On 12 March 2025, shortly after the Trump Administration's steel and aluminum tariffs took effect, the European Union (the EU),¹ and then Canada,² separately announced their respective retaliatory measures covering approximately US$28b and US$29b of US goods, respectively.

The US steel and aluminum tariffs, implemented on 12 March 2025, target all US trading partners with 25% punitive tariffs. Products subject to the tariffs range from industrial-grade steel and aluminum materials to semi-finished and finished products such as steel pipes, wire, engine parts and exercise equipment. The specific Harmonized Tariff Schedule of the United States (HTSUS) codes for the steel and aluminum products and their derivatives are presented in Annex 1 to each of the Federal Register notices issued on 5 March 2025.³

There were a few notable differences between the steel and aluminum tariffs imposed during the first and second Trump Administration:

• The aluminum tariffs have been increased from 10% to 25%.
• There are no exceptions or exemptions available in the second Trump term.
• The products subject to steel and aluminum tariffs will continue to be added to the lists. The US Secretary of Commerce is tasked with establishing a system by May 2025 to manage the evolving list of derivative products, according to White House announcements.⁴

The EU and Canada retaliated against US tariffs equivalent to the value of their affected exports.

Canadian retaliatory tariffs

The Canadian tariffs take effect on 13 March 2025 and target billions of dollars of US imports, including products such as computers, sporting equipment and cast-iron products. The 25% punitive tariffs will not apply to US goods that are in transit to Canada on the day the tariffs come into force.

EU retaliatory tariffs

The EU retaliatory tariffs will be implemented in two phases, starting on 1 April 2025. The first phase will reinstate a set of previously suspended 2018 and 2020 countermeasures against the US, set to expire on 31 March 2025. The range of products include bourbon, whiskey, boats and motorcycles.

The second phase is expected to take effect in mid-April and discussion reportedly is underway with relevant stake holders. The potential product list includes a wide range of products that are primarily categorized as industrial and agricultural⁵ and are summarized as follows:

• Industrial products: steel and aluminum products, textiles, leather goods, home appliances, house tools, plastics, wood products
• Agricultural products: poultry, beef, certain seafood, nuts, eggs, dairy, sugar and vegetables

Action for businesses to consider

Companies with international supply chains either importing to the US or exporting to EU and Canada should immediately identify the potential impact of these measures and explore potential mitigation strategies. For example:

• Keep up with the latest news and developments in trade policies and stay adaptable to quickly respond to changes in trade regulations and tariff rates.
• Consider valuation planning, such as bifurcating product and non-product costs and other country-specific planning, such as first sale for export in the US, to mitigate the increase in duty.
• Review contracts with suppliers and customers to clarify contractual liability for duties and taxes.
• Consider renegotiating supplier and customer pricing agreements and/or cost-splitting arrangements.
• Monitor updates from US Customs and Border Protection to provide further instructions on "melt and pour requirements" for steel products as well as "smelt and cast requirements" for aluminum products.
• Develop compliance processes and procedures that demonstrate reasonable care in the face of increased customs enforcement and scrutiny.
• Review Free Trade Zone operations and admission status of steel and aluminum products under the new requirements.
• Review US-continuous-import-bond sufficiency to help prevent goods' being stuck at the border due to insufficient bond and stacking liability.

Additionally, the imposition of Section 232 duties will almost certainly affect transfer prices for US distributors that purchase from related parties and identify that their products are now subject to the punitive duties. Along with considering the mitigating duty impact while aligning the income tax and customs approaches, affected parties should also review the mechanics for reporting any transfer pricing adjustments to US Customs. This process may be particularly complex when duties are present for only part of the year. US Customs has specific rules for reporting adjustments to prices made after importation, including rules for transfer pricing adjustments. These rules require the importer to take specific actions before importing goods for which prices may be adjusted, including adding customs-specific language to transfer pricing policies. With proper planning, refunds may be obtained on duties paid if transfer prices are reduced.