Trump Announces Potential New Country-wide Tariffs on Mexico

UPDATE: 06/08/19
Yesterday evening President Trump called off the tariff on Mexican goods which had been slated to start on Monday, June 10.

Original: 05/31/2018
President Trump announced yesterday that in an effort to force Mexico to take action on immigration issues, the U.S. will be imposing 5% tariffs on all products imported into the U.S. from Mexico starting June 10^th.  The tariffs will rise by an additional 5% per month (rising to 10% on July 1^st, 15% on August 1^st, 20% on September 1^st, and finally to 25% on October 1^st), until Mexico “substantially stops the illegal inflow of aliens coming in through its territory.”  As per President Trump’s announcement, the U.S. will have sole discretion to determine whether Mexico has made the required “substantial” progress towards this goal.  These additional tariffs will apply regardless of whether the goods would otherwise qualify for duty-free entry under NAFTA.

 The President’s claimed legal basis for the tariffs is the International Emergency Economic Powers Act (“IEEPA”), which provides broad authority to the President to regulate commerce in response to foreign threats.  While IEEPA authority has been used to impose economic sanctions on a number of countries in the past, it has never been used
as support for the imposition of tariffs.  President Trump declared the “emergency” required by IEEPA last night.   

While President Trump tends to act in unpredictable ways, he’s shown that he is not afraid to follow through on threats to impose tariffs to achieve policy goals.  Moreover, the White House showed no signs of backing down in the face of opposition expressed by business groups and others today.  Therefore, while it’s impossible to predict what will happen with any certainty, this announcement should be taken seriously.

Here are some important points to consider now:

1. The announcement leaves a brief period (slightly more than a week) for the U.S. and Mexico to reach agreement canceling or delaying these tariffs. Mexico announced today that it will be meeting with Secretary of State Mike Pompeo this coming Wednesday to attempt to reach a resolution of this issue prior to the imposition of the tariffs.  While it’s again impossible to predict the outcome of the summit with any certainty, the extremely short time period
   before the announced tariffs are to take effect complicates its potential for success. 
2. The likely adverse impact of these new tariffs on the adoption of the USMCA will probably be a significant factor in any negotiations.  Separately, if the tariffs go into place, analysts are predicting that USMCA may very well not be adopted until after the 2020 elections.
3. U.S. court challenges to the tariffs are also likely, as several business groups have announced that they intend to challenge the legal basis for the new tariffs.
4. The brief delay in the imposition of the new tariffs also means that importers and exporters have a brief opportunity to avoid the impact of these tariffs now.  If possible, exporters should move the shipping dates forward for their near-term scheduled shipments so that they enter the U.S. before June 10^th.
5. Significant delays are likely at U.S. land ports of entry in the coming several weeks, as exporters will likely scramble to get their goods in now.  The delays will be exacerbated by the high volume of goods moved through ports on the border with Mexico; in fact, Laredo has now overtaken Los Angeles as the busiest port in the United States.

If the tariffs do go into effect, we can work with you on strategies to mitigate them.  Our affiliated team of Customs and trade attorneys have years of experience in this area.  For example, the U.S. has set up a process for importers to apply for exclusions from additional tariffs on Chinese-origin goods; if the U.S. sets up a similar exclusion process for the tariffs on Mexican-origin goods, we have substantial experience in successfully applying for such exclusions.