On April 2, 2025, President Trump invoked his authority under the International Emergency Economic Powers Act (IEEPA) to implement "reciprocal" tariffs on U.S. trade partners via executive order (the Order). These tariffs (Reciprocal Tariffs) are purportedly designed to address trade deficits and trade barriers between the U.S. and other nations. Here is what you need to know: 

Under what legal authority?

IEEPA authorizes the president to regulate imports as a way to "deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States." 50 U.S.C. §§ 1701-1702. In this instance, President Trump declared a national emergency "arising from conditions reflected in large and persistent annual U.S. goods trade deficits" that is "driven by the absence of reciprocity in our trade relationships and other harmful policies." You can read the Order here.

Some companies have challenged the Reciprocal Tariffs and other IEEPA-based tariffs in court, arguing that IEEPA does not give the president power to imposed these tariffs, or, in the alternative, that the scope of the tariffs is too broad under IEEPA. In May, the Court of International Trade (CIT) enjoined the IEEPA-based tariffs, including the Reciprocal Tariffs, on a nationwide basis. However, that injunction was stayed pending ongoing appellate proceedings. It is expected that these legal challenges will ultimately be heard by the Supreme Court.

What reasoning does the White House provide for implementing the Reciprocal Tariffs?

The White House cited the Foreign Trade Barriers report published by the Office of the United States Trade Representative (USTR) in the Order, explaining that the report "details a great number of non-tariff barriers to U.S. exports around the world on a trading-partner by trading-partner basis." You can access the report in the link above, which provides a country-by-country assessment of trade barriers.

What Reciprocal Tariff rate applies and when?

As of April 5, 2025, at 12:01 a.m. EDT, a baseline 10 percent tariff applies to imported products of all countries except Canada and Mexico. 

On April 9, 2025, at 12:01 a.m. EDT, the 10 percent rate increased to a new rate for certain countries. The list of rates for each specified country can be found in Annex I of the Order. However, the increased Reciprocal Tariff rates stayed in place only for one day. On April 9, the White House announced via a new executive order that, with the exception of China, these country-specific rates would be suspended, effective April 10, 2025, at 12:01 a.m. EDT. A a result, all increased Reciprocal Tariff rates (except the rate imposed on China-origin products, discussed below) returned to the original 10 percent baseline Reciprocal Tariff rate. The suspension of the increased Reciprocal Tariff rates was originally scheduled to last until July 9, 2025, but has since been extended to August 1, 2025.

In early July, Trump sent letters to a total of 22 countries as well was the EU, announcing that products form these countries would be subject to a different Reciprocal Tariff rate when the increased rates resume on August 1. The majority of the revised rates are equal to or lower than the original Reciprocal Tariff rates, with only five countries and the EU receiving an increased rate (generally between one and three percent). The largest rate increase was allocated to Brazil, which increased to 50 percent from the universal 10 percent rate. The rates modified by the tariff letters (as of July 14) are in the chart below. Rates on all other countries remain the same.

Country	Original Reciprocal Tariff Rate	New Reciprocal Tariff Rate (effective Aug. 1)	Rate Difference
Brazil	10%	50%	+40%
EU	20%	30%	+10%
Philippines	17%	20%	+3%
Brunei	24%	25%	+1%
Japan	24%	25%	+1%
Malaysia	24%	25%	+1%
Algeria	30%	30%	0%
Indonesia	32%	32%	0%
South Africa	30%	30%	0%
South Korea	25%	25%	0%
Thailand	36%	36%	0%
Libya	31%	30%	-1%
Bangladesh	7%	35%	-2%
Kazakhstan	27%	25%	-2%
Serbia	37%	35%	-2%
Tunisia	28%	25%	-3%
Myanmar	44%	40%	-4%
Bosnia and Herzegovina	35%	30%	-5%
Moldova	31%	25%	-6%
Laos	48%	40%	-8%
Iraq	39%	30%	-9%
Cambodia	49%	36%	-13%
Sri Lanka	44%	30%	-14%

The letters also indicated that transshiped goods would be subject to the higher tariff rate evaded by the transshipping effort. It is unclear how transshipment will be defined – or how a transshipment rule will be implemented. It is possible that a transshipment tariff could be enforced either by prohibiting manufacturing moves with the intent to avoid tariffs or by adding a content requirement (e.g., a good may not be Thai origin if x percent of the content is non-Thai origin). 

Additionally, the letters warned that, if the country raises its tariffs on U.S. goods, the U.S. will impose a tariff rate that is 25 percent higher than that country’s tariff rate. Similarly, the letters leave open the ability to reduce the tariff rate based on future negotiations. 

Although the administration has publicly released the letters and tariff rates, there has been no implementing order.

Other Tariff Letters: In addition, Trump sent letters to Canada and Mexico, which are not currently subject to the Reciprocal Tariffs. The letters state that the U.S. will begin charging a 35 percent tariff on products of Canada and a 30 percent tariff on products of Mexico starting August 1. Although the letters follow a similar form as the Reciprocal Tariff letters described above, it is unclear whether these letters threaten a new Reciprocal Tariff on products of Canada and Mexico or increase the existing rates on products of Canada and Mexico imposed under separate executive orders, which also cite IEEPA.

China Reciprocal Tariffs: Shortly after the administration's announcement of the Reciprocal Tariffs in April, there were several increases to the Reciprocal Tariff rate on China-origin products, reaching a high of 125 percent. However, as we discuss in detail below, the China Reciprocal Tariff Rate was returned to 10 percent based on a framework trade agreement between the U.S. and China, which dropped the rate to allow negotiations to proceed. Currently, the Reciprocal Tariff rate on China-origin products is scheduled to increase to the original 34 percent rate on August 12.

Do the Reciprocal Tariffs apply to the country of origin or the country of export?

Tariff exposure is based on the product's country of origin, not the country of export. Therefore, if a product's country of origin is China and it is exported from Mexico, the product will still be subject to the 10 percent Reciprocal Tariff on China, even though Mexico is currently excepted from the Reciprocal Tariffs.

What if my products are already in transit to the U.S.?

The Reciprocal Tariffs will not apply to goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before 12:01 a.m. EDT on the effective date and entered for consumption or withdrawn from the warehouse for consumption after 12:01 a.m. EDT on the effective date and before 12:01 a.m. EDT on May 27, 2025.

Neither the administration nor CBP has signaled whether a similar "in transit" exception will be available to importers when the country-specific Reciprocal Tariffs resume on August 1, 2025. It is similarly unclear whether an "in transit" exception will be available if and when the 34 percent China-origin Reciprocal Tariff resumes.

Do I have to pay the Reciprocal Tariffs on imported products made with U.S.-origin components?

If at least 20 percent of the value of the imported good is U.S.-originating, meaning the components are produced entirely in or substantially transformed in the U.S., then the Reciprocal Tariffs apply only to the value of the non-U.S.-origin content of the product. 

Are there any exceptions to the Reciprocal Tariffs?

Yes. Some products will not be subject to the Reciprocal Tariffs. The original scope of excepted products was set forth in Annex II of the Order, though the scope has since expanded.

Excepted articles currently include:

1. Articles subject to 50 USC § 1702(b) (i.e., personal communications, donations, personal luggage) 
2. Automobiles/auto parts already subject to Section 232 tariffs 
3. Steel and/or aluminum content in articles already subject to Section 232 tariffs
4. Certain articles of copper and lumber, pharmaceuticals, and semiconductors listed in Annex II
5. All articles that may become subject to future Section 232 tariffs
6. Articles subject to Column 2 rates of duty from countries with which the U.S. does not have normal trade relations (Belarus, Cuba, North Korea, and Russia)
7. Bullion
8. Energy and other certain minerals that are not available in the U.S.
9. Civil aircraft and aircraft parts of the U.K.
10. Other articles delineated in Chapter 99 Note 2(v)(iii) of the Harmonized Tariff Schedule (HTS)

On April 11, 2025, Trump issued a memorandum clarifying which semiconductor products were excluded from Reciprocal Tariffs. The memorandum explains that smartphones, automatic data processing machines, magnetic or optical readers, flat panel modules, electronic integrated circuits, and certain semiconductor devices and parts are included within the meaning of the semiconductors exemption and therefore exempted from Reciprocal Tariffs. The clarification extends back to April 5, 2025, allowing importers to retroactively claim this exemption if the semiconductors definition now applies to a product already imported.

Other exceptions may be granted as the administration finalizes new trade deals, which we discuss in greater detail below.

How do I know which new tariffs apply to my product?

The chart below tracks recent tariff developments, including the newest Reciprocal Tariffs, to help importers determine whether the president's new tariffs will apply to their products. 

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The information contained in this communication is not intended as legal advice or as an opinion on specific facts.
See full disclaimer information at the end of this alert.

What is the Reciprocal Tariff rate on China-origin products?

In response to a retaliatory tariff levied by China on U.S. goods, Trump signed a second executive order on April 8 that amends the Reciprocal Tariff on China, increasing the tariff rate from 34 percent to 84 percent. As mentioned above, this rate then was increased to 125 percent on April 9, via the third executive order. Effective 12:01 a.m. EDT on April 10, 2025, products of China are subject to a Reciprocal Tariff of 84 percent in addition to all other applicable tariffs.

On May 12, 2025, the U.S. and China released a joint statement indicating that each country would reduce its tariffs on the other while negotiations continue. According to the White House's executive order implementing the agreement, the U.S. will reduce the Reciprocal Tariff rate on China-origin goods to 10 percent for 90 days, beginning May 14 at 12:01 a.m. EDT. This action lowers the China Reciprocal Tariff rate to the same rate that is currently imposed on most nations. After this 90-day period, the China Reciprocal Tariff rate will return to the original China Reciprocal Tariff rate of 34 percent. 

How do the Reciprocal Tariffs stack with other tariffs, including the existing IEEPA and Section 232 tariffs?

The Reciprocal Tariffs are in addition to pre-existing tariffs, including the product's general duty rate, Section 301 tariffs on China-origin products, and IEEPA tariffs for Canada, Mexico, and China. These tariff rates are cumulative. If a hypothetical product is subject to a general duty rate of 6.5 percent, Section 301 duties of 25 percent, a China IEEPA tariff of 20 percent, and the new Reciprocal Tariff of 10 percent, then the total tariff exposure for the product is 61.5 percent.

On April 29, 2025, the president issued an executive order that revises how certain tariffs interact and "stack." While not impacting Reciprocal Tariffs, this order changes whether Section 232 automotive tariffs, Section 232 steel and aluminum tariffs, and IEEPA tariffs on products of Canada and Mexico remain cumulative. This amendment was made retroactive to entries made on or after March 4, 2025. Corrections to past entries must be submitted no later than 12:01 a.m. EDT on May 16, 2025.

On June 3, 2025, CBP clarified that the phrase "subject to" means that "more than 0% is owed under the tariff action." Therefore, if there is no actual money owed for a particular tariff (e.g., an exemption or exclusion applies), then the article is not "subject to" that tariff and the article may be exposed to other applicable tariffs. In the context of Reciprocal Tariffs, this clarification can impact how tariffs stack and whether a product will be subject to the Reciprocal Tariff. For example, even though products that are subject to Section 232 automotive tariffs are exempt from the Reciprocal Tariff, an automotive product will still be subject to the Reciprocal Tariff if zero percent automotive tariffs are owed. Consider an electrical rangefinder that is classified in HTS 9015.10, which could be used in automobiles to detect and measure the car's distance from an object or could be used in non-automotive contexts. Even though HTS 9015.10 is included in the list of HTS codes covered by the Section 232 automotive parts tariff, if the electrical rangefinder is not for use in a passenger vehicle or light truck, it is not subject to the Section 232 automotive tariff. As such, that electrical rangefinder will still be subject to the Reciprocal Tariff.

Also on June 3, President Trump issued a proclamation increasing the tariff rate for goods subject to Section 232 steel and aluminum tariffs. In addition, the proclamation amended the tariff such that it will only apply to steel or aluminum content of the article and the Reciprocal Tariff will apply to the non-steel and non-aluminum content of the article. 

For example, consider a part of an agricultural machine that is classified in HTS 8432.90.00. The part is made in Thailand, has a value of $100, and it is 60 percent steel and 40 percent rubber. The part is duty-free, and there are no automotive or Canada/Mexico/China IEEPA tariffs that apply. The steel content is 60 dollars of the part’s total value, and a 50 percent tariff applies to the steel content. $60 * 50% = $30. The Reciprocal Tariff applies to the non-steel content, which is $40 of the part’s total value. $40 * 10% = $4. Therefore, the total tariffs are $30 (Section 232 steel tariff) and $4 (Reciprocal Tariff).

How does the Order impact existing IEEPA tariffs for Canada, Mexico, and China?

Currently, products of Canada and Mexico are not subject to Reciprocal Tariffs, and the existing IEEPA tariffs on these products are unaffected by the Order. If the administration ends these IEEPA tariffs, USMCA-compliant goods would continue to receive preferential treatment, while non-USMCA-compliant goods would be subject to a 12 percent Reciprocal Tariff under the terms of the Order.

However, the administration recently announced that tariffs on products of Canada and Mexico would increase from 25 percent to 35 percent and 30 percent, respectively. It is unclear whether the announcement reflects an upcoming increase to the existing Canada- and Mexico-specific IEEPA orders or indicates that these countries will now be subject to Reciprocal Tariffs.

For China, the existing 20 percent IEEPA tariff will remain in effect in addition to the current 10 percent Reciprocal Tariff for a total 30 percent IEEPA and Reciprocal Tariff rate. The Reciprocal Tariff rate on China-origin products is set to increase to 34 percent on August 12.

Is the de minimis exemption still available?

The de minimis exemption permits duty free importation of certain low-value shipments valued at under $800. As of May 2, 2025, at 12:01 a.m. EDT, the de minimis exemption is no longer available for products from China and Hong Kong. Pursuant to the framework trade agreement reached between the U.S and China, the tariffs imposed on de minimis goods were reduced and the following duties will now apply for those goods:

• For packages not coming through the mail that previously would qualify for de minimis: now subject to all applicable duties (Most Favored Nation, IEEPA, etc.). 
• For packages coming through the mail that previously qualified for de minimis: packages were initially subject to a 120 percent tariff if the carrier reports the product value, or a $100 charge per product if no value is reported. The carrier can choose which will apply. The executive order published on May 12, 2025 modified the tariffs for packages coming through the mail as follows: 
  • As of May 14, 2025, at 12:01 a.m. EDT, packages will be subject to a to 54 percent tariff if the carrier reports the product value. 
  • The $100 charge per product if no value is reported remains the same. 
  • Pursuant to the same executive order, the charge per product will no longer increase to $200 on June 1, 2025, as originally ordered. 
• At any time, CBP can decide that a formal entry process is required, instead of the tariff or charge above.  

Currently, the de minimis tariffs do not apply to Macau, but the USTR is reviewing whether it should extend to Macau. The executive order is available here, as well as the April 8 and April 9 amendments.

Is drawback (or duty refund) available for the Reciprocal Tariffs?

A drawback is a duty refund available for products imported into, but not used, in the U.S. and which are subsequently exported or destroyed. Trump's prior trade actions, including the earlier IEEPA and Section 232 tariffs, specified whether the tariffs would be drawback-eligible, but the Order is silent on the issue. However, on April 4, 2025, CBP circulated additional guidance to importers that confirmed that importers will be able to claim drawback to recover up to 99 percent of the duties paid. Drawback eligibility should offer some relief to importers and potentially mitigate the impact of the Reciprocal Tariffs.

Is Chapter 98 subject to the Reciprocal Tariffs?

Chapter 98 includes special classification provisions based on the use or condition of a product. With some exceptions, the Reciprocal Tariffs are not imposed where a product is properly entered under Chapter 98 of the tariff schedule. 

Despite the general rule, the Reciprocal Tariffs will still apply to certain products:

• The Reciprocal Tariffs apply to goods exported for repairs or alterations and then re-imported into the U.S. as well as metals manufactured in the U.S. that are exported for further processing and re-imported. However, the Reciprocal Tariffs are only applied to the value of the repairs, alterations, or processing performed in the foreign country. For example, if a product whose value is $5,000 is exported from the U.S. to a foreign country for repair, and the importer pays $1,000 for that repair, the Reciprocal Tariffs will only apply to the $1,000 repair. 
• The Reciprocal Tariffs also still apply to goods assembled abroad using U.S. components. However, the Reciprocal Tariffs are only applied to the value of the assembled good after subtracting the value of the U.S. parts. For example, if a product whose value is $4,000 is imported into the U.S. following assembly in a country subject to the Reciprocal Tariffs and the product is composed of U.S. parts totaling $2,500, the Reciprocal Tariffs will only apply to the remaining value of $1,500.

See the flow chart above for more detail on whether the Reciprocal Tariffs apply to products eligible for Chapter 98 special classification.

What is the impact on Foreign Trade Zones (FTZs)?

The Reciprocal Tariffs will not apply to goods that are eligible for "domestic status" under 19 CFR 146.43, meaning U.S.-origin or previously imported goods. Goods which are admitted to FTZs on or after April 9, 2025, when the country-specific tariff increases take effect, must be admitted as "privileged foreign status" under 19 CFR 146.41, therefore fixing the duty rate. The Order's impact on products admitted under the "privileged foreign status" prior to April 5, when the 10 percent tariff rate on all countries takes effect, is unclear. 

When will the Reciprocal Tariffs be lifted?

According to the Order, the Reciprocal Tariffs will remain in effect until Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is "satisfied, resolved, or mitigated."

How were the Reciprocal Tariff rates calculated?

The country-specific Reciprocal Tariff rates were originally calculated based on the tariffs that each country imposes on the U.S. Reports have indicated that the tariff rates imposed on the U.S. were calculated via the following formula: trade deficit with country X divided by total imports from country X. Another way to view this formula is the following:

The USTR published a longer calculation on its website, using the formula below, which reaches the same outcome.

The USTR explained that:

• ε = price elasticity of import demand (set at 4)
• φ = elasticity of import prices with respect to tariffs (set at .25)
• ε and φ cancel each other out, since 4 x .25 = 1
• X_i = total exports to country X
• m_i = total imports from country X

In other words, another way to view this formula is the following:

This formula is the same as that indicated in the reports above. The calculation of the tariffs that each country imposes on the U.S. is divided by two to reach the Reciprocal Tariff rate.

It is unclear how the modified Reciprocal Tariff rates, recently announced via letter, were calculated.

Can trading partners effectuate any changes to their existing tariff rate?

The Order also contains modification authority, allowing the president to increase the tariff if trading partners retaliate or decrease the tariffs if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the U.S. on economic and national security matters.

What trade deals have been negotiated and how do these deals impact Reciprocal Tariffs?

• U.K.: On May 8, 2025, the U.S. and U.K. announced the U.S.-U.K. Economic Prosperity Deal, and on June 16, 2025, Trump signed an executive order implementing the terms of the trade deal. The order establishes a lower tariff rate for the first 100,000 U.K. automobiles entered into the U.S. each year, reduces the tariff rate on U.K. automotive parts, eliminates Reciprocal Tariffs and Section 232 steel and aluminum tariffs on certain U.K. aircraft parts, and directs the Department of Commerce to establish a tariff-rate quote for U.K. steel and aluminum products, but otherwise leaves the 10 percent Reciprocal Tariff in effect. 
• China: In early May, the U.S. and China announced a framework trade agreement. The specific details have not been released, but both China and the U.S. have taken steps to reduce tariffs while negotiations continue. On May 12, 2025, Trump signed an executive order that reduced the China-specific Reciprocal Tariff rate from 125 percent back to 34 percent, suspended the China-specific Reciprocal Tariff rate until August 12, 2025, re-imposed the 10 percent universal Reciprocal Tariff rate on China-origin products in the interim, and reduced the applicable de minimis tariffs. Essentially, the order undid the retaliatory tariff actions previously implemented.
• Vietnam: According to a Truth Social post on July 2, 2025, the administration reached a new trade deal with Vietnam, which will reduce the Reciprocal Tariff rate on Vietnamese-origin products from 46 percent to 20 percent and reduce Vietnamese tariffs on U.S. products to zero percent. In addition, the agreement will impose a higher tariff (40 percent) on goods that are transshipped through Vietnam. It is unclear how the agreement will define transshipment and whether the higher tariff will be applied based on the content of imported articles or the movement of said articles prior to import. As of July 14, the final terms of the agreement and implementing order have not been published.

Several other countries and trading blocs, such as Japan, India, and the EU, continue to negotiate trade deals.

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The tariff landscape is rapidly shifting. It is imperative for companies to review the tariff classification, country of origin, and value of U.S. imports, and consider making supply chain adjustments, as appropriate, to limit tariff exposure. Should you have any questions about these strategies or the content of the tariffs themselves, reach out to our Customs team.  

For more information, please contact:

Richard A. Mojica, rmojica@milchev.com, 202-626-1571

Julia M. Herring, jherring@milchev.com, 202-626-1486

Brittany Huamani, bhuamani@milchev.com, 202-626-5911

Franco Jofré, fjofre@milchev.com, 202-626-1585

Peter Kentz, pkentz@milchev.com, 202-626-5891

Aditi Patil, apatil@milchev.com, 202-626-1485

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