Trump’s Tariff Announcement in the Executive Order
On February 1, 2025, President Trump signed an executive order imposing a 25% tariff on all products imported from Mexico into the United States. This action, effective February 4, 2025, is in response to the “sustained influx of illicit opioids and other drugs” entering the U.S. from Mexico. The order also states that no drawback or de minimis rules will apply to these duties, and no duty inversion benefits may be used in foreign trade zones. Accordingly, the legal basis of the Executive Order is the International Emergency Economic Powers Act (IEEPA).
Unprecedented application of the International Emergency Economic Powers Act (IEEPA).
The International Emergency Economic Powers Act (IEEPA) is a U.S. law that grants the President the authority to regulate international commerce during a national emergency. It has been used extensively in the past, primarily to impose economic sanctions on countries like Iran, North Korea, and Russia. However, its application against Mexico in the context of addressing the immigration crisis at the U.S.-Mexico border is unprecedented.
In May 2021, the Biden administration invoked IEEPA to direct federal agencies to identify and use all legal authorities to provide assistance to the governments of El Salvador, Guatemala, and Honduras to address the root causes of migration. This marked the first time the act has been used in this manner, highlighting the U.S. government’s shift in approach to tackle the complex issue of migration from Central America. But, such first application did not entail the use of tariffs.
Mexico’s President Responds: Plan B with Tariff and Non Tariff Measures
Mexican President Claudia Sheinbaum Pardo swiftly responded to the tariff announcement. In a statement, she categorically rejected the U.S. government’s claims of Mexican government alliances with criminal organizations and emphasized Mexico’s commitment to combating drug trafficking. She also proposed establishing a working group with U.S. counterparts to address security and public health issues collaboratively.
In her social media, she instructed the Minister of Economy to implement the “Plan B” that entailed tariff and non-tariff measures. The details of the plan were never revealed.
Agreement to Suspend Tariffs and Countermeasures.
Following these developments, both presidents agreed to suspend the emergency tariffs and countermeasures this Monday morning. The agreement, reached through diplomatic negotiations, includes the following key points:
Mexican Deployment of Troops
Mexico will deploy 10,000 soldiers to its northern border to combat drug trafficking and illegal migration.
U.S.-Mexico Negotiations
High-level representatives from both countries will engage in negotiations to address illegal migration and illicit drug trafficking.
Tariff Suspension
The U.S. will pause the anticipated tariffs for one month, during which negotiations will take place.
This agreement demonstrates both nations’ commitment to addressing shared challenges and maintaining diplomatic relations without disturbing international trade. Needless to say, the tariff threat has indeed revealed the fragility of the rule of law of USMCA. As the situation evolves, it is crucial for businesses and individuals to stay informed about potential changes in trade policies and their impact on international commerce.