I. Introduction

On April 2, 2025, President Trump signed Executive Order 14257 on "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits." This far-reaching order established a two-tiered tariff framework: a universal 10% baseline tariff applicable to imports from virtually all trading partners (effective April 5, 2025), coupled with additional country-specific "reciprocal" tariffs targeting 57 nations deemed to engage in unfair trade practices (implemented on April 9, 2025).

As of April 10, 2025, the United States has temporarily suspended the reciprocal tariffs for 90 days for all trading partners except China, where tensions have escalated dramatically. The U.S.-China trade conflict has intensified through a series of retaliatory measures, with both nations now imposing reciprocal tariffs of 84% on each other's goods (at the time of writing). According to U.S. trade officials, when combined with pre-existing duties, Chinese imports now face effective tariff rates exceeding 100% in many categories.

This selective suspension highlights the administration's strategic focus on addressing what it characterizes as China's "systematic trade imbalances" while providing negotiation space for other trading partners. Market analysts project further escalation between the United States and China in the coming weeks, with potential impacts on global supply chains and inflation.

Further adjustments to the U.S. tariff regime remain possible. This note will be updated as developments unfold in this rapidly evolving trade landscape.

II. Declaring a "national emergency"

The new tariffs were imposed on so-called economic and national security grounds, pursuant to the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), Section 604 of the Trade Act of 1974, and Section 301 of title 3 of the United States Code.

President Trump "declared a national emergency arising from conditions reflected in large and persistent annual U.S. goods trade deficits, which have grown by over 40 percent in the past 5 years alone, reaching $1.2 trillion in 2024".

According to the executive order, these trade imbalances have resulted in a loss of manufacturing jobs, diminished manufacturing capacity, and an atrophied industrial base in the United States over the past years:

"The cumulative effect of these imbalances has been the transfer of resources from domestic producers to foreign firms, reducing opportunities for domestic manufacturers to expand and, in turn, leading to lost manufacturing jobs, diminished manufacturing capacity, and an atrophied industrial base, including in the defense-industrial sector. At the same time, foreign firms are better positioned to scale production, reinvest in innovation, and compete in the global economy, to the detriment of U.S. economic and national security." (Section 1, para. 3)

"The absence of sufficient domestic manufacturing capacity in certain critical and advanced industrial sectors — another outcome of the large and persistent annual U.S. goods trade deficits — also compromises U.S. economic and national security by rendering the U.S. economy less resilient to supply chain disruption. Finally, the large, persistent annual U.S. goods trade deficits, and the concomitant loss of industrial capacity, have compromised military readiness; this vulnerability can only be redressed through swift corrective action to rebalance the flow of imports into the United States. Such impact upon military readiness and our national security posture is especially acute with the recent rise in armed conflicts abroad. I call upon the public and private sector to make the efforts necessary to strengthen the international economic position of the United States." (Section 1, para. 4)

III. Reciprocal tariff policy: a two-tiered framework

The framework of this new tariff structure operates on two levels. First, a universal baseline tariff of 10% will apply to all countries importing goods to the United States, scheduled to take effect on 5 April 2025. This baseline tariff will apply to nearly all goods regardless of origin, with limited exceptions outlined in Annex II of the executive order. Second, a series of higher country-specific "reciprocal" tariffs targeting approximately 56 countries identified as the "worst offenders" will be implemented starting 9 April 2025. These reciprocal tariffs have been tailored on a country-basis to match or counteract the trade deficit that the United States maintains with each of the targeted countries. These rates vary significantly by country.

- Major economies and their tariff rates

• United Kingdom: 10% (equal to the baseline rate)
• European Union: 10% baseline rate + 10% reciprocal tariff
• Switzerland: 32% (including 10% baseline rate)
• China: 34% (including 10% baseline, on top of an existing 20%, totaling 54%)
• Japan: 24% (including 10% baseline)
• India: 27% (including 10% baseline)

- Highest tariff targets

Some smaller nations face the most punitive rates:

• Lesotho: 50% (including 10% baseline)
• Cambodia: 49% (including 10% baseline)
• Laos: 48% (including 10% baseline)
• Madagascar: 47% (including 10% baseline)
• Vietnam 46% (including 10% baseline)

- Product-based exemptions

Certain products are exempt from the new tariffs if they fall under existing sector-specific duties (e.g. steel, aluminium, automobiles, or auto parts) or are listed in Annex II to the executive order (e.g. pharmaceuticals, semiconductors, critical minerals).

IV. The special framework for Mexico and Canada

Furthermore, the 2 April executive order excludes Mexico and Canada from the new 10% baseline tariff and the country-specific reciprocal tariffs. This exemption stems from their status as parties to the United States-Mexico-Canada Agreement (USMCA), which provides preferential treatment for compliant goods.

However, this exemption is conditional and does not mean that Mexico and Canada are entirely free from U.S. tariffs. Imports from these countries will remain subject to pre-existing duties tied to fentanyl- and migration-related national emergencies declared earlier this year.

- Current Tariff Structure for Non-Compliant Goods

USMCA-Compliant Goods

Goods that meet USMCA rules of origin remain exempt from all tariffs under both the 2 April order and earlier emergency measures. This preferential treatment is indefinite unless revoked by future actions.

Non-USMCA-Compliant Goods

General Tariffs:

A 25% tariff applies to all non-USMCA-compliant goods imported from Mexico and Canada since 4 March 2025.

Energy and Potash:

Non-compliant energy products (e.g., oil, natural gas) and potash imports are subject to a lower tariff rate of 10%, reflecting pressure from U.S. agricultural stakeholders reliant on potash for fertilizers.

Automotive Sector:

A 25% tariff on automobiles and auto parts entered into force on April 3, 2025, under Section 232 of the Trade Expansion Act of 1962.

This tariff applies to vehicles that do not meet USMCA rules of origin but excludes auto parts originating in Mexico or vehicles substantially finished in Canada.

- Conditional Future Changes

The exemptions provided to Mexico and Canada are tied to ongoing national emergency orders addressing fentanyl trafficking and migration issues at both borders. Should these orders be repealed or suspended:

USMCA-Compliant Goods:

Would remain exempt from tariffs (0%).

Non-USMCA-Compliant Goods:

Would face a reduced reciprocal tariff rate of 12%, instead of the current 25%.

- Exemptions for Specific Products

Certain products originating in Mexico or Canada are exempt from all reciprocal tariffs under Annex II of the April 2 order:

• Steel and aluminum (already subject to Section 232 tariffs)
• Copper, pharmaceuticals, semiconductors, lumber articles
• Critical minerals not available in the United States
• Energy products (subject only to the pre-existing 10% tariff)

These exemptions reflect strategic considerations tied to U.S. domestic industries reliant on imports from its neighbors.

V. Rapid escalation of China-U.S. tariff confrontation

The tariff confrontation between the United States and China has experienced dramatic developments within an exceptionally compressed timeframe. According to official statements from China's Ministry of Commerce (MOFCOM) and Ministry of Finance:

• April 4, 2025: Following the announcement of the U.S. reciprocal tariff framework, China's Ministry of Finance issued Announcement No. 14 (2025), declaring retaliatory tariffs of 34% on approximately $112 billion of U.S. exports, targeting agricultural products, aircraft, semiconductors, and medical devices. The announcement explicitly characterized these measures as "a necessary response to U.S. unilateralism and protectionism" (必要反制美方单边主义和保护主义行为).

• April 9, 2025: After the U.S. escalated its tariff threat to 84%, China's Customs Tariff Commission of the State Council (国务院关税税则委员会) announced a proportional increase in its countermeasures. According to the official statement published on the Ministry of Finance website, China would "implement corresponding tariff increases on certain products originating from the United States," raising duties to 84% on the previously targeted $112 billion of U.S. goods effective 12:01 AM on April 10. The official statement emphasized that "China's position remains consistent—we do not want a trade war, but we are not afraid of one, and we will fight one if necessary" (中方的立场一贯且明确，不愿打，不怕打，必要时不得不打).

• April 10, 2025: The U.S. suspended reciprocal tariffs for 90 days on most trading partners but excluded China, instead raising tariffs on Chinese imports to above 100%. China escalated its retaliation by:

  • Implementing 84% tariffs on U.S. goods effective April 10

  • Adding 12 U.S. defense/tech firms to its export control list

  • Filing a new WTO dispute against U.S. measures

MOFCOM spokesperson Lin Jian condemned the U.S. actions as "unilateralism and economic coercion," stating that: "China will take resolute countermeasures to defend its legitimate rights. We urge the U.S. to immediately correct its wrongdoings rather than shifting blame".

On April 9, 2025, the State Council Information Office of the People's Republic of China issued a white paper on "China's Position on Some Issues Concerning China-US Economic and Trade Relations", explicitly rejecting dialogue under current conditions, declaring that: "Negotiations cannot proceed while the U.S. maintains its tariff-based economic terrorism".

VI. Global reactions

European Union

The European Union is subject to a 25% U.S. tariff on steel/aluminum and a 20% tariff (10% baseline plus 10% reciprocal) under Executive Order 14257. In response, the European Commission was close to adopting countermeasures against U.S. President Donald Trump's April 2 tariffs. Because President Trump's April 2 tariffs were suspended a day prior to the establishment of EU countermeasures, the EU is reportedly reassessing the situation. If the EU were to impose countermeasures against the United States, it would join China and Canada in retaliating and escalating a conflict that could become a global trade war.

While the European Union has not yet imposed countermeasures against the United States, it does maintain a list of products that could be subject to such countermeasures.

Japan and South Korea

Japan faces a 24% tariff, while South Korea is subject to a 25% rate. Both countries have expressed regret over the measures and are actively seeking exemptions through diplomatic channels. Japan’s trade minister called the tariffs "extremely regrettable", while South Korea has announced emergency financial support for its affected industries, particularly automotive manufacturers. Both nations are also exploring ways to strengthen trade ties with other partners to offset potential losses in the U.S. market.

Switzerland

Switzerland has been hit with a steep 31% tariff, significantly higher than the 20% imposed on EU goods or the 10% on British exports. This decision has provoked strong reactions from Swiss leaders and business groups. Swiss President Karin Keller-Sutter emphasized the importance of adhering to international law and free trade principles, stating that Switzerland would "quickly determine next steps." However, she ruled out immediate retaliation, noting that escalation is not in Switzerland's economic interest.

The Swiss economy minister highlighted that key exports like pharmaceuticals and gold (which constitute over half of Swiss exports to the U.S.) are exempt from these tariffs. However, other iconic Swiss products such as cheese, chocolate, and watches will be significantly affected. Economiesuisse, Switzerland's main business federation, labeled the tariffs as "harmful and unjustified," pointing out that Switzerland eliminated industrial tariffs in 2024 and maintains lower import duties than the U.S.

Strategic Considerations for Businesses

1. Compliance with exemptions

Companies should review Annex II for product-specific exemptions and ensure compliance with rules of origin requirements where applicable (e.g., USMCA provisions).

2. Supply chain diversification

Exporters heavily reliant on U.S. markets should explore alternative destinations or adjust production strategies to mitigate tariff impacts.

3. Engagement with governments

Businesses should actively engage with their respective governments to influence retaliation policies or secure exemptions through diplomatic negotiations.

4. Monitoring retaliation risks

With countries like China and the EU preparing countermeasures, companies must assess potential disruptions across their supply chains.

Legal options

The new tariff structure implemented by the United States appears to be at odds with US commitments under the WTO agreements and the USMCA treaty (in particular, with Articles I and II of the GATT 1994, and Article 2.4.1 of the USMCA).

Relevant WTO rules

Article I:1 of the GATT 1994 (General Most-Favoured-Nation Treatment):

With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.

Article II (b) of the GATT 1994 (Schedules of Concessions):

(b) The products described in Part I of the Schedule relating to any contracting party, which are the products of territories of other contracting parties, shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set forth and provided therein.

Relevant USMCA rule

Article 2.4.1 of the USMCA (Treatment of Customs Duties):

Unless otherwise provided in this Agreement, no Party shall increase any existing customs duty, or adopt any new customs duty, on an originating good.

Security exceptions

The United States administration, however, has invoked economic and national security as grounds for the imposition of the new tariffs.

Security grounds are explicitly foreseen in Article XXI of the GATT 1994 and Article 32.2 of the USMCA as a legal basis to justify a policy that is otherwise inconsistent with WTO and USMCA rules. Should it be challenged before WTO or USMCA panels, the United States would expectedly invoke the security exceptions foreseen in these treaties.

Article 32.2 of the USMCA: Essential Security

1. Nothing in this Agreement shall be construed to: (a) require a Party to furnish or allow access to information the disclosure of which it determines to be contrary to its essential security interests; or

(b) preclude a Party from applying measures that it considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

Under WTO jurisprudence, however, particularly following the December 2022 ruling against US steel and aluminum tariffs, these security justifications face increasing scrutiny from the international legal community.

At the time of writing, there have been no invocations of the USMCA security exception. The text of the USMCA security exception is somewhat similar to that under WTO law, albeit with two notable differences. First, the USMCA version does not require that the party invoking the exception demonstrates the existence of an emergency in international relations. Second, the language of the USMCA exception seems to provide virtually unlimited discretion to the party invoking it as to what it regards as a "security" issue.

As a result, the United States has significantly higher probability of successfully invoking the security exception before a potential USMCA panel, compared to if it were to do so before the WTO tribunals.

Conclusion

Trump’s reciprocal tariffs mark a turning point in global trade relations, signaling a retreat from decades of liberalization toward aggressive protectionism. While the administration defends these measures as necessary for restoring fairness in trade practices, their broader economic consequences remain uncertain.

The global response to Trump’s reciprocal tariffs evidences widespread dissatisfaction with this unilateral move. While some countries are preparing retaliatory measures, others are opting for negotiation or restraint to avoid escalating trade tensions further. The economic fallout could reshape global supply chains and trade alliances as nations adapt to this new protectionist landscape.

For businesses worldwide, navigating this new landscape will require agility, strategic planning, and proactive engagement with policymakers as nations brace for what could become an extended era of trade conflict.

De Minimis Law has substantial experience advising clients on WTO and USMCA rules and related trade policies, including those pertaining to national security. For further updates or assistance in navigating these complex trade issues, please contact our office.

Disclaimer:

This article is for informational purposes only and does not constitute legal advice.

Resources

- White House, Executive Order on "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits" (available here)

- Annex I: Reciprocal Tariffs (List of Countries and Territories) (available here)

- Annex II: List of products exempted from executive order (available here)

- White House, Fact sheet (available here)

- State Council Information Office of the People's Republic of China, White Paper, China's Position on Some Issues Concerning China-US Economic and Trade Relations (available here)

- European Commission, List of the US products which could be subject to possible commercial policy measures (available here)

- Manuel Sánchez Miranda, When Sanctions Become Weapons: The Relationship between the WTO System and the Broader International Law in the Governance of Economic Sanctions, 1 June 2023. (paper available here)