On Feb. 1, 2025, President Donald Trump announced far-reaching 25% tariffs on goods from the United States’ closest neighbors, Canada and Mexico. The broad tariffs were originally set to go into effect on Feb. 4, 2025, but were paused for 30 days after negotiations with the two countries. In recent days, however, President Trump has signaled that the tariffs are set to go into effect as planned: tomorrow, March 4, 2025.
Canadian Goods: An additional duty rate of 25% will be applied to all Canadian products, as these will be defined on the forthcoming Federal Register. The exception to this is energy or energy resources, where a 10% duty will apply instead.
Canada previously announced retaliatory 25% tariffs on imports from the U.S. but agreed to delay their imposition upon the delay of U.S. tariffs on Canadian goods. As of this writing, Canada has not yet announced resumption of its tariffs on U.S. goods.
Mexican Goods: An additional 25% duty rate will apply to all products of Mexico, as these will be defined in the Federal Register.
Mexico has not yet implemented retaliatory tariffs because of the 30-day pause, but it is expected that it will increase tariffs on U.S. products including steel, aluminum and fresh produce.
What to Do Now: Full visibility of your supply chain is key. If you have not already, map your supply chain to determine the origin of products and identify what products will be subject to the 25% tariffs.
For any products you identify as subject to tariffs, take steps to understand the contractual landscape. Gather all contract documents, including supply agreements, purchase orders, invoices and releases, and identify what documents form the operative contract for your supply arrangement.
After contract documents have been identified, it’s time to consider potential responsibility for the increase in costs. Tariffs are the responsibility of the importer of record, and the contracts between the importer of record and its buyer will determine whether the tariff can be passed on further down the supply chain. The same is true for each link in the supply chain. Evaluate all contracts for products subject to the new tariffs to determine whether you may be responsible for the tariffs or if the costs could be absorbed by your seller or passed on to your buyer.
Finally, formulate strategies for dealing with your suppliers and buyers. It is important to understand your position in the supply chain and your strategy for handling these potential extra costs before you communicate with your suppliers or customers. A clear communication strategy focused on the future of the business relationship can go a long way towards mitigating the impact of tariffs on your business.
Warner has published other eAlerts on the recent tariff situations, available here and here. Should suppliers have any questions about ongoing developments related to tariffs or need counsel regarding their contracts, please reach out to a member of Warner’s Supply Chain Industry Group or your Warner attorney.
