24 January 2025

Trade Talking Points | Latest insights from EY's Trade Strategy team (January 2025)

  • This edition of Trade Talking Points includes updates on: trade policy developments following the inauguration of US President Trump; reauthorization of the US African Growth and Opportunity Act; the EU Free Trade Agreement with Mexico and Malaysia; entry into force of the EU-Chile Interim Trade Agreement; the latest European Free Trade Association agreements with Thailand and Ukraine; China's new safeguard investigation into beef products; and more.
 

Executive summary

This edition of Trade Talking Points provides updates on:

  • President Trump's day-one trade policy agenda
  • United States (US) de minimis rule changes
  • US Section 301 tariffs
  • Reauthorization of the US African Growth and Opportunity Act
  • European Union (EU) Free Trade Agreement with Mexico and Malaysia
  • Entry into force of the EU-Chile Interim Trade Agreement
  • Latest European Free Trade Association (EFTA) agreements with Thailand and Ukraine
  • China's new safeguard investigation into beef products
  • Global trade remedies
  • UK-Switzerland Recognition of Professional Qualifications Agreement

Trump's "America First Trade Policy" and tariffs

On 20 January 2025, Donald Trump was inaugurated as President of the United States of America. One of his first acts was to issue a Presidential Memorandum covering an America First Trade Policy. The stated aim of the Policy is to promote investment and productivity and enhance the USA's industrial and technological advantages while defending economic and national security concerns.

The Memorandum directs the economic agencies of the US Government to undertake reviews and propose recommendations across a range of trade issues raised by President Trump during his campaign, including a 25% tariff on products from Canada and Mexico, creating an External Revenue Service (ERS) and addressing persistent trade deficits.

Specific focus areas target the US's relationship with China, export controls and intellectual property rights, as well as the impact of foreign subsidies on US procurement; relevant recommendations will be forthcoming. Reports and recommendations are expected to be published by 1 April 2025.

While Trump did not immediately impose new tariffs, during the signing of the Memorandum he stated that potential duties of 25% on imports from Canada and Mexico from 1 February 2025.

Businesses should identify the impacts Trump's announcements and proposed tariff hikes may have on their operations, and mitigate exposure by commence short-term actions, including scenario-modelling and the assessment of customs valuation, classification and origin. Businesses should also stay up to date with the latest news and developments and be prepared to adapt quickly to changes in trade policies and tariff rates.

Further details are available in EY Global Tax Alert, United States President signs 'America First Trade Policy' Presidential Memo, dated 22 January 2025.

Proposed changes to US de minimis duty exemption

During the final week of the Biden Administration, the US Customs and Border Protection (CBP) announced two proposed changes to the de minimis duty exemption for low-value shipments.

The first proposed rule seeks to strengthen CBP's information collection requirements for low-value shipments to enhance CBP's ability to identify and interdict high-risk shipments that may contain illegal drugs, merchandise that poses a risk to public safety, counterfeit or pirated goods, or other contraband.

The second proposed rule, called the Trade and National Security Actions for Low-Value Shipments, would exclude goods subject to national security tariffs from this exemption. Specifically, items affected by tariffs under Section 232, Section 201 and Section 301 would no longer qualify for duty-free treatment. Currently, goods subject to absolute or tariff-rate quotas, as well as those with anti-dumping and countervailing duties, are not eligible for the de minimis exemption. However, items subject to Section 232, 201 and 301 tariffs can still claim the exemption under the current rules.

Businesses have 60 days, until 14 March 2025, to comment on the proposed rule.

US Section 301 investigations into clean energy products and semiconductors from China

The outgoing Biden administration announced updates on two investigations on Chinese products under Section 301 of the Trade Act of 1974.

  • Tungsten and clean-energy products: The Office of the US Trade Representative (USTR) announced an increase in tariffs on certain clean-energy products from China, following the conclusion of a Section 301 investigation. The tariff rates for solar wafers and polysilicon have been raised to 50%, while the rates for certain tungsten products have been increased to 25%. These tariff hikes came into effect on 1 January 2025.
  • Semiconductors: On 23 December 2024, the USTR initiated a Section 301 investigation into China's acts, policies and practices related to the semiconductor industry. The investigation will initially focus on China's manufacturing of foundational semiconductors (also known as "legacy" or "mature node semiconductors"), particularly those used in critical industries such as defense, automotive, medical devices, aerospace, telecommunications and power generation. The investigation will also cover the production of silicon carbide substrates (or other wafers used as inputs into semiconductor fabrication). A docket for comments opened on 6 January 2025. The new Trump Administration will conclude the investigation and implement any possible tariffs under Section 301.

Reauthorization of the US African Growth and Opportunity Act

With the US African Growth and Opportunity Act (AGOA) expiring in 2025, legislation was introduced to reauthorize it during the final days of the 118th Congress. The AGOA Extension and Enhancement Act of 2024, introduced by Rep. John James (R-MI), would extend AGOA for 12 years, until 30 September 2037. The US Congress enacted the African Growth and Opportunity Act in May 2000, providing eligible sub-Saharan African countries with duty-free access to the US market.

Following the annual AGOA eligibility review, which included a public hearing in July 2024 chaired by the USTR, President Biden decided to maintain AGOA benefits for all currently eligible countries. As a result, the list of eligible and ineligible countries will remain unchanged for 2025 until the program potentially expires.

EU Free Trade Agreements with Mexico and Malaysia

Last week, the EU progressed Free Trade Agreement (FTA) negotiations with Mexico and Malaysia:

  • EU-Mexico: On 17 January 2025, the EU and Mexico finalized negotiations to modernize the current EU-Mexico Global Agreement, which has been in place since 2000 and only covered industrial goods. The upgraded deal was initially agreed in 2020 but delayed due to revisions of the agreement following a Mexican energy sector reform removing benefits for EU energy companies.

The modernized Agreement will cover services, government procurement, investment and farm produce, and remove 95% of Mexican tariffs on EU exports, while the EU is set to increase tariff quotas for Mexican exports. The deal will also put in place a framework to deepen the political dialogue and secure sustainable supplies of critical raw materials.

Subject to legal revision, the EU and Mexico will undertake procedures for conclusion and ratification before the deal can enter into force.

  • EU-Malaysia: On 19 January 2025, the EU and Malaysia relaunched FTA negotiations, aiming to create a preferential trading relationship between the two regions. Negotiations initially began in 2010 but were paused in 2012. In 2023, both parties conducted a review to assess their positions on resuming talks.

The EU and Malaysia have expressed commitment to a rules-based international order, economic openness, sustainable development and regional stability. The renewed agreement is expected to strengthen their trade relationship, currently valued at approximately £38b annually; an FTA also will provide significant benefits for businesses and consumers.

EU-Chile Interim Trade Agreement enters into force from 1 February 2025

The European Commission has announced that the EU-Chile Interim Trade Agreement (ITA) will enter into force on 1 February 2025, replacing the previous EU-Chile Association Agreement. The ITA introduces a simpler and more streamlined approach to establishing preferential origin, as the following changes will apply:

  • Exporters and importers can now use self-certification, based on statements of origin even for multiple shipments of identical products, or importer's knowledge, while the EUR.1 movement certificates and invoice declarations issued with the Association Agreement will no longer be accepted as proof of preferential origin.
  • Claims for preferential origin for products in transit, temporary storage, warehousing or in free zones should be based on statements of origin according to the ITA.
  • The REX number has replaced the Approved Exporter number under the old Association Agreement. Consequently, statements of origin for EU-originating products in consignments exceeding €6,000 should contain the REX number.

Businesses trading with the EU and Chile should review the agreement and assess how to benefit from relevant provisions, while ensuring compliance with the changes set out above.

EFTA Free Trade Agreements with Thailand and Ukraine

The EFTA states, comprising of Iceland, Liechtenstein, Norway and Switzerland, announced the conclusion of two FTAs:

  • EFTA-Thailand: On 29 November 2024, the EFTA countries, concluded negotiations with Thailand on a comprehensive FTA, following the resumption of negotiations in 2022, which had initially stalled in 2005. The FTA covers trade in goods and services, investment, intellectual property rights, competition, government procurement, trade and sustainable development, and legal and horizontal provisions. It also includes chapters on small and medium-sized enterprises and on cooperation and capacity building.
  • EFTA-Ukraine: On 2 December, the EFTA countries and Ukraine concluded negotiations on a modernized FTA, which will include new chapters on digital trade, small and medium-sized enterprises, and trade and sustainable development. It will also feature revised provisions on trade in goods, sanitary and phytosanitary measures, trade facilitation, government procurement, technical cooperation, and the protection of intellectual property. Additionally, the parties reviewed market access for goods, liberalizing trade in certain product categories to deepen trade relations and provide greater market access for businesses on both sides. The parties have agreed to proceed with joint legal reconciliation of the agreement's existing and new provisions. Following this procedure, preparations will begin for signing the modernized FTA.

Businesses will be able to benefit from the agreements once they have entered into force (following signature and ratification by all parties involved).

China's safeguard investigation into imported beef products

On 27 December 2024, China notified the World Trade Organization's (WTO's) Committee on Safeguards regarding the initiation of a safeguarding investigation into imported beef products to assess the impact of increased imports on the domestic beef industry.

The application highlighted a 106% increase in imported beef during the first half of 2024 compared to the same period in 2019, claiming this surge has significantly damaged China's domestic industry. A Ministry spokesperson confirmed that normal trade will not be affected during the investigation, which is expected to conclude within eight months. Producers from Brazil, Argentina and Australia are expected to be the most impacted.

Businesses affected by the safeguarding investigation should familiarize themselves with China's safeguarding investigation process and should share their views with the Ministry of Commerce to provide evidence relevant to the investigation, while assessing the impact of potential investigation outcomes on their supply chains.

Global trade remedies developments

Recent developments in the trade remedies landscape have seen actions taken by the US, China, the EU and India:

  • US: The International Trade Commission is expected to announce preliminary anti-dumping and anti-subsidy determinations on float glass imports from China and Malaysia by 30 April 2025 and 6 March 2025, respectively. Additionally, the Commerce Department announced preliminary findings of significant dumping rates (186.15% to 379.87%) for vanillin from China, with a final determination expected by 30 May.
  • China: The Commerce Ministry concluded an anti-dumping investigation into imports of industrial plastics from the US, EU, Japan and Taiwan, imposing provisional anti-dumping duties ranging from 3.8% to 74.9%, and launched an investigation into US semiconductor subsidies on 20 January 2025.
  • EU: The European Commission imposed definitive anti-dumping duties on imports of the sweetener erythritol from China and on imports of polyvinyl chloride (PVC) from Egypt and the USA.
  • India: On 6 January 2025, India notified the WTO's Committee on Safeguards regarding the initiation of a safeguard investigation on non-alloy and alloy steel flat products, which began on 19 December 2024.

Businesses trading with, or processing goods affected by, trade remedy investigations should assess their supply chains and exposure to potential remedy measures. Impacted traders should engage with relevant authorities in ongoing investigations and develop mitigation responses to arising trade risks.

UK-Switzerland Recognition of Professional Qualifications Agreement

The UK and Switzerland have agreed a new Recognition of Professional Qualifications Agreement (PQA), facilitating professional mobility and strengthening economic ties between the jurisdictions. The PQA entered into force on 20 January 2025, replacing the now expired arrangements under the Citizens' Rights Agreement, which served to protect the rights of UK and Swiss nationals living in each other's countries.

The PQA makes it easier for UK-qualified professionals to work in Switzerland and vice versa, ensuring that more than 200 professional qualifications in the UK will be recognized in Switzerland, ranging from qualifications as a lawyer, veterinarian or auditor to driving and being a ski instructor. Additionally, the agreement includes a bespoke route to recognition for certain legal professionals, allowing lawyers to become qualified in the other country after practicing for three years. The PQA was agreed in parallel to ongoing negotiations for an enhanced UK-Switzerland FTA, with the sixth round of negotiations expected to take place in early 2025.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United Kingdom), London

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

Document ID: 2025-0316