On March 3, the Trump administration announced that previously delayed tariffs on U.S. trading partners Canada and Mexico would in fact take effect March 4. The update came after a month-long pause on the 25% tariffs that President Trump had previously threatened. After the White House received a call from Mexican President Claudia Sheinbaum, the Trump administration once again paused the tariffs on Canada and Mexico, allowing exemptions for products that are qualified under the United States-Mexico-Canada Agreement (USMCA), a trade agreement introduced and signed by President Trump in his first term of office. The USMCA replaced the North American Free Trade Agreement (NAFTA) on July 1, 2020.
The short-lived implementation of tariffs came after Sheinbaum and Canadian Prime Minister Justin Trudeau committed to providing additional border security, terms that Trump had asked to be met. Additionally, leaders in both countries claim the current administration’s actions violated the USMCA.
On March 6, the Trump administration announced the most recent pause on the wide-sweeping tariffs, with no explicit expiration date being given at this time. Trump also added that he still intends to impose reciprocal tariffs starting April 2.
The continually evolving trade war is leaving many in the propane industry with questions about how tariffs are impacting their own business. This confusion is reflected on a broad scale in the stock market, with the stock market S&P 500 dropping 2% since the most recent string of back-and-forth tariff announcements.
On March 5, the National Propane Gas Association (NPGA) hosted an informational webinar on the then-current status of tariffs. When speaking about the concept of reciprocal tariffs, legal expert Micah Myers said the following:
“It’s a massive change in the way the U.S. does tariffs. Since World War II, we’ve had the concept that tariffs are MFN [most favored nation]. Products are subject to the same rate, regardless of which country they’re coming from. This would be a real sea change in the way U.S. tariffs work and essentially a reversion to the pre-World War II way tariffs were done.”
Speaking about the recent update for USMCA exemptions in an NPGA Member Alert, NPGA stated that “the USMCA rules of origin are fairly complicated and can be found in 19 CFR Part 182 Appendix A.”
NPGA also advised concerned businesses to maintain their own legal counsel during this time in order to best determine their course of action and whether their products meet USMCA stipulations.
Update (05/02):
After a hopeful back-and-forth between President Trump and Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudaeu, the president resolved to maintain the trade agreement USMCA with both countries, a trade agreement first signed by President Trump in November 2018.
Since April 9, both countries have faced 25% ad valorem tariffs on goods that are not compliant with USMCA.
Additionally, many countries now face the threat of looming reciprocal tariffs, meaning tariffs that directly match the tariffs other countries have in effect on U.S. imports. Many of these tariffs have been delayed until July 9.
U.S.-China trade relations has been in the spotlight for the past month, with each country progressively escalating the trade war. On March 24, the U.S. administration threatened 25% tariffs on Chinese imports, a rate that was dwarfed April 10 at a total rate of 145%. However, the specific tariff rate depends largely on the product.
Regardless of the specific rate that any given product faces or will face in the future, the icy relations between the U.S. and China is leaving many industries in a state of uncertainty with questions about how to plan around price hikes and possible supply shortages.
According to John G. Murphy, senior vice president of the U.S. Chamber of Commerce, "Tariffs on manufacturing inputs that are not domestically available are especially problematic for American manufacturers. When a product is not otherwise readily available except by import, the manufacturer has little recourse but to pay the tariff. This immediately increases the cost of making goods here in America."
This seems to be reflected in the latest quarterly gross domestic product (GDP) report, where the GDP fell in value by 0.3%. Analysts credit the surge in imports for the decline.
For more resources on how to navigate tariffs in the propane industry, take a look at NPGA’s newly created Tariff Information Center.
BPN will continue to provide updates on tariffs in the coming weeks.
