On July 31, President Trump issued a new executive order (EO) further modifying U.S. reciprocal tariff rates and building upon EO 14257, dated April 2, 2025, which declared that large and persistent U.S. trade deficits presented an unusual and extraordinary threat to national security and the economy. The July 31 EO responds to continued concerns that many foreign trading partners maintain higher tariff and non-tariff barriers that disadvantage U.S. exports and critical industries. After additional review and recommendations from federal officials, President Trump determined it was necessary to further recalibrate tariffs to promote reciprocity in trade relationships, encourage aligned economic and security objectives, and address ongoing imbalances.
The new tariff structure is detailed in Annex II to the EO, outlining adjusted "reciprocal tariffs" by country. For most countries, tariff rates now range from 10% to 41%, depending on the perceived alignment with the United States and the status of bilateral trade negotiations. Notably, goods from the European Union will be subject to a minimum 15% tariff unless their existing tariff rate already meets or exceeds this threshold. Countries that have concluded or are close to concluding "meaningful" trade and security agreements with the United States may see favorable treatment, but their goods remain subject to elevated tariffs until such agreements are finalized and further orders are issued.
Importers are allowed a grace period for goods in transit. The new tariff rates become effective on August 7 at 12:01am Eastern Daylight Time, but goods "loaded onto a vessel at the port of loading and in transit on the final mode of transit" before 12:01am Eastern Daylight Time on August 7, and entered for consumption, or withdrawn from warehouse for consumption, before 12:01am Eastern Daylight Time on October 5, 2025, will not be subject to the revised new tariff. Instead, such goods in transit will be subject to the tariff outlined in EO 14257, typically 10%.
The July 31 EO does not impact tariff rates for Chinese-origin goods. The U.S. and China continue to negotiate a trade deal during the 90-day pause, which is set to conclude on August 12 unless further extended. Similarly, on July 31, President Trump announced a 90-day extension of the deadline for negotiations with Mexico, delaying a potential increase in tariffs for the U.S.'s southern neighbor.
A key focus of concern for the Trump administration is tariff evasion and transshipment. The order provides an enforcement mechanism targeting transshipment evasion. Goods determined by U.S. Customs and Border Protection (CBP) to be transshipped (i.e., rerouted through third countries to evade tariffs) will face a punitive 40% duty in addition to other penalties. (For an article discussing Customs penalties, please visit our article, Import Violations: What You Need to Know about 19 USC 1592). CBP will also publish biannual lists of countries and facilities implicated in circumvention schemes to assist the public and importers in their commercial due diligence.
In summary, the executive action significantly increases tariff rates for many U.S. trading partners. Businesses engaged in cross-border trade should be aware of both higher immediate costs and the evolving legal and regulatory environment and are encouraged to closely monitor further updates as ongoing negotiations and enforcement unfold.
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