Trade Update: Navigating Trump Administration Tariffs – May 2025 Developments

Update Summary: Post-April 9 Developments

Since the April 9, 2025 pause on the application of the Trump administration’s “reciprocal” tariffs, which we included in our most recent update, several additional developments have occurred which materially impact the implementation and scope of both IEEPA-based and Section 232-based tariff regimes. Below is a summary of key changes.

I. Executive Summary of Key Changes (Post-April 9, 2025)

Since early April 2025, several pivotal developments have occurred:

• U.S.-China Tariff De-escalation (Effective May 14, 2025): A significant agreement was reached to temporarily reduce the intensity of the U.S.-China tariff conflict. For a 90-day period, the U.S. has modified its tariff structure on Chinese imports, and China has reciprocated.
• China De Minimis Update: While the de minimis ($800 duty-free) exemption for Chinese goods remains eliminated (effective May 2, 2025), the specific tariff rates applied to low-value postal shipments from China have been adjusted downwards as part of the May 12 agreement.
• Section 232 Developments:
  • The Department of Commerce launched a new Section 232 steel and aluminum “inclusions” process on April 30, 2025, allowing for requests to expand tariffs to derivative articles. The previous product exclusion process has been eliminated.
  • Tariffs on certain auto parts (25%) under Section 232 became effective on May 3, 2025.
• U.S.-UK Trade Discussions: On May 8, 2025, an agreement was announced involving the U.S. lowering tariffs on British steel, aluminum, and automobiles.
• Extended Suspension Period for Non-Retaliating Countries: The 90-day suspension of country-specific IEEPA reciprocal tariffs for 57 non-retaliating countries (announced April 9, 2025) continues, generally subjecting these countries to the 10% global baseline IEEPA tariff. The country-specific reciprocal tariff suspension is therefore scheduled to expire at 12:01 a.m. EDT on July 9, 2025.

II. U.S.-China Trade Relations: Tariff De-escalation

The most notable recent development is the U.S.-China agreement announced on May 12, 2025, aimed at temporarily de-escalating trade tensions.

A. The May 12, 2025 Agreement

Effective May 14, 2025, for an initial period of 90 days (through August 11, 2025), the U.S. and China have implemented measures to reduce recently imposed tariffs.¹

B. Revised U.S. Tariffs on China

The core changes to U.S. tariffs on Chinese goods are as follows:

1. IEEPA “Fentanyl-Related” Tariff: The 20% ad valorem tariff imposed on nearly all goods from China (related to IEEPA and fentanyl concerns, announced February-March 2025) remains in effect.
2. IEEPA “Reciprocal” Tariff Adjustments:
   1. The highly escalated IEEPA reciprocal tariffs that contributed to the widely reported 125% (or higher, when combined with the 20% fentanyl tariff) rates on Chinese goods in early April are removed/suspended.
   2. The original 34% country-specific IEEPA reciprocal tariff on China (announced April 2, 2025) is suspended.
   3. A new, temporary 10% ad valorem IEEPA reciprocal tariff is applied to goods from China (including Hong Kong and Macau) for the 90-day period.
3. Resulting Total IEEPA Tariffs on China: For the 90-day period, the combined IEEPA-related tariffs on most Chinese imports will be 30% (20% fentanyl-related + 10% temporary reciprocal).
4. Other Tariffs Unchanged: This 30% IEEPA tariff is in addition to:
   1. Existing Most Favored Nation (MFN) duty rates.
   2. Section 301 tariffs (ranging from 7.5% to 25% on various lists of products).
   3. Applicable Section 232 tariffs (e.g., on steel or aluminum, though IEEPA and Section 232 tariffs generally do not stack on the same product if one exempts the other as per the original document’s clarification).

Table: Summary of Key U.S. IEEPA-Related Tariffs on China

^{Note: The total above does not include MFN, Section 301, or applicable Section 232 duties. (Source: White House, May 12, 2025)}

C. China’s Reciprocal Measures

As part of the agreement, China has also committed to:

• Reducing its retaliatory tariffs on U.S. goods. For the 90-day period, China will lower its April 4 retaliatory tariff from 34% to 10%, and remove additional retaliatory increases that had brought the total to 125%.
• Suspending or removing non-tariff countermeasures taken against the U.S. since April 2, 2025.
  • On May 14, 2025, China announced a 90-day suspension of measures imposed on certain U.S. entities under the Unreliable Entity List framework.

D. De Minimis Update for China

• The elimination of the de minimis ($800 duty-free) entry for goods from China and Hong Kong, effective May 2, 2025, remains in place.
• However, for low-value postal shipments from China/Hong Kong that would have qualified for de minimis, the tariff rates have been adjusted as of May 14, 2025:
  • The ad valorem duty is reduced from 120% to 54%.
  • Alternatively, carriers can pay a specific duty of $100 per package. The previously planned increase of this specific duty to $200 on June 1, 2025, has been cancelled.

III. Status of Other Key U.S. Tariff Programs

A. Global Baseline and Country-Specific Reciprocal Tariffs (IEEPA)

• Global Baseline Tariff: The 10% ad valorem global baseline tariff on all imported goods (announced April 2, 2025, effective April 5, 2025, under IEEPA) generally remains applicable to countries not covered by specific exemptions or higher rates. 
• Country-Specific Reciprocal Tariffs (57 Countries): The 90-day suspension (announced April 9, 2025, ending midnight July 8, 2025) of the higher, country-specific reciprocal IEEPA tariff rates for 57 named countries, continues for non-retaliating nations.
  • During this suspension, these countries are generally subject to the 10% global baseline IEEPA tariff. For example, the EU’s specific reciprocal rate of 20% is suspended, and it currently faces the 10% baseline.
  • This suspension does not apply to countries deemed to be retaliating.

B. IEEPA Tariffs on Canada and Mexico

• The previously announced 25% IEEPA tariffs on imports from Mexico and Canada (with exceptions for USMCA-qualifying goods, which remain duty-free) are still in effect.
• An Executive Order on April 29, 2025, reportedly provided some relief from the “stacking” effect of IEEPA tariffs and Section 232 tariffs for Canada and Mexico, though details should be reviewed for specific applicability.

C. Section 232 National Security Tariffs

• Steel and Aluminum: The 25% tariffs on steel and aluminum products (and derivatives, including beer and empty aluminum cans) from all countries, effective March 12, 2025, remain in place.
  • New Inclusions Process: On April 30, 2025, the Department of Commerce launched a new “Section 232 Steel and Aluminum Inclusions Process.” This allows U.S. manufacturers to request that new derivative articles containing steel or aluminum be made subject to the Section 232 tariffs. The first submission period opened May 1, 2025. The previous process for requesting product exclusions was eliminated as of February 10, 2025. 
• Automobiles and Auto Parts: The 25% Section 232 tariff on imported passenger vehicles and light trucks (effective April 3, 2025) and key automobile parts (effective May 3, 2025) remains in effect. As noted in the original document, these Section 232 tariffs are generally not additive with the IEEPA reciprocal tariffs.

D. Ongoing Section 232 Investigations

The White House had previously announced Section 232 investigations into imports of:

• Copper
• Timber and Lumber

The Department of Commerce is reportedly conducting these, along with investigations into semiconductors, pharmaceuticals, and critical minerals. No definitive outcomes or new tariffs resulting from these specific investigations have been announced as of this publication, but they remain pending.

IV. Other Notable Trade Developments

• U.S.-UK Trade Discussions (May 8, 2025): President Trump announced a trade deal with the UK, which will reportedly see the U.S. lower tariffs on British steel, aluminum, and automobiles. Specific implementation details and timelines are pending. 
• Proposed 100% Tariff on Foreign Films (May 4, 2025): President Trump announced via social media his intent to authorize a 100% tariff on all foreign-produced films imported into the U.S. This remains a proposal at this stage.
• Lawsuit Against Tariffs (April 23, 2025): Several states reportedly filed a lawsuit against the Trump administration concerning its tariff policies. ²

V. Supply Chain Strategies and Key Takeaways

The tariff landscape is fluid and subject to rapid changes based on negotiations, retaliatory actions, and policy shifts. Companies must continue to:

• Evaluate and Diversify: Continuously assess supply chain vulnerabilities and diversify suppliers and manufacturing locations to mitigate tariff impacts.
• Country of Origin: Re-evaluate product designs and manufacturing operations for opportunities to establish favorable country(ies) of origin.
• Contractual Protections: Negotiate tariff cost-sharing or pass-through provisions in supply and distribution contracts.
• Valuation Strategies: Explore options like “first sale” pricing where applicable. For related party transactions, reassess transfer pricing.
• Duty drawback: Duty drawback is generally allowed for Section 301 and IEEPA-based tariffs, but not permitted for Section 232 tariffs, including those on steel, aluminum, and autos, due to explicit statutory exclusions.

• Monitor Retaliation: Identify potential new costs associated with retaliatory tariffs from other countries.
• Stay Informed: Closely monitor evolving negotiations, regulatory changes, and official guidance for new exclusions, exemptions, or modifications.
• Utilize Trade Programs: Leverage Free Trade Agreements (FTAs) and Foreign Trade Zones (FTZs) where practicable.
• Compliance: Maintain rigorous customs compliance, including accurate HTS classification and country of origin documentation.

¹ China reciprocally agreed to reduce its retaliatory tariffs on U.S. goods, generally to 10% for the 90-day period, down from much higher recently imposed rates (which had also reached levels like 125%). China also committed to suspending or removing certain non-tariff countermeasures.

² As of mid-May, 12 states have filed a lawsuit against the Trump administration, challenging the legality of the recently implemented tariffs. The states involved in this legal action are: Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York, Oregon, Vermont.