Tariff Talk

There were no tariff changes for goods importing into the U.S. overnight. This gives us a brief moment to pause, regroup, and strategize moving forward.

With good reason, everyone’s primary focus has been on rates. These have the most direct impact on the bottom line and are a key deciding factor when buying from overseas today. But each tariff has its own set of terms and conditions, which vary—”Reciprocal Tariffs” having the most exclusions to date. These include the global reciprocal of 10%, which became effective April 5 with a one-day bump. For China, this is now 125%, or is it? The number 145% is likely more accurate due to the 20% IEEPA tariff. What is each tariff, and how are they working together?

Reciprocal tariffs are the most far-reaching and headline-grabbing, particularly the 125% tariff in the trade war with China, which also includes Hong Kong and Macau. Each newly issued tariff is ad valorem, in addition to, or stacked with, other applicable duties and taxes. Reciprocal Tariffs have a set of exclusions, some of which are unique to this tariff. For example, if at least 20% of the value originates from the U.S., that content will not be subject to the tariff, effectively reducing the 125% by at least 20%. Also excluded are articles subject to Section 232 actions (such as steel, aluminum, related articles, and vehicles) with a 25% duty, as well as a list known as Annex II, which contains chemicals, pharmaceuticals, wood, copper items, and others.

Reciprocal tariffs share some common exclusions with the other new 2025 tariffs, such as informational materials (publications, films, artworks, etc.) and donations intended to relieve human suffering. A positive aspect for trade is the ability to recover duty drawback on this tariff if the article is reexported (either in the same condition or remanufactured).

While reciprocal tariffs are issued to rectify trade practices that contribute to large and persistent annual U.S. goods trade deficits, the 20% IEEPA tariff levied against China and the 25% tariff on non-USMCA goods from Mexico and Canada are aimed at addressing the synthetic opioid supply chain. The bases for these tariffs, along with Section 232 and Section 301 actions, vary, but outside of exclusions, they are all in addition to, or ad valorem to, other tariffs.