White House Executive Order Reshapes US Tariff Landscape With New Reciprocal Rates and Trade Measures

This latest action, which follows a series of key developments across multiple trade fronts, ushers in a new round of tariff updates, revised implementation timelines, and additional provisions, such as the 40% tariff penalty on illegal transshipment. However, the new developments also raise a host of new implementation and interpretation issues, most of which are still awaiting US Customs and Border Protection (CBP) guidance.

In addition to new reciprocal tariff rates, this update covers recent developments regarding the Canada and Mexico tariff regimes, new trade deal frameworks with South Korea, Japan, the European Union (EU), and others, further actions targeting imports from Brazil, global changes to the de minimis exemption, and the implementation of the Section 232 tariff of 50% on copper products.

Reciprocal Tariff Modifications

Late on July 31, just before the country specific rates were scheduled to apply on August 1, the White House issued an EO further modifying US reciprocal tariff rates that were issued under the International Emergency Economic Powers Act (IEEPA) to address trade imbalances and national security concerns. The order imposes new and adjusted ad valorem duties on goods from a wide range of foreign trading partners, as detailed in Annex I. The Harmonized Tariff Schedule of the United States will be updated to reflect these changes.

Timing and In Transit Exemption

The new tariff rates (see below) take effect for goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 AM ET, seven days after the date of the EO, which appears to set the date to August 7. However, goods loaded onto a vessel at the port of loading on the final mode of transit before 12:01 AM ET August 7 and entered for consumption before 12:01 AM ET on October 5 will remain subject to the duties in effect prior to this order. Importers should closely review the requirements to qualify for this in transit exemption, including shipping by carrier on the water and on the final vessel.

New Reciprocal Tariff Rates Effective August 7

Countries that are not listed in Annex I of the EO will be subject to a default ad valorem duty of 10%. For an updated consolidated list of the current and updated duty rates, please refer to our AFS Tariff Tracker here.

Annex I of the EO lists specific countries, each with its own adjusted tariff rate, ranging from 10% to 41%. The rate adjustments increase rates by up to 8% for certain trading partners such as Switzerland, Costa Rica, and New Zealand, while decreasing rates by up to 35% for some countries, mainly those with which the United States has minimal trade. Aside from the United Kingdom (UK), EU, and Falkland Islands, the reciprocal tariff rate floor for Annex 1 countries now stands at 15%. See the table below for a comparison of the reciprocal tariff rates announced on April 2 with the newly implemented rates effective August 7. Note that some new countries received individual rates and had been subject to the general 10% rate on April 2. 

*The reciprocal duty rate for Brazilian goods is set at 10% according to the newest EO. However, President Trump imposed an additional 40% IEEPA duty rate for Brazilian imports, bringing the total applicable duty rate on Brazilian imports to 50%. Products listed in the Brazil Tariff EO Annex I are exempt from the 40% additional duty but continue to be subject to the 10% reciprocal tariff imposed by the IEEPA Reciprocal EO.

Countries identified in the Reciprocal EO Annex I that are negotiating trade agreements with the United States will be subject to the published new duty rates until such trade deals are finalized and subsequent orders are issued to officialize the terms. These countries include (note that the rates correlate with recent announcements):

• Vietnam: 20%
• Japan: 15%
• South Korea: 15%
• Indonesia: 19%
• Philippines: 19%
• UK: 10%

For EU imports, the EO establishes a 15% ceiling for the reciprocal tariff rate, although it could still face a higher total duty rate:

• If the current Column 1 Duty Rate (i.e., the most-favored-nation (MFN) duty rate) is less than 15%, the sum of the Column 1 Duty Rate and the additional ad valorem duty will equal 15%.
• If the current rate is 15% or higher, the additional ad valorem duty is zero, so the total rate remains at the existing Column 1 Duty Rate.

Notably, China was not included in this new EO. In May, the United States and China agreed to lowering the reciprocal duty rate to 10% until August 12. While there are reports of a possible 90-day extension of this deadline, the White House has not yet confirmed this information.

The EO does not address how origin will be determined, thus it currently appears that standard country of origin rules apply to goods subject to reciprocal tariffs.

New Transshipment Rules: 40% in Lieu of Country-Specific Rate Plus Penalties

The EO also provides further guidance on transshipment rules. To prevent circumvention, goods that CBP determines has been transshipped to evade duties will be subject to a punitive 40% ad valorem duty, replacing the country-specific rate. Additional fines and penalties may also apply, and mitigation or remission of penalties for transshipment violations is not permitted. The government will publish a list of countries and facilities involved in circumvention schemes every six months. We note that “transshipment” is not defined by the EO, leaving questions as to the scope of this particular prohibition. Due to this uncertainty, importers should take appropriate measures to verify that the country of origin of imported products is accurately declared to CBP based on applicable rules of origin.

We note that this is a fluid situation and new agreements and changes to the tariff rates could continue. We will update our guidance as this occurs.

Other Recent Tariff News

• Canada: Announced on July 31 and effective August 1, non-United States-Mexico-Canada Agreement (USMCA) qualifying goods from Canada will be subject to a 35% tariff rate, replacing the original IEEPA fentanyl 25% tariff rate. USMCA qualifying goods remain exempt from this additional tariff. Additionally, goods that are transshipped through Canada to evade duties will be subject to 40% instead of 35%. See “Amendment to Duties To Address the Flow of Illicit Drugs Across Our Northern Border” and CBP’s fact sheet.
• Mexico: Goods from Mexico that do not qualify for treatment under the USMCA were set to be subject to an increased tariff rate of 30% beginning on August 1. However, on July 31, the United States and Mexico agreed to continue negotiating a potential trade deal for 90 more days, meaning the current 25% rate (and the USMCA exemption) will remain in place while those discussions proceed.
• Brazil: On July 30, President Trump issued an EO on Brazilian imports. The EO imposes an additional duty rate of 40% on certain products of Brazil, bringing the total tariff amount to 50%. See the fact sheet here. The new rate is effective “on or after 12:01 a.m. eastern daylight time 7 days after the date of this order,” which appears to set the date as August 6. There are some exceptions to this new rate, such as the goods listed in Annex I, including certain silicon metal, pig iron, civil aircraft, and parts and components. Products listed in Annex I are exempt from the 40% additional duty but continue to be subject to the 10% reciprocal tariff imposed by the EO. Goods subject to Section 232 are excluded from these tariffs.
  
  Additionally, on July 15, the US Trade Representative launched a Section 301 investigation into Brazil’s trade practices, focusing on issues such as digital trade restrictions, preferential tariffs, weak anti-corruption measures, inadequate intellectual property protection, barriers to US ethanol, and poor enforcement against illegal deforestation. The investigation will include a public comment process (with a deadline of August 18) and will hold a hearing on September 3 to determine whether Brazil’s actions are unreasonable or discriminatory toward US commerce, which could result in additional trade measures. For more information, please see our client alert here.
• Elimination of De Minimis: In a July 30 EO, President Trump announced that commercial de minimis entries from all countries will be suspended as of August 29. De minimis has not been permitted for China origin shipments since May. A more detailed alert is forthcoming.
• Copper Tariffs: The White House published a proclamation and fact sheet announcing 50% tariffs on copper, effective August 1. Section 232 tariffs of 50% will be imposed on imports of semi-finished copper products and copper derivative products. See the list of affected Harmonized Tariff Schedule codes here. The tariff only applies to the copper content of the products and does not stack with Section 232 tariffs on automobiles and automobile parts. Within 90 days after the date of the proclamation, the Secretary of the US Department of Commerce will establish a process for including additional derivative copper articles within the scope of the copper tariffs. While unclear at this time, we expect that there will be a rebuttal process for the inclusion requests, similar to those observed in the steel and aluminum derivatives inclusion requests.

We will provide more details in our forthcoming monthly newsletter.

Next Steps for Importers

While the recent EO has shed additional light on the Administration’s novel approach to trade policy, significant uncertainties remain. Key details, including comprehensive guidance on transshipment rules and the specifics of newly announced trade deals, have yet to be fully addressed. As demonstrated throughout the past couple of months, the landscape of US trade policy is highly dynamic and fluid, with the potential for further changes not only leading up to August 7 but also well beyond as countries continue to negotiate and new agreements emerge. To stay informed on these ongoing developments, we encourage you to visit our updated AFS Tariff Tracker and subscribe to our monthly newsletter for the latest insights and analysis.

As these tariffs will have a substantial financial impact, importers will need to identify legal avenues to mitigate effects of the tariffs. The AFS Customs team assists clients with bespoke tariff mitigation strategies. Contact the authors for more information.