A version of this article was published on The DCN website on 1 August 2025.
The rest of the world has been waiting with some trepidation for the announcement of the ‘final’ reciprocal tariffs which the US proposed to impose on goods exported from countries on their import into the US.
In our latest Customs & Trade alert, Andrew Hudson breaks down the reciprocal tariffs and the imposition of the new rates.
Legislative basis for the reciprocal tariffs
The ostensible legislative support for these reciprocal tariffs was to be found in the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.), section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483), and section 301 of title 3, United States Code (among other laws).
Liberation Day and the original imposition of reciprocal tariffs
The first version of these reciprocal tariffs was announced on ‘Liberation Day’ on 2 April 2025 by way of Executive Order, invoking the legislative provisions described above. Those provisions allowed the US President to unilaterally impose additional tariffs and other measures without the need for those tariffs to be subject to congressional approval.
Deferral of the reciprocal tariffs to allow for deals to be struck with the US
The effect of the ‘Liberation Day’ reciprocal tariffs was then deferred to allow countries to negotiate ‘deals’ or ‘agreements’ with the US to reduce reciprocal tariffs that would apply to their exports. Several countries did strike such deals, including the United Kingdom, the European Union, Indonesia and the Philippines. Those deals set lower reciprocal tariff rates for exports from those countries than those threatened in the ‘Liberation Day’ announcement, in exchange for which the US secured ‘tariff-free’ entry for US exports. The deals also provided for other trade commitments towards the US, such as providing for additional investment into the US from a number of those countries.
Review of the reciprocal tariffs and imposition of the new rates
The original reciprocal tariffs have now been finalised by further Executive Order issued by the US President on 31 July 2025, again invoking the supporting legislation described above. Those countries which had struck deals with the US since the imposition of the Liberation Day reciprocal tariffs had those tariffs imposed on their exports reduced as agreed. For example, reciprocal tariffs on the import of goods exported from Japan and the Philippines were reduced to 19% and 15% respectively.
Annex 1 to the Executive Order sets out rates of reciprocal tariffs imposed on various countries with a default rate of 10% on exports from all other countries when they are imported into the US.
Australia maintained the ‘default’ rate of 10% on its exports when imported into the US as was imposed by the Liberation Day reciprocal tariffs. Ironically, the outcome for Australia provides it with a comparative advantage to other countries as a source for exports to the US. However, for some reason, the US has now imposed a tariff of 15% on exports from New Zealand when they are imported into the US. In the absence of explanation from the US, it is difficult to determine the reasons for such separate treatment. It may be that New Zealand producers may establish operations in Australia to benefit from the lower Australian tariff rates.
These revised reciprocal tariffs are scheduled to commence on 8 August 2025 and there are specific provisions relating to other prevailing tariff rates on shipments of goods loaded for export before that date or already in transit to the US.
As with the original reciprocal tariffs, the new Executive Order imposes an additional duty of 40% on top of the prescribed rates for goods arriving in the US which are found to have been transhipped into the US from the original country of origin through another country or countries aiming to secure lower rates payable on exports from those countries.
However, there are several important qualifications and exceptions to be considered.
Qualifications and exceptions
Despite the generalities discussed above, there are some important qualifications and exceptions to be considered including the following.
- The legal challenges to the imposition of the reciprocal tariffs in the US. Following the imposition of tariffs on Liberation Day, several interested US parties brought successful actions in various courts to have the reciprocal tariffs removed on the basis the legal provisions cited by the US President did not support the imposition of those reciprocal tariffs. However, the US authorities secured a stay on those orders pending appeals to higher level courts which are now taking place.
- The sectoral tariffs already imposed and to be imposed on certain goods such as aluminium, steel and copper. They are generally significantly higher than the reciprocal tariffs and are imposed under other legislative provisions.
- The possible imposition of future sectoral tariffs. At the moment, the main possible tariffs of concern are the 200% tariffs being threatened on exports of pharmaceutical products on import into the US. The rationale is alleged ‘unfair’ practices in other countries which disadvantage US exporters to those countries.
- That the US has now suspend duty- free status for ‘de minimis’ imports (where the values of goods is less than US$800). Details of the relevant Executive Order setting out the various rationale for the suspension can be found here but the effect will probably be to slow down the movement of these imports which are normally imported through ‘express’ channels.
- The future of existing exceptions to exports from China and Mexico which are subject to ongoing negotiations.
- The possibility that the US may revise the reciprocal tariffs and sectoral tariffs in the future at short notice.
- Whether other countries seek to challenge US reciprocal and sectoral tariffs at the WTO or in other jurisdictions.
The ongoing impact of uncertainty
It is important to note that nothing in today’s announcements can be taken as certain to apply indefinitely. This uncertainty does not support the making of investment or other financial decisions. Before making any decisions on trade and investment it is also important to secure legal, political and commercial advice both here and in the US on how these various tariffs and other trade developments will impact on future investments.
Contact us
If you would like to discuss the impact of the reciprocal tariffs and the newly imposed rates on goods imported into the US, please contact a member of our Customs & Trade team.
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