FREIGHT MARKET UPDATE | SPECIAL EDITION U.S. TARIFFS ON CHINA, MEXICO, CANADA | WEEK 06 | 2025

SPECIAL EDITION U.S. TARIFFS ON KEY TRADE PARTNERS: CHINA, CANADA, & MEXICO

Week 06 finds the freight market responding to a shifting global trade landscape as the U.S. rolls out new tariffs on key trade partners. The first tariffs targeting Chinese-origin goods, took effect on February 4, 2025, at 12:01 a.m. ET, giving the logistics industry and supply chains little time to implement procedures to comply with the new tariffs. Further complicating the situation are potential tariffs set to begin in March 2025 with Canada and Mexico should U.S. negotiations with these trade partners fail.

BREAKDOWN OF U.S. TARIFF MEASURES WITH KEY TRADE PARTNERS: CHINA, CANADA, MEXICO

The Trump Administration announced on February 1, 2025, that new U.S. tariffs on China, Canada, and Mexico would take effect on February 4, 2025, under the International Emergency Economic Powers Act (IEEPA) and other trade enforcement authorities. While tariffs on Chinese goods are now in force, duties on imports from Canada and Mexico have been temporarily delayed until March 5, 2025. This policy shift is expected to influence trade flows, cost structures, and compliance procedures across North America and Asia.

China: Effective February 4, 2025, a 10% tariff now applies to imports from China, including Hong Kong. De minimis shipments ($800 threshold) are no longer exempt, and all mail shipments from China require formal customs entry.

Canada: A 25% tariff on most Canadian-origin goods is scheduled to take effect on March 5, 2025. Energy products will be subject to a 10% tariff. However, in-transit goods that clear U.S. Customs by February 7, 2025, may qualify for an exemption.

Mexico: A 25% tariff on imports from Mexico is also scheduled for March 5, 2025. The delay follows a diplomatic agreement under which Mexico has committed to deploying additional security forces along the U.S. border.

U.S. TARIFF EXEMPTIONS AND COMPLIANCE MEASURES

As tariffs on Canada and Mexico remain on hold until March 5, 2025, compliance efforts are currently centered on the U.S. tariffs affecting Chinese-origin goods. The newly implemented 10% tariff applies broadly to imports from China, including those from Hong Kong, with limited exceptions.

Exemptions differ by category, particularly for in-transit shipments and specific duty-free classifications.

Goods in Transit: Shipments loaded before February 1, 2025, may qualify for exemptions if they clear CBP before March 7, 2025.

Duty-Free Provisions: Certain Chapter 98 duty-free provisions remain intact; however, products classified under subheadings 9802.00.40, 9802.00.50, 9802.00.60, and 9802.00.80 will be taxed based on their foreign content.

Duty Drawback Restrictions: Duty drawback is not permitted for tariffs enacted under IEEPA, though standard Section 301 duty drawbacks remain in place.

Foreign Trade Zone (FTZ) Implications: Articles entering FTZs must now be admitted under privileged foreign status, meaning duties will be assessed based on rates in effect at the time of FTZ admission rather than withdrawal.

RESPONSE FROM TRADE PARTNERS: U.S. TARIFFS ON CANADA, MEXICO, CHINA

The announcement of new U.S. tariffs has triggered swift reactions from key trade partners, each responding with measures that could reshape supply networks and regulatory frameworks. While Canada and Mexico have secured temporary pauses, China has moved forward with countermeasures, escalating trade tensions.

The following outlines how each country is addressing the new tariffs:

Canada: Prime Minister Justin Trudeau announced late on February 3, 2025, that the proposed 25% tariff on Canadian goods and 10% duty on energy and energy resources, will be paused for a month while negotiations between Canada and the U.S. take place.

Mexico: The U.S. Administration announced a one-month moratorium on the Imposing Duties to Address the Situation at Our Southern Border Executive Order tariffs dated February 1, 2025.

China: In direct response to the 10% U.S. tariff on Chinese-origin goods, effective February 4, 2025, China has announced new tariffs, trade restrictions, and regulatory actions targeting American industries.

• • New Tariffs on U.S. Goods: Beginning Monday, February 10, 2025, China will impose a 15% import tariff on U.S. coal, liquefied natural gas (LNG), and automobiles, increasing costs for American exporters and impacting energy and automotive supply networks.
  • WTO Challenge: China has also filed a formal complaint with the World Trade Organization (WTO), contesting the legality of the U.S. tariffs and seeking an international review.
  • Increased Scrutiny of U.S. Companies: China has expanded its economic countermeasures by adding U.S. firms, including Calvin Klein, to its “unreliable entities” list, signaling heightened regulatory scrutiny for American businesses operating in China. Additionally, China’s competition authority has launched an antitrust investigation into Google, intensifying pressure on U.S. technology companies.

U.S. TARIFFS ON CHINA, CANADA, MEXICO: SUPPLY NETWORK ADJUSTMENTS & MITIGATION STRATEGIES

While challenging, these new U.S. tariffs on China, Canada, and Mexico present opportunities for U.S. importers and supply chains to evaluate their operational approach, examine alternative strategies, and maximize efficiencies.

Businesses impacted by the new U.S. tariffs should consider one or more of the following strategies:

• Bonded Warehousing: Leveraging bonded warehouses allows importers to defer duties while monitoring regulatory changes.
• Supplier Diversification: Reassessing supplier networks and exploring alternative sourcing outside affected countries can reduce tariff exposure.
• Enhanced Trade Compliance Measures: Ensuring accurate classification, valuation, and country-of-origin documentation will be critical to avoiding unnecessary penalties.

FOR MORE DETAILED INFORMATION ABOUT THE IMPACT OF THE U.S. TARIFFS ON CHINA, CANADA, MEXICO – JOIN US FOR A WEBINAR THAT ADDRESSES THE IMPACT FOR U.S. SHIPPERS & SUPPLY CHAINS

This webinar offers essential insights for businesses navigating evolving trade regulations. Attendees will gain a deeper understanding of new compliance requirements, legal considerations, and strategies to mitigate risk. This session will also explore the financial and operational impact of these new tariffs.