Trump has slapped tariffs on goods from Canada, China, and Mexico entering the US. Companies should reassess their supply chains and develop contingency plans to stay ahead of potential tariffs on UK and EU products.
Shutterstock.com/Dilok Klaisataporn
On 1 February 2025, President Donald Trump announced his plans to impose a 25% tariff on US imports from Canada and Mexico and a 10% tariff on imports from China.
According to the White House statement, tariffs are “a powerful, proven source of leverage for protecting the national interest.” Trump is “using the tools at hand and taking decisive action that puts Americans’ safety and our national security first,” the statement continues.
Canada – and its provinces – quickly adopted retaliatory tariffs on US goods entering its market, whilst Mexican President Claudia Sheinbaum has indicated that her government may adopt similar measures.
Meanwhile, China announced plans to file a legal complaint with the World Trade Organisation (WTO) in response to the tariffs.
Lexology PRO highlights the key US tariffs and retaliatory tariffs against US products, as well as potential implications for businesses.
The US tariff situation is changing constantly. We recommend consulting government and media outlets, and Lexology PRO’s automated regulatory monitoring tool, Scanner, for the most up-to-date information.
Canada
From 4 February 2025, Canadian products entering the US will face a 25% tariff, apart from Canadian energy or energy resources which are subject to 10% taxes.
Following Trumps announcement, Prime Minister Justin Trudeau retaliated with 25% tariffs on US$106 billion worth of imported US products. As part of the first phase of the response, the Canadian Minister of Finance and Intergovernmental Affairs unveiled the full list of items covered by the retaliatory measures.
Canadian consumers have been urged by Trudeau to ‘buy Canadian’ in response to the tariffs.
Other Canadian officials have adopted staunchly anti-US stances in response to the sanctions. On 3 February 2025, Ontario Premier Doug Ford announced that US companies will be banned from entering into contracts with the province. Ford also plans to cancel Ontario’s US$100 million contract it holds with Elon Musk’s Starlink.
This is not the first time that Trump has imposed tariffs on Canadian products. During his previous term in office, Trump hit Canadian aluminium with 10% tariffs and steel with 25% levies.
Mexico
Mexican goods entering the US will carry a 25% tariff from 4 March 2025. Mexican President Claudia Sheinbaum and Trump agreed a one-month delay to the tariffs following a conversation between the two on 3 February 2025.
A day earlier, Sheinbaum announced plans for Mexico’s own retaliatory tariffs on US goods (Spanish language only) and asked Mexico’s Secretary of the Economy to implement plan B, including tariff and non-tariff measures in defence of Mexico’s interests. Further details of the retaliatory sanctions have not yet been announced.
Trudeau and Sheinbaum spoke shortly after Trump’s announcement and have expressed plans to “enhance the strong bilateral relations between Canada and Mexico” in response to the tariffs.
China
Chinese goods entering the US market will face a 10% levy from 4 February 2025.
On 2 February 2025, China stated that it will take “necessary countermeasures” against the tariff hikes, which “severely violate WTO rules.” The statement indicates China’s intention to challenge the tariffs at the WTO through a legal complaint against the US.
The EU and UK
Trump has not yet imposed tariffs on EU and UK goods entering the US.
However, tariffs on EU products will happen “pretty soon,” according to the US president. The EU has pledged to “respond firmly” if Trump imposes tariffs.
US tariffs on UK goods are currently unlikely, with Trump stating that a deal “can be worked out.”
Potential impacts for businesses
On 16 January 2025, the World Bank stated in its Global Economic Prospects report that tariffs are a major threat to global growth in 2025.
This point was made clear on 3 February 2025 when shares slid in Europe and Asia and the FTSE 100 Index fell 1.3% in the first two hours of trading,following Trump's announcement.
The impact of the new tariffs will be felt throughout the supply chain and will affect manufacturers, importers, retailers, as well as consumers.
Businesses should prepare to pay higher prices for goods, parts, and materials coming from Canada, China and Mexico. In some cases, stockpiling ahead of tariff hikes may work, but can leave others with an inventory of surplus goods.
In-house compliance and legal teams should help companies assess supply chains and identify which products and steps in the chain are subject to or could become subject to tariffs.
Companies should consider diversifying their supply chains and suppliers in case they become unable to meet demand, or if the cost of a product increases dramatically as a result of the new tariffs. Some companies may even consider relocating to reduce costs of manufacturing in or importing from certain countries.
The uncertainty of not knowing what tariffs lie around the corner reduces businesses’ abilities to plan effectively and efficiently. In-house and compliance teams should stay informed by visiting government websites and news outlets frequently to keep up-to-date with new developments.