korea quickly described those claims as "somewhat exaggerated," and Japan media reported that joint responses to reciprocal tariffs were not discussed. The diverging accounts reflect underlying tensions and the lack of unified positions on trade matters, despite the revival of high-level dialogue. The meeting marked a step forward in engagement, but consensus on retaliation remains elusive for now.

Negotiation

The Trump Administration could leverage the April 2, 2025, tariff actions (i.e., the Reciprocal Tariffs, Section 301 tariffs and Section 232 investigations) as a starting point for bilateral negotiations with targeted countries. The Trump Administration has consistently used tariffs or the threat of tariffs as leverage to encourage trading partners to deliver concessions in order to avoid tariffs.

For example, the IEEPA Tariffs imposed on Canada and Mexico were originally set to be applied on Feb. 4, 2025. Following negotiations, these tariffs were delayed until March 4, 2025. Then, on March 5, 2025, the IEEPA Tariffs were paused on goods qualifying for duty-free treatment pursuant to USMCA.

USMCA requires review by the three parties no later than July 2026. The Trump Administration may use the continuing threat of reciprocal tariffs to induce Canada and Mexico to initiate the review and potential renegotiation this year.

However, the April 9, 2025, implementation deadline does not leave much time for negotiations other than for Canada and Mexico. Additionally, President Trump has frequently expressed interest in establishing a long-term global tariff.

Analysis

President Trump's announcement of a Global Tariff and increased Reciprocal Tariffs marks both the fulfillment of a campaign promise and a significant escalation in trade tensions with virtually every country that exports goods to the U.S.

The stated purpose of these tariffs is to promote the revitalization of the U.S. manufacturing base. The fact that Canada and Mexico are not subject to new tariffs may be an acknowledgment of the intricate manufacturing supply chains that crisscross North America. The long list of products (in Annex II) subject to exemptions from these tariffs is a further indication of Trump Administration efforts to shield some U.S. manufacturers from the effects of these tariffs.

This tariff announcement is the most significant step by President Trump to upend U.S. trade policy and is consistent with other efforts currently underway. The Commerce Department is conducting Section 232 investigations into the imports of copper, timber and lumber. The Trump Administration recently announced 25 percent tariffs on imports from any country that imports Venezuelan oil, subject to the U.S. Department of State Secretary's determination and discretion.

USTR recently held public hearings and received comments on its proposal to impose significant port fees on Chinese commercial vessels calling on U.S. ports in response to a petition that identified Chinese shipbuilding dominance as a threat to U.S. commerce and economic and national security. USTR's decision whether to impose such port fees is due by April 17, 2025, and any such fees would be imposed no later than 30 days after.

Finally, note that a number of congressional members, including a number of Republicans, have stated that they are interested in hearing from stakeholders, particularly in the agricultural sector, about products and inputs that cannot be domestically sourced. These congressional members have indicated that they are willing to discuss these issues with the Trump Administration to assist their constituents. However, USTR has expressed skepticism for granting particular products exclusions where these products could potentially be made in the U.S.

Holland & Knight attorneys and professionals are continuing their analysis of these and other trade development and their impact on client operations. For more information or questions, please contact the authors or another member of Holland & Knight's Tariff Task Force.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.