On wednesday 2nd of April, the US President announced the future imposition of what he calls ‘reciprocal tariffs� on every country in the world (apart from Canada and Mexico on which US already imposed additional duties) based on “national emergency�.
RECIPROCAL TARIFFS - REALLY?
Reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of their trading partners. It is not limited to monetary factors and includes non-tariff barriers.
As the Customs duty rate varies from one product to another, operators were expecting reciprocal tariffs to be different according to the product.
However, the Trump administration has decided to apply one unique rate of additional Customs duty for all products originating from one country (which is much easier and faster to implement than real reciprocal tariffs).
The calculation was finally made using a simple calculation: the country’s trade deficit divided by its exports to the US, multiplied by half.
The reciprocal tariffs will range from 10% to 49% and will apply to all products from all countries apart from specific exceptions on products already submitted to additional duties on other grounds (either based on the origin of the product (e.g. Canada and Mexico) or the nature of the product (e.g. aluminium, steel, cars).
IMPLEMENTATION PHASE
These reciprocal tariffs will enter into force as follows:
- Phase 1: From the 5th April to the 9th April, a flat 10% additional duty rate will apply on all products from all countries;
- Phase 2: From the 9th April, specific country per country rates will be implemented. The 10% additional rate will remain applicable for products originating from the other countries.
The rates of phase 2 are the following (non-exhaustive list):
- China 34%
- EU 20%
- Vietnam 46%
- Taiwan 32%
- Japan 24%
- India 27%
- South Korea 26%
- Thailand 37%
- Switzerland 32%
- Indonesia 32%
- Malaysia 24%
- Cambodia 49%
- South Africa 31%
- Bangladesh 37%
- Israel 17%
- Philippines 18%
EXEMPTIONS
The executive orders on reciprocal tariffs provide exemptions for:
Products already submitted to additional duties:
- Steel/aluminum articles already subject to Section 232 tariffs.
- All automobile and automobile parts already subject to Section 232 tariffs.
Products potentially subject to Section 232 tariffs and listed in Annex II:
Copper, pharmaceuticals, semiconductors, certain critical minerals, and energy and energy products.
US CONTENT
The reciprocal tariffs will not apply to the US content of a subject product, given that:
- at least 20% of the value of the product is US originating;
- the importer can demonstrate, if required by the US Customs and Border Protection, that the US components were indeed entirely, or substantially transformed, in the US.
In addition to the implementation of these �reciprocal tariffs�, the following have been announced:
The elimination of the “De minimis� rule for China, Hong Kong and Macau (exemption of import duties for shipments below $800) from May 2nd.
A distinction is made between commercial shipments and postal parcels. From the executive order, commercial shipments below $800 of Chinese-originating products should be treated under the normal regime. Concerning postal parcels, only the ones directly sent to the United States through the international postal network from the PRC or Hong Kong are concerned by the elimination of the �De minimis� rule (to be confirmed).
The entry into force of the additional 25% for automotive and automotive parts.
Automobiles are subject to 25% additional duties from April 3, 2025.
For automobile parts, they will be subject to 25% additional duties on the date specified in the Federal Register, but no later than May 3, 2025.
The ad valorem tariff of 25% shall not apply to automobile parts that qualify for preferential treatment under the USMCA until a process is established to apply the tariff exclusively to the value of the non-U.S. content.
Retaliation actions:
- The European Union announced that there will be countermeasures. The entry into force of the postponed additional duties is to be expected on April 15th. In addition, the European Union plans to tax numerical services provided by US companies.
- The UK Prime Minister announced that Britain would consider responding to the tariffs.
- South Africa said it wants to negotiate a new trade deal urgently.
- Canada, Mexico, Brazil and China announced that they would retaliate with countermeasures.
In these uncertain and quickly evolving times, it is key for companies to review their current supply chain, identify how they will be impacted and prepare accordingly.
We will be pleased to cover these measures and the future reaction during our webinar Tuesday 8th April.
Olivier Sorgniard
㣨Leyu Avocats
Juliette Guérin-Touet
㣨Leyu Avocats
