Mexico, Canada, China: 25%/10% Tariff Explainer
- Arne Mielken
- Mar 4, 2025
- 10 min read
Updated: Mar 10, 2025
Trump's new tariffs on Mexican, Canadian, and Chinese goods have taken effect — what does this mean for businesses?
US President Donald Trump's tariffs—25% on Mexican and Canadian goods and an additional 10% on Chinese imports—took effect on March 4, 2025.
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With more than $75 billion worth of products impacted, how will these tariffs affect industries and businesses across North America and beyond?
In this article, we'll address key questions about these tariffs' risks and explore strategies businesses can use to mitigate their impact.
What we will answer in this blog entry:
What are the key points in a nutshell?
Which industries will be most affected by the new tariffs?
What are Canadian Retaliatory Tariffs?
What are the Mexican Retaliatory Tariffs?
What are the Chinese Retaliatory Tariffs?
What is the US consumer's and business impact of these tariffs?
What strategies can businesses adopt to minimize tariff-related costs?
Why are these tariffs imposed?
Watch The Video Explainer
The Key Points In Nutshell
✅ Immediate Impact : These duties apply as of March 4, 2025, meaning businesses must adjust their import strategies quickly.
✅ USMCA Not Overriding : These tariffs are applied on top of USMCA commissions, meaning duty-free preferences under the agreement do not offer relief.
✅ Foreign Trade Zone (FTZ) Changes : The requirement for "privileged foreign status" means affected goods cannot benefit from duty deferral or reduction within FTZs.
✅ Potential Exemptions : Some goods, particularly humanitarian items and certain Chapter 98 provisions, remain excluded.
✅ Duty-free de minimis On March 2, 2025, the President announced that Duty-free de minimis treatment under 19 USC 1321 is available from both countries.
Which industries will be most affected by the new tariffs?
The tariffs on Mexico and Canada include a 25% rate on most imports, with a lower 10% tax on Canadian energy products like oil and electricity. The tariffs are expected to impact several sectors, with the following being particularly vulnerable:
Agriculture: Importers of food products, especially those from Mexico and Canada, will face higher costs. This could increase consumer prices and squeeze the profit margins of food processors.
Automotive Industry: As North America's automotive sector is highly integrated, manufacturers will see costs rise due to higher tariffs on parts and raw materials, disrupting supply chains.
Manufacturing: Industries dependent on raw materials and components from Canada and Mexico must adjust pricing strategies to absorb higher costs, which may affect their competitiveness globally.
What are Canadian Retaliatory Tariffs?
Canadian Prime Minister Justin Trudeau announced that Canada has allocated over 1 billion Canadian dollars to enhance border security, asserting that there is no fentanyl crisis at the US-Canada border. Trudeau also declared that Ottawa will immediately implement 25% tariffs on C$30 billion ($20.7 billion) worth of US imports.
He previously mentioned that the targeted items would include American beer, wine, bourbon, home appliances, and Florida orange juice . If US tariffs persist for 21 days , Canada plans to extend its countermeasures to include an additional C$125 billion ($86.2 billion) of US goods. Trudeau remarked, “Tariffs will disrupt an incredibly successful trading relationship,” stressing that these actions breach the US-Mexico-Canada Agreement (USMCA) , which former President Trump signed during his first term.
Canada's swift response signals a clear intent to counterbalance the economic impact of US tariffs. The 25% surtax on selected US imports will likely target industries where Canada has leverage, such as agriculture, steel, aluminum, and consumer goods.
Key Considerations:
Supply Chain Disruptions – Businesses importing affected US goods into Canada should prepare for cost increases and explore alternative sourcing.
Trade Agreement Implications – Canada's review of existing trade agreements could signal further policy shifts, possibly affecting USMCA or other bilateral trade provisions.
Energy Export Restrictions – If Canada restricts US energy exports, this could impact industries relying on cross-border energy trade.
For a complete list of affected US products, visit: Canadian Government Notice .
What are the Mexican Retaliatory Tariffs?
In retaliation, Mexican President Claudia Sheinbaum announced that Mexico will implement both tariff and non-tariff measures against the United States. While specific targets have not been detailed, potential areas for retaliation may include US agricultural products, steel, and aluminum.
What are the Chinese Retaliatory Tariffs?
Besides the tariffs on Mexico and Canada, Trump revealed plans to raise the 10% tariff on China because of its involvement in producing chemicals for fentanyl. China responded by announcing additional tariffs of up to 15% on some US goods starting March 10 and limiting exports to 15 US companies.
Following the initial round of new US tariffs in February, China's countermeasures included increasing duties on specific US energy imports and adding two US companies to an unreliable entities list, potentially limiting their business operations in China. This response from China signifies a significant escalation in trade tensions, especially affecting US agricultural exports:
15% Tariff on Key Grains & Poultry – Chicken, wheat, corn, and cotton face higher costs for Chinese importers, which could shift demand to alternative suppliers.
10% Tariff on High-Value Agri-Products – Soybeans, pork, beef, seafood, fruits, vegetables, and dairy will increase barriers, potentially reducing US market share in China.
To be specific:
The Chinese Commission of Customs Tariff of the State Council has published an announcement regarding additional tariffs on specific imported goods originating in the United States. These tariffs are set to come into effect on March 10, 2025.
The following tariff rates apply:
15% Additional Tariff:
The following goods will be subject to a 15% additional tariff:
HS Code 0207.11: Gallus domesticus (Chicken), not cut in pieces, fresh or chilled
HS Code 0207.12: Gallus domesticus (Chicken), not cut in pieces, frozen
HS Code 0207.13: Gallus domesticus (Chicken), cuts and offal, fresh or chilled
HS Code 0207.14: Gallus domesticus (Chicken), cuts and offal, frozen
HS Code 1602.32: Other prepared or preserved meat of Gallus domesticus (Chicken)
HS Code 1001.11: Durum wheat, seed
HS Code 1001.19: Durum wheat, other
HS Code 1001.91: Other wheat and meslin, seed
HS Code 1001.99: Other wheat and meslin, other
HS Code 1101.00: Wheat or meslin flour
HS Code 1103.11: Cereal groats, meal, and pellets, of wheat
HS Code 1103.20: Cereal groats, meal, and pellets, pellets
HS Code 1005.10: Maize (corn), seed
HS Code 1005.90: Maize (corn), other
HS Code 1102.20: Cereal flours other than of wheat or meslin, maize (corn) flour
HS Code 1103.13: Cereal groats, meal, and pellets, of maize (corn)
HS Code 1104.23: Cereal grains otherwise worked, of maize (corn)
HS Code 5201.00: Cotton, not carded or combed
HS Code 5203.00: Cotton, carded or combed
10% Additional Tariff:
The following HS Chapters will be subject to a 10% additional tariff:
HS Chapter 02: Meat and edible meat offal
HS Chapter 03: Fish and crustaceans, molluscs, and other aquatic invertebrates
HS Chapter 04: Dairy produce; birds' eggs; natural honey; edible products of animal origin, not elsewhere specified or included
HS Chapter 05: Products of animal origin, not elsewhere specified or included
HS Chapter 07: Edible vegetables and certain roots and tubers
HS Chapter 08: Edible fruit and nuts; peel of citrus fruit or melons
HS Chapter 10: Grain sorghum
HS Chapter 11: Products of the milling industry; malt; starches; inulin; wheat gluten
HS Chapter 12: Soya beans, whether or not broken
HS Chapter 15: Fats and oils and their fractions, of fish or marine mammals, whether or not refined, but not chemically modified
HS Chapter 16: Preparations of meat, of fish, of crustaceans, molluscs or other aquatic invertebrates, or of insects
HS Chapter 20: Preparations of vegetables, fruit, nuts or other parts of plants
HS Chapter 21: Miscellaneous edible preparations
HS Chapter 35: Albuminoidal substances; modified starches; glues; enzymes
Tax Commission Announcement No. 2 of 2025
On March 3, 2025, the US government announced that it would impose a further 10% tariff on all Chinese goods exported to the US on the grounds of fentanyl. The US's unilateral tariff increase damages the multilateral trading system, increases the burden on US companies and consumers, and undermines the foundation of economic and trade cooperation between China and the US.
In accordance with the Tariff Law of the People's Republic of China, the Customs Law of the People's Republic of China, the Foreign Trade Law of the People's Republic of China and other laws and regulations and the basic principles of international law, and with the approval of the State Council, additional tariffs will be imposed on some imported goods originating from the United States starting March 10, 2025. The relevant matters are as follows:
A 15% tariff will be imposed on chicken, wheat, corn and cotton. For the specific commodity range, please see Appendix 1.
A 10% tariff will be imposed on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products. For the specific range of commodities, please see Appendix 2.
For the imported goods listed in the appendix originating from the United States, corresponding tariffs will be levied on the basis of the current applicable tariff rates. The current bonded and tax reduction and exemption policies remain unchanged, and the additional tariffs will not be reduced or exempted.
Goods that have been shipped from the place of departure before March 10, 2025 and imported between March 10, 2025 and April 12, 2025 shall not be subject to the additional tariffs prescribed in this announcement.
State Council Tariff Commission
March 4, 2025
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This announcement is significant for companies involved in the import of these commodities from the U.S., as the new tariffs will impact trade operations starting March 10, 2025. A detailed review of affected goods and tariff classifications will be crucial for importers and customs professionals to ensure compliance and manage the cost implications effectively.
China continues to be the largest market for US agricultural products, even though imports have decreased since 2018 when Beijing imposed tariffs of up to 25% on soybeans, beef, pork, wheat, corn, and sorghum in response to the duties on Chinese goods implemented by Trump.
The world's leading agricultural importer and second-largest economy imported $29.25 billion worth of US agricultural products in 2024, a 14% decline from the previous year. These tariffs could affect prices and profitability, particularly for soybeans and pork, where China is a major customer.
What is the US consumer's and business impact of these tariffs?
The Peterson Institute for International Economics, a think tank, claims that enacting a 25% tariff on Canada and Mexico and a 10% tariff on China would represent "the largest tax increase in at least a generation," possibly costing the average US household over $1,200 per year.
The overall impact of these tariffs could cost US consumers between $120 billion and $225 billion annually for the tariffs on Mexico and Canada, and up to $25 billion for the additional tariffs on China.
These actions could lead to higher consumer prices and slower economic growth, creating a challenge for Trump, who campaigned to lower inflation. However, he is determined to implement reciprocal tariffs, which would be adjusted according to the tariffs imposed by other countries on US goods.
Businesses in various sectors are likely to experience:
Higher operational costs due to increased import tariffs.
Potential supply chain disruptions as businesses deal with the increased cost of goods and delayed shipments.
Price pressure on consumers, making products less competitive in international markets.
Reduced profitability and market share if businesses are unprepared and unable to manage the additional costs.
What strategies can businesses adopt to minimize tariff-related costs?
There are several strategies businesses can use to mitigate the impact of these tariffs, although some may not apply to these specific measures.
Key Mitigation Strategies:
✅ Supply Chain Review – Identify affected products and assess potential cost increases.
✅ Tariff Mitigation Options – Explore tariff reclassification, duty drawback programs, and Foreign Trade Zone (FTZ) solutions.
✅ Alternative Sourcing – Diversify suppliers outside the US, Canada, and Mexico.
✅ Compliance Adjustments – Ensure adherence to new rules, including “privileged foreign status” for FTZ imports.
Tariff Mitigation Options
📌 Country of Origin Rules – Determine if products qualify for preferential treatment under trade agreements like USMCA to lower duty costs.
📌 Duty Drawback Programs – Seek refunds on duties paid for goods that are later exported.📌 Customs Valuation Methods – Use strategies like first sale for export or transfer pricing adjustments to reduce tariff liability.
📌 Free Trade Agreement (FTA) Utilization – Identify whether goods qualify for lower duties under FTAs.
📌 Tariff Engineering – Modify materials, assembly locations, or packaging to reclassify products into lower-duty categories.
background
This is part of a broader strategy to curb the fentanyl crisis and secure the US border.
President Trump argues that drugs continue to flow into the United States from Mexico and Canada at alarming levels, with a significant portion of these substances, including fentanyl, being produced and supplied by China. In 2023, over 100,000 lives were lost due to the distribution of these dangerous and highly addictive substances, and millions have died over the past two decades.
He argues that the impact on the families of victims has been devastating.
To address this ongoing crisis, tariffs set to take effect on March 4th will remain in place, including an additional 10% tariff on goods from China.
The reciprocal tariff scheduled for April 2nd will also be enforced as planned.
Read about these measures here: https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/
Both Canada and Mexico have stressed their ongoing efforts to address these issues. Canada has appointed a fentanyl czar, and Mexico has deployed 10,000 members of its National Guard to the US border.
Conclusion
The tariffs are expected to cause major difficulties for businesses, such as higher expenses, supply chain interruptions, and reduced market competitiveness. Overlooking these tariffs might lead to decreased profits and a weakened market position. Nevertheless, businesses can take proactive measures to reduce these effects, adapt to the new tariffs, and should consult customs and trade experts. Keeping informed and applying effective strategies will help mitigate risks and ensure a smooth transition to the new tariff system.
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