On February 1, 2025, President Trump imposed tariffs on imports from Canada, Mexico, and China, to take effect on February 4, 2025.1 The tariffs are an additional 25% ad valorem rate of duty to all imports from Canada and Mexico and 10% on imports from China (except Canadian energy resources exports, which would face a 10% tariff instead).
Shortly after the US announcement2, Mexico’s President instructed the Secretary of Economy to implement its “Plan B” (among a confidential series of plans being discussed in cabinet) which includes tariffs on imports from the United States and non-tariff measures.3
On February 3, both US and Mexican Presidents announced reaching an agreement on immigration and drug trafficking concerns, suspending Mexican tariffs increase for a month.4
The Executive Order (EO) against Mexican imports has been paused until March 4, 2025.
Content of the Executive Order
In describing the US national emergency with regard to the “situation in the southern border”, the Executive Order (EO) signals the Mexican government of having an alliance with Drug Trafficking Organizations (DTOs) and that “the government of Mexico has afforded safe havens for the cartels to engage in the manufacturing and transportation of illicit drugs, which collectively have led to the overdose deaths of hundreds of thousands of American victims”.
To deal with such an “unusual and extraordinary threat”5, President Trump invoked Section 1702(a)(1)(B) of IEEPA, imposing ad valorem tariffs on articles that are products of Mexico, by finding that action under other authority to impose tariffs is inadequate to address such threat.
Content of the Presidential Agreement.
On February 3, 2025, U.S. President Donald Trump and Mexican President Claudia Sheinbaum announced a mutual agreement to suspend the impending 25% tariffs on Mexican imports for one month. This decision followed a phone conversation between the two leaders, during which they addressed various bilateral concerns.
President Trump has emphasized the necessity of the tariffs as a measure to address issues related to illegal immigration and drug trafficking, particularly fentanyl, entering the United States. He acknowledged that while Americans might experience "some pain" due to the tariffs, such actions are essential for national security.
Following discussions with President Sheinbaum, Trump agreed to a one-month suspension of the tariffs, during which Mexico committed to deploying 10,000 National Guard troops to the northern border to enhance security and curb illicit activities. Trump also highlighted the U.S. commitment to intensify efforts to prevent the illegal flow of high-powered weapons into Mexico.6
The tariff suspension is therefore a temporary measure, as President Trump mentioned afterwards in the oval office when asked if there is any chance that Canada or China could also get out of the tariffs after he had struck a deal with Mexico: “Well nobody is out with Mexico… We haven’t agreed on tariffs yet, maybe we will, maybe we won’t”.7
Pursuant to the above, The White House has posted a new Executive Order on Mexico, suspending the trade actions of the previous executive order until March 4: Progress on the Situation At Our Southern Border.
“During this pause, the Secretary of Homeland Security, in consultation with the Secretary of State, the Attorney General, the Assistant to the President for National Security Affairs, and the Assistant to the President for Homeland Security, shall continue to assess the situation at our southern border, as provided in section 3 of the Executive Order of February 1, 2025.
If the illegal migration and illicit drug crises worsen, and if the Government of Mexico fails to take sufficient steps to alleviate these crises, the President shall take necessary steps to address the situation, including by immediate implementation of the tariffs described in the Executive Order of February 1, 2025”.8
Had the Mexican and US president not reached an agreement (which Canada also reached hours later)9, all Mexican exports would have been subject to a 25% tariffs, on or after 12:01 a.m. Eastern Standard Time on February 4, 202510, and Mexico would have announced the content of its retaliatory plan B.
Implementation of the “pause agreement”.
Given the complexity of addressing issues related to illegal immigration and drug trafficking it is very likely that the US will maintain in place the Executive Order of February 1, 2025, pausing its implementation periodically, until sufficient action to alleviate the crisis and alleviate the threats in the southern border has occurred.11
The February 1, Executive Order, which remains in pause until March 4, 2025, states that the Secretary of Homeland Security shall inform the President of any circumstances that, indicate that the government of Mexico has taken adequate steps to alleviate the illegal migration and illicit drug crisis through cooperative “enforcement” actions. Which upon the President's determination of sufficient action to alleviate the crisis, the tariffs will be removed.12
Possible outcomes
The US requests and Mexican compromises for action on behalf of the Mexican authorities against the Mexican drug trafficking organizations, would have to be read or complemented under the Mexican policy of prevention and focusing of recourses on the causes of crime (the so called “hugs not bullets” policy).13 It is reasonable to expect that any security measures adopted by Mexico (and the US) may also provide a better environment for businesses engaged in cross border trade between Mexico and the US.
Although the content of Mexico’s retaliatory “plan B” was never made public, it is possible to expect that if at any point in the future the US decided to adopt tariffs under its EO, Mexico’s response would be at least similar to Canada’s reaction imposing tariffs, details that can be found in our Trade Alert: Canada Imposes 25% Tariffs on United States in Retaliation to Trump Tariffs
With regard to the issue of the US trade deficit with Mexico, which is not part of the EOs itself, President Sheinbaum mentioned that this was also discussed during their conference call, an issue that may be part of the discussion to be held bilaterally under the announced “negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, and Secretary of Commerce Howaward Lutnick, and high-level Representatives of Mexico (Marcelo Ebrard was named by President Sheimbaum). The deficit issue was part of the so called Phase One trade deal on January 15, 2020, under which increased imports of U.S. goods and services were expected to continue on this same trajectory for several years after 2021 and should contribute significantly to the rebalancing of the U.S.-China trade relationship.
It will be important to determine how these EOs would play under an upcoming USMCA review/renegotiation, and if they will be part of the discussions of a revised agreement in particular with regard to its “essential security” and “general exceptions” provisions contained under USMCA Chapter 32.
1 For more information, see our alert here: President Trump Imposes 25% Tariffs on Canada and Mexico, and 10% Tariffs on China | White & Case LLP
2 Executive Order of February 1, 2025: “Imposing Duties to Address the Situation at Our Southern Border”.
3 See Announcement from the President of Mexico
4 See Mexico and US posts on X and press conference of the Mexican President here.
5 This unusual threat consists on the “failure of Mexico to arrest, seize, detain, or otherwise intercept DTOs, other drug and human traffickers, criminals at large, and illicit drugs”. See EO para. 9.
6 While both statements reflect a mutual agreement to suspend the tariffs and enhance border security, President Trump's remarks are centered on enforcement and national security imperatives, whereas President Sheinbaum's comments focus on bilateral cooperation and shared responsibility. President Sheimbuan in its daily morning press conference, mentioned that President Trump had also agreed to address the ilegal traficking of high-powered weapons into Mexico.
7 Bloomberg: Trump Delays Mexico Tariffs by a Month After Sheinbaum Talk
8 Progress on the Situation at Our Southern Border Section 3 b) and c)
9 See NBC News: Trump and leaders of Canada and Mexico say tariffs will be delayed one month after talks. See Progress on the Situation at Our Northern Border
10 For more details, see our alert here: President Trump Imposes 25% Tariffs on Canada and Mexico, and 10% Tariffs on China | White & Case LLP
11 See Progress EO Section 2. Immediate Steps: “I have determined that the Government of Mexico has taken immediate steps designed to alleviate the illegal migration and illicit drug crisis through cooperative actions. Further time is needed, however, to assess whether these steps constitute sufficient action to alleviate the crisis and resolve the unusual and extraordinary threat beyond our southern border”.
12 See. Sec 3 a) and b) of the EO.
13 See Mexico’s National Security Strategy
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