Recent Trade Deals with the UK and China Provide Reasons for Optimism, but Companies Should Still Consider Tariff Mitigation Strategies

By Geoffrey M. Goodale, Hope P. Krebs, Thomas R. Schmuhl, Eduardo Ramos-Gómez, Raul Rangel Miguel, and Laura M. González Alemán of Duane Morris LLP
Originally published May 14, 2025

The Trump administration recently announced separate trade deals with the United Kingdom and China. As discussed below, while these announcements have generated considerable excitement, it is important to recognize that higher tariffs are a new reality, and companies should continue to consider adopting tariff mitigation strategies.

Genesis and Rollout of Reciprocal Tariffs

The administration’s approach to reciprocal tariffs stems from the America First Trade Policy Memorandum, which President Donald Trump issued on January 20, 2025. Among other things, the memorandum directed various U.S. government agencies to evaluate the “large and persistent annual trade deficit in goods, as well as the economic and national security implications and risks resulting from such deficits” and to recommend potential remedies to address such deficits (e.g., increased tariffs).

Subsequently, relying on the International Emergency Economic Powers Act (IEEPA), President Trump issued Executive Order 14257 on April 2, 2025, pursuant to which a reciprocal tariff regime was created to address the declared national emergency caused by trade deficits. In accordance with EO 14257, a baseline reciprocal tariff rate of 10 percent was established for imports from most countries. However, select trading partners assessed elevated rates based on prior treatment of U.S. exports. Countries subject to enhanced rates under EO 14257 included China, the European Union, India, Vietnam and Israel. Pursuant to EO 14257, the reciprocal tariffs are stackable with other special tariffs, except those imposed under Section 232.

Following escalating retaliatory responses from certain countries and supply chain disruptions, President Trump issued Executive Order 14266 on April 9, 2025, which temporarily paused reciprocal tariff rates above 10 percent for virtually all countries except for China for a 90-day period, which is now set to expire on July 9, 2025. For example, the reciprocal tariff rate for Vietnam was reduced from the 46 percent rate referenced in EO 14257 to 10 percent.

Additional product-level exemptions have been granted through a presidential memorandum issued on April 11, 2025, which excluded categories such as semiconductors, laptops and smartphones. However, it is important to note that the Trump administration subsequently initiated several Section 232 investigations that could result in the imposition of Section 232 tariffs on some of these products (e.g., semiconductors).

IEEPA-Based Tariffs on China, Canada and Mexico

Prior to enacting the reciprocal tariff regime, President Trump used IEEPA to impose special tariffs on China, Canada and Mexico. According to President Trump, such tariffs were necessary to address the national emergency created by the international fentanyl trafficking crisis.

For China, an initial 10 percent tariff was imposed pursuant to Executive Order 14195 of February 1, 2025. Subsequently, an additional 10 percent tariff was added in accordance with Executive Order 14228 of March 3, 2025. These fentanyl-related IEEPA tariffs remain in place and are stackable with other special tariffs applicable to China (e.g., reciprocal and Section 301 tariffs). Separately, effective May 2, 2025, the administration eliminated de minimis treatment for low-value imports from China and Hong Kong.

Canada and Mexico have also been subject to fentanyl-related IEEPA tariffs. Initially, pursuant to Executive Order 14193 of February 1, 2025, (Canada) and Executive Order 14194 of February 1, 2025, 25 percent tariffs were established for all products from Mexico and virtually all products from Canada, except that a lower 10 percent rate was set for certain Canadian energy products. Although these tariffs were temporarily paused by Executive Order 14197 of February 3, 2025, and Executive Order 14198 of February 3, 2025, they entered into force on March 6, 2025.

However, pursuant to Executive Order 14231 of March 6, 2025, and Executive Order 14232 of March 6, 2025, IEEPA-based fentanyl tariffs were paused on USMCA-compliant goods and a 10 percent special tariff rate was established for potash from Canada that does not satisfy the applicable USMCA rules of origin. These measures remain in effect.

Trade Deal with the U.K. Announced on May 8

On May 8, 2025, the Trump administration announced the U.S.-U.K. Economic Prosperity Deal. Under the agreement, the reciprocal tariff rate of 10 percent currently applicable to the U.K. will remain in effect. The United States also will reduce the tariff rate applicable to British automobiles from 27.5 percent to 10 percent, subject to volume limits. In addition, U.S. tariffs on U.K.-origin steel and aluminum products, currently subject to Section 232 tariffs at a rate of 25 percent, will be reassessed. In exchange, the United Kingdom will eliminate tariffs on substantial volumes of U.S. ethanol and beef, opening an estimated $5 billion in new export opportunities. The deal also includes preliminary commitments to enhanced cooperation on digital trade, technology policy and critical supply chains, although specific details are subject to further negotiation.

Trade Deal with China Announced on May 12

On May 12, 2025, the United States and China reached an agreement to pause the ongoing tariff escalation. Under the agreement, both countries have agreed to reduce the special tariffs that had previously been imposed by 115 percent. Specifically, China has agreed to reduce its special tariffs on U.S. goods from 125 percent to 10 percent. For its part, the United States will lower country-specific special tariffs on Chinese goods from a cumulative 145 percent to 30 percent (i.e., a reduction of the reciprocal tariff rate applicable to China from 125 percent to 10 percent plus the IEEPA-based fentanyl tariff rate of 20 percent). However, other special tariffs applicable to China will remain in effect (e.g., Section 232 and Section 301 tariffs). This reduction in special tariff rates will remain in effect for 90 days while bilateral discussions continue.

Considerations for Companies

As the developments above illustrate, the current U.S. tariff environment remains fluid. While certain reciprocal tariff rates above 10 percent are temporarily paused through July 9, 2025, the administration has signaled that these rates could be reinstated swiftly depending on policy developments or the outcome of bilateral negotiations. Similarly, while the recently announced trade deals with the U.K. and China may offer some relief, reciprocal tariff rates of 10 percent still apply to both countries, and they do not eliminate the broader complexity or compliance risks associated with stacked tariff regimes.

In this context, companies engaged in cross-border trade must be proactive and strategic. Businesses should conduct thorough reviews of their supply chains, evaluate the country of origin of critical imports and assess their exposure to both current and potential future tariff actions. Consideration should also be given to tariff mitigation opportunities, de minimis compliance adjustments and the viability of product-based exclusion requests as these processes may become available.

Engaging experienced trade counsel is essential. Such counsel can assist in evaluating legal exposure under overlapping tariff regimes, developing tariff mitigation strategies, advising on exclusion filings and ensuring documentation and procedures are aligned with evolving enforcement practices.

Geoffrey M. Goodale is a Partner in the Duane Morris Corporate Practice Group. His practice focuses on export controls, economic sanctions, import compliance, trade litigation, international intellectual property rights protection, foreign direct investment, cybersecurity and compliance counseling to government contractors. He can be reached at GMGoodale@duanemorris.com or 202.776.5211.

Hope P. Krebs is an International Tax Partner, Co-Chair of Duane Morris’s International Practice, and a member of the Corporate Transparency Act Strategy Team. She can be reached at HPKrebs@duanemorris.com or 215.979.1694.

Thomas R. Schmuhl is Of Counsel with Duane Morris LLP. He focuses his practice on international law, financial restructuring, and corporate finance. He can be reached at TRSchmuhl@duanemorris.com or 215.979.1272.

Eduardo Ramos-Gómez is a Partner with Duane Morris LLP. He has practiced international and corporate law for more than 30 years, advising multinational and foreign companies in Asia, North America, Europe and Latin America on cross-border direct foreign investment, project development and project finance. He can be reached at ERamos-Gomez@duanemorris.com or +65.6311.3650.

Raul Rangel Miguel is Special Counsel with Duane Morris LLP and practices in the area of corporate law. He has a multidisciplinary and multicultural practice focused on cross-border and domestic mergers and acquisitions, joint ventures, international trade, international investment, and real estate development. He can be reached at RRangel@duanemorris.com or 202.776.7871.

Laura M. González Alemán is an Associate with Duane Morris LLP and practices in the area of corporate law. She can be reached at LGonzalezAleman@duanemorris.com or 202.776.5235.