U.S. Tariffs: Navigating The New Realities of International Trade

What you need to know

• The U.S. tariff regime is now highly fragmented, with multiple overlapping measures that can apply to a single import transaction. Tariffs are often cumulative, layered on top of each other and on pre-existing base tariff rates.
• Determining the correct tariff exposure now requires a detailed, fact-specific analysis, considering the country of origin, product valuation and classification, applicable trade agreements, and the latest policy changes.
• Key mitigation strategies include reassessing and optimising customs modalities, such as applicable standards for rules of origin; customs valuation and classification and applicable preferential treatments. On a contractual level, operators should proactively assess existing agreements and incorporate protective provisions in future contracts.
• Companies must prepare for ongoing volatility and uncertainty as the new normal in global trade. Mastery of customs law fundamentals – rules of origin, classification, and valuation – has become more essential than ever. 

Background

There has been a whirlwind of tariff developments in recent weeks, further reshaping the global trade landscape. Following the end of the 90-day suspension of the "reciprocal tariff regime," the U.S. President has introduced new country-specific tariffs ranging from 10% to 40%. Additional duties have also been imposed on certain copper products under Section 232 of the Trade Expansion Act of 1962 (Section 232), and the global de minimis exception has been suspended by the United States  – changes that will have a substantial impact on companies with a large U.S. customer base. In addition certain countries were specifically targeted by new measures. In particular, the U.S. President imposed additional tariffs under the International Emergency Economic Powers Act (IEEPA) on Brazil and Canada while India has faced successive rounds of new duties, including the first-ever use of tariffs as a secondary sanction in response to India's ongoing purchases of Russian oil, which are being perceived as undermining the effectiveness of the G7 sanctions against Russia. At the same time, new trade agreements are being negotiated. The United States and China have agreed to extend the suspension of certain tariffs for another 90 days while talks continue, and most recently, the United States and the EU have reached an agreement on a Framework for Reciprocal, Fair, and Balanced Trade.

The overarching message is clear: the era of broad-based trade liberalisation has come to a halt, at least for the foreseeable future. Since the start of the year, new U.S. trade policies have contributed to a climate of increased market uncertainty, ongoing supply chain challenges, and persistent inflationary pressures. The situation is growing even more complex, as tariff regimes continue to evolve and new bilateral trade agreements create a patchwork of rules that vary by country and product. At the same time, rising geopolitical tensions are adding further unpredictability to the global trade landscape.

In light of these developments, this briefing is designed to help companies understand and navigate the shifting trade environment. Understanding the fundamentals of customs rules and proactively managing tariff exposure is now more critical than ever. We outline both the legal implications and commercial impacts of the new measures, together with practical strategies for risk mitigation and cross-border operations.

The new U.S. tariffs landscape

Key applicable regimes 

Historically, the determination of applicable U.S. tariff rates was relatively straightforward. The default position was enshrined in the multilateral tariff schedules established under the World Trade Organization (WTO), which set the Most-Favoured Nation (MFN) tariff rates. These MFN rates applied uniformly to U.S. imports from all WTO member countries, with only limited exceptions – such as preferential rates under Free Trade Agreements (FTAs) / customs unions or special arrangements for developing countries. As a result, businesses could generally rely on a stable and predictable framework for calculating tariff exposure. Furthermore, low-value shipments (below USD 800) were traditionally exempted from import duties under a global de minimis exception. 

However, since the new U.S. administration has introduced a series of far-reaching additional tariff regimes – both country-specific and sectoral tariffs on imports from nearly all countries – this landscape has changed fundamentally. The average effective U.S. tariff rate now stands at 15.8% – a significant increase from the 2.3% rate at the end of 2024. With a myriad of different measures in place now it is important to understand how these tariff rates apply and how they are linked to each other. 

Very broadly, the U.S. tariff measures can be categorised into "across the board/general measures", "product-specific measures" and "country-specific measures". 

With respect to general measures, while under the multilateral WTO framework, countries applied MFN tariff rates, which varied by product but were uniformly extended to all WTO members, the new U.S. administration has introduced a so-called "reciprocal tariff regime," establishing a baseline tariff rate of 10% on all products from all countries. Under this new system, certain countries are subject to even higher "reciprocal rates," determined by a highly contested methodology that takes into account the U.S. trade deficit with those countries:

*amended reciprocal rate on the basis of "trade deal" concessions (see below). 

Besides the above across the board/general measures, the U.S. administration also introduced further country-specific and product specific measures.

In addition there are a number of ongoing investigations under section 232 and section 301: 

Generally, the new measures are layered on top of the existing MFN or FTA rates and on top of each other, resulting in cumulative tariff burdens (so-called "tariff stacking"). For instance, the overall, generally applicable tariff rate for Chinese imports is 30% (20% country-specific rate + 10% reciprocal rate) and the overall tariff rate for Indian imports is 50% (25% reciprocal rate + 25% country-specific rate). However there are some exemptions to this general rule. Some regimes exclude certain products from their scope if those items are already covered by other tariff measures. For example, under the "reciprocal tariffs" scheme, products that are already subject to Section 232 tariffs are exempt. Illustrated in a practical example this means, aluminium wire exported from India to the United States would be subject to a 2.6% MFN base tariff, as there is no FTA between the two countries. In addition, a 50% tariff would apply under Section 232, which targets certain metal imports for national security reasons. This results in a combined tariff rate of 52.6%. Importantly, no further reciprocal or country-specific tariffs would be imposed on this product, as both the reciprocal and the country-specific regime exempt goods that are already subject to Section 232 tariffs.

Furthermore, the United States has begun to implement and continues to negotiate so-called "trade deals" or targeted sectoral arrangements (which, technically speaking, are not FTAs), which can create further deviations from the standard rates and the methodology of calculating the final rates depending on the countries and products involved. So far, the United States has struck deals with, in particular, the UK, the EU and also Japan, South Korea, Vietnam, Philippines and Indonesia.

See in in further detail for example:

While these "trade deals" provide partial relief from existing tariff rates and implement some product-specific exemptions, tariff rates are mostly not reduced to zero at all. For instance, the UK–US agreement implements tariff-rate quotas for sectors such as automobiles, aerospace, and steel and aluminium. However, it maintains a baseline tariff of 10% on most imports from the UK, which continues to affect a wide range of goods. Similarly, the US–EU agreement (a copy of the joint statement on the recently agreed framework is available here and here) includes provisions for tariff relief on EU automotive imports, offering targeted benefits without fully eliminating tariffs across all product categories.

Furthermore, some agreements also introduce a different methodology to the usual "tariff stacking". In particular, under the United States’ tariff agreement with the EU, a specific exemption applies to the usual practice of layering tariffs. If the MFN rate is higher than 15%, the IEEPA/ reciprocal rate will be 0%, and the new rate is capped at 15%. Conversely, if the MFN rate is lower than 15%, the IEEPA/ reciprocal rate will be adjusted so that the sum of the MFN rate and the IEEPA/ reciprocal rate does not surpass 15%. In both scenarios, the total tariff applied to EU goods is capped at 15%, regardless of how the individual rates might otherwise be combined.

The implementation of these agreements may provide some relief from further escalation of the relevant tariff rates; however, they do not guarantee lasting legal certainty. For instance, the EU-US trade deal requires the EU to make several concessions, such as reducing tariffs on certain U.S. products. Nevertheless, the EU’s applicable implementation process – known as the ordinary legislative procedure, which is the most common method for enacting EU legislation – is both lengthy and complex. There is no set timeframe for the completion of this legislative procedure, which currently takes an average of seventeen months. Although an urgent procedure has not yet been invoked in this case, the European Commission has expressed its desire to pursue adoption of the proposed regulations as swiftly as possible. The regulation aimed at eliminating tariffs on U.S. industrial goods and granting preferential market access for a range of U.S. non-sensitive agricultural goods is then intended to enter into force the day after its publication in the EU Official Journal. The same applies to the regulation to extend tariff-free treatment for certain types of lobster and processed lobster, which is expected to apply retroactively from 1 August 2025 – the date on which the original regulation, which already provided for the suspension, expired. 

Both the Joint Statement and the subsequent legislative proposals have received mixed reactions. In particular, some Members of the European Parliament have criticised the European Commission, claiming that it has conceded too much to the United States, and have called for resistance within the European Parliament. The Chair of the International Trade (INTA) Committee of the European Parliament, Bernd Lange, has announced that the Parliament will scrutinise the legislative proposals closely and amend them if necessary. In this context, an extraordinary meeting of the INTA Committee took place on 3 September 2025 to discuss EU-US trade relations with Sabine Weyand, the European Commission's Director General for Trade and Economic Security. Only a few weeks ago, Mr Lange expressed concerns, stating "For my part, I see an asymmetry set in stone. …I want to make sure that nothing in our right to regulate, from digital services to carbon pricing, has been compromised in return for this deal. Also that if this deal turns into binding commitments, the European Parliament and Council will have the last say on it" (statement, 28 July 2025). 

While opponents to the deal are unlikely to secure a majority in the European Parliament, they may nonetheless present some challenges for the European Commission as the legislative process unfolds. If the EU is unable to implement the concessions agreed upon in the US-EU trade deal, President Trump is likely to reinstate higher tariffs on EU goods or even impose additional increases to exert maximum pressure. Unlike the EU’s complex legislative process, the United States’ procedure for implementing tariff changes is largely delegated to the executive branch. This allows the President to enact such changes directly through Executive Orders, enabling a much swifter response.

Additionally, the United States has suspended its de minimis exemption for all low-value commercial shipments, effectively ending the previous USD 800 threshold. This means that goods entering the United States, even those valued under USD 800, will now face tariffs and duties starting on 29 August 2025. Executive Order 14324 of 30 July 2025 introduces a temporary exception for goods shipped via the international postal network, applying special duty rates for a limited period. For the first six months, importers may choose between two assessment methods:

• Ad valorem duty: Applied at the effective IEEPA tariff rate for the product’s country of origin, calculated on the total shipment value.

• Specific duty: A fixed charge of USD 80-200 per item, depending on the applicable IEEPA tariff rate for the country of origin.

After the six-month transition period, all postal shipments will be subject exclusively to the ad valorem duty methodology.

A new, highly fragmented landscape

The result is a highly fragmented and dynamic system, where multiple overlapping and sometimes rapidly changing regimes may apply to a single import transaction. This increased complexity means that determining the precise tariff exposure for any given shipment now requires a careful, fact-specific analysis. The applicable rate may depend not only on the product’s classification and country of origin, but also on the latest policy developments, the existence of any relevant bilateral or sectoral agreements, and the imposition of special or retaliatory tariffs. The main regimes that need to be assessed when determining the tariff exposure are: 

• The MFN tariff rates under the U.S. Harmonized Tariff Schedule (HTSUS) (official schedule see here) or potentially applicable preferential rates under existing FTAs (for an overview on the existing FTAs signed by the US see here).

• Additional tariffs imposed under U.S. trade law, including those authorised by the IEEPA, such as the "reciprocal tariff regime", product specific rates such as those under Section 232 on aluminium and steel and additional country-specific tariffs such as the special rates on Chinese imports or the recently imposed additional tariffs on Indian imports related to imports involving Russian oil.

• Bilateral or sectoral arrangements, such as the US–UK Trade Deal, which may lower applicable rates or introduce exemptions for certain products.

• Special rates under the new de minimis rules. 

Given this fragmented environment, it is essential to carefully analyse the specific facts of each cross-border transaction to determine which regime(s), potential exemptions and tariff rates will apply. The tariff exposure for a certain product / shipment will depend on several factors, including its value, the classification of the goods under the HTSUS and the determination of their country of origin under U.S. customs law. 

In the United States, the Customs and Border Protection (CBP) is the principal authority responsible for determining the country of origin of imported goods. The framework for origin determination is divided into two primary categories: non-preferential rules of origin and preferential rules of origin.

Non-preferential rules of origin are applied to goods imported from countries with which the United States maintains MFN status, i.e. no FTA with preferential treatment is in force. While the assessment of the origin of a product can be straightforward, when it is entirely derived/ processed and/or manufactured in one country, the assessment can be quite complicated in the case of goods manufactured/ assembled in cross-border supply chains. Here, the central legal standard for origin determination under U.S. law is the “substantial transformation” test. This test assesses whether a product has undergone a process that results in a new and distinct article of commerce, characterised by a different name, character, or use compared to the original materials or components. The determination of substantial transformation is inherently fact-specific and is made on a case-by-case basis, drawing on CBP administrative rulings and judicial precedent.

Key factors considered in this analysis include:

• The character and essential nature of the finished article

• The nature and complexity of the manufacturing or processing operations performed

• The value added by such operations

• The relative importance of the components or materials incorporated

It is important to note that the application of these criteria can vary significantly across product categories. For example, in the case of electronic goods, the origin may be determined by the location where the core components – such as the “brain” of the product – are added, whereas for other products, the place of final assembly may be decisive.

Preferential rules of origin are relevant in the context of FTAs and other preferential trade arrangements. These rules are designed to determine whether goods qualify for preferential tariff treatment under specific agreements, such as the United States-Mexico-Canada Agreement (USMCA). Each FTA or preference programme establishes its own set of origin criteria, which may include requirements such as minimum regional value content, specific manufacturing processes, or labour value content thresholds.

Under the current tariff regimes, the non-preferential rules of origin will be most contentious as tariffs are generally applied regardless of FTA status. However, the preferential rules of origin are still relevant for obtaining a lower base tariff rate (as opposed to the higher MFN-rate) which will lower the overall tariff exposure.

Valuation and classification of products

Under U.S. law, tariffs are generally imposed as a percentage of the customs value of imported goods. The methodology for determining customs value is governed by the international framework established by the WTO Agreement on Customs Valuation. This agreement provides a standardised and neutral system for valuing imported goods, ensuring consistency and transparency in the assessment of duties.

The primary basis for customs valuation is the “transaction value” of the goods, which is defined as the price actually paid or payable for the goods when sold for export to the United States. This approach reflects the commercial reality of the transaction and serves as the foundation for most customs value determinations.

The WTO Agreement allows for certain costs to be included in, or excluded from, the customs value, depending on the legislation of the importing country. These costs may include:

• Supply chain costs, such as documentation and logistic fees

• Warehousing costs, inspection or testing fees

• Insurance costs

The inclusion or exclusion of these elements can have a significant impact on the final customs value and, consequently, the amount of duty assessed.

U.S. law furthermore foresees some specificities when it comes to customs valuation. For instance, the “first sale for export” rule is a special U.S. customs rule that can help importers pay less in tariffs when goods are bought and sold through several parties before reaching the United States. When a product is made by a foreign manufacturer and then sold to a foreign middleman, who then sells it to a U.S. importer, there are multiple sales before the product enters the United States. Normally, U.S. customs would calculate tariffs based on the price the U.S. importer pays to the middleman, which is usually higher because it includes the middleman’s markup. However, if certain conditions are met, the “first sale for export” rule allows the importer to use the lower price from the first sale (the sale from the manufacturer to the middleman) as the basis for calculating tariffs. This can result in lower duties because the value declared to customs is lower.

Furthermore, given the complexity of the U.S. tariff regime – including the prevalence of product-specific tariffs and narrowly defined exclusion categories – it is essential to conduct a thorough review of tariff classifications under the HTSUS. This review should encompass all stages of the supply chain, particularly where components or intermediate goods are assembled or processed in multiple jurisdictions.

Key mitigation strategies 

Adjust to trade volatility as the new normal

Key mitigation strategies for navigating the current trade environment begin with adjusting cross-border operations for volatility as a persistent feature. U.S. tariff measures have introduced ongoing supply chain disruptions and long-term uncertainty, compelling businesses to rethink their cross-border operations, pricing structures, and investment strategies. While some relief may arise from future negotiations, the overall trade landscape remains fragmented and unpredictable. Legal challenges are unlikely to reverse these policies, signalling that broad trade liberalisation is not expected to return in the near future.

A critical component of mitigation is mastering the fundamentals of customs law, particularly rules of origin, classification, and valuation. U.S. specific complexities, such as the “substantial transformation” test require close legal and operational scrutiny. The substantial transformation test is inherently subjective and applied on a case-by-case basis, relying on precedent and administrative rulings. Importers must be familiar with U.S. customs procedures, ensuring goods are declared accurately and determining whether any preferential rules of origin apply based on the product and its country of origin.

Furthermore, customs valuation strategies have become more significant as duty rates rise. Companies should reassess how goods are valued, considering the exclusion of non-goods-related costs from customs value and exploring the specific U.S. customs law preferences such as the “first sale for export” rule which can be advantageous in multi-tiered transactions, allowing the customs value to be based on the initial sale price, which is often lower than the final transaction value. 

Furthermore, evaluating the applicability of existing free trade agreements is also crucial. While most current tariff measures apply broadly, including to FTA partners, a lower base rate under an FTA can reduce the overall burden due to the cumulative nature of tariffs. Even partial preferential duty treatment can provide meaningful cost relief.

Generally, strengthening internal expertise in customs law through adequate training and reliance on state-of-the-art procedures is increasingly important as trade barriers rise and more bilateral agreements come into play, each with unique conditions. A proactive approach to understanding and applying these rules not only reduces compliance risk but also supports strategic planning around sourcing, pricing, and market access, helping businesses remain agile and competitive.

The U.S. trade policy environment has become significantly more complex and unpredictable, with higher tariffs, more targeted measures, and a patchwork of bilateral and sectoral agreements, many of which still stand on shaky grounds. This has a far-reaching and lasting impact on the overall, global trade landscape. Companies must invest in deepening their understanding of customs rules, proactively manage tariff exposure, and ensure their contracts and supply chains are resilient to ongoing trade volatility

Our international trade team at Ashurst stands ready to support companies navigating any tariff-related challenges. Our dedicated team is highly experienced across the full spectrum of international trade law, including WTO law, free trade agreements, trade policy, trade defence, customs and market access, sanctions and export controls as well as regulatory affairs.