Navigating Reciprocal and Derivative Tariffs: A Practical Guide for Global Trade Compliance

Global trade has become much more unstable in recent times. Reciprocal and derivative tariffs are rewriting the rulebook and presenting new challenges for global enterprises everywhere. For compliance officers, global sourcing strategists, and supply chain leaders, there’s more to it than just understanding regulations – you must know how to adapt sourcing strategies, ensure correct HTS codes, and build resilience against unfair trade practices as well. In short, you have to be nimble, flexible, and informed.  

What follows is a detailed, actionable roadmap through the maze of reciprocal and derivative tariffs and their implications for global trade management. Along the way, you’ll find practical tips, scenarios, and steps you can take today to turn compliance challenges into opportunities. 

Decoding the new tariff environment 

With changes to the global trade landscape occurring almost daily, it’s important to get a good grasp on the concepts involved and how everything shifts when new regulations are introduced. So, let’s dive into the ins and outs of reciprocal and derivative tariffs, and harmonized tariff schedule (HTS) codes. 

What are reciprocal tariffs? 

Reciprocal tariffs are, in essence, a tit-for-tat response that aims to rebalance trade relationships. If Country A charges a high tariff on US goods, the US reciprocates with a similar duty on Country A’s products. Their calculation typically follows the trade deficit formula: 

Reciprocal duty rate = (US Trade deficit with the country ÷ Country’s exports to the US) × 100 

Suppose the US runs a $92 billion deficit with Vietnam, which exports $200B of goods to America. The resulting reciprocal tariff? A whopping 46%. Such a straightforward formula can feel more like a sledgehammer than a scalpel, but it’s the new normal for many import scenarios. 

What are derivative tariffs? 

Derivative tariffs extend to downstream products containing targeted materials (for example, steel or aluminum). A steel bolt, a dining table with steel legs, or automotive parts using Chinese steel might face Section 232 derivative tariffs, even if they’re assembled elsewhere. It aims to prevent the circumvention of the primary tariffs by taxing downstream products.

Derivative tariffs seek to level the playing field for domestic producers and applies the tariff to the known content value. If unknown or can’t be determined, the tariff is applied to the entire value of the product, making close collaboration with suppliers so important. Combined with secondary tariffs that penalize third parties trading with sanctioned regions, it can start to feel like you’re playing 3-dimensional chess with the rules changing mid-game. 

HTS codes and their pivotal role 

With these new measures, accurately identifying and applying the correct HTS codes for each layer of tariff is crucial. A single import transaction may require multiple HTS codes:  

• The primary product code 

• Additional codes for Section 301 (China-specific duties), Section 232 (steel/aluminum/derivative tariffs), Section 201 (safeguards), and even retaliation-based duties 

Misclassifying could leave you vulnerable to overpayment, costly delays, or compliance headaches. 

Why reciprocal and derivative tariffs matter 

Tariffs have long been a part of the global trade toolkit, primarily as a means for governments to address what are perceived as unfair trade practices or balance trade deficits. However, 2025 ushered in a whole new era as the latest wave of reciprocal tariffs and derivative duties landed with historic reach and intensity. US policies triggered swift retaliatory measures from trading partners around the world, touching virtually every major industry. 

For example, in April 2025, reciprocal tariffs jumped to 46% for Vietnam, 20% for the European Union, up to 125% for China, and 10% as a new baseline* across most imports. These numbers aren’t just statistics; they’re tied to real impacts on margin, sourcing, and compliance complexity for companies navigating the rough seas of global trade.

*Some of these figures may be out of date at the time of reading, as the tariff landscape is shifting quickly. 

Hypothetical example of a derivative tariff

Suppose your company imports furniture into the US. The dining table is assembled in Mexico using Brazilian wood and Chinese steel legs:

• Customs will rule the country of origin as Mexico, but Section 232 derivative tariffs are triggered by the steel legs from China.
• US Customs expects to see both codes on the entry documentation:
  • The base code for the table
  • Derivative code for the steel, applying the 25% duty only to that portion
• To remain compliant the company would need to:
  • Document the origin for all materials
  • Show where the final transformation happens
  • Provide a Bill of Materials (BOM), if requested
  • Apply the USMCA rules, if applicable

This highlights the need for detailed material traceability. 

A step-by-step approach to tariffs for trade compliance professionals 

E2open has curated a quick guide to help businesses like yours ensure compliance and avoid any unnecessary risks or hiccups due to tariffs.  

Step	Action
Step 1: Identify impacted products and quantify impact	Review your imports and identify items that are subject to tariffs, reciprocal tariffs, secondary tariffs, or retaliatory duties Qualify the tariff liabilities of each product Use compliance technology platforms that allow you to perform rapid product database analysis
Step 2: Classify products accurately with all secondary HTS codes	Assign and verify both the main HTS code and all applicable secondary codes for special duties
Step 3: Optimize and mitigate tariff exposure	Tariff engineering: Redesign products to shift them into a lower-tariff classification (e.g., substituting aluminum or plastic components where possible) Country of origin planning: Investigate shifting production and production locations to nations with favorable free trade agreements and lower tariff risk Supply chain diversification: Expand your supplier and manufacturing base to spread risk and cost Duty drawback programs: Claim refunds on duties paid for importing goods that are later exported Customs valuation optimization: Exclude non-dutiable charges where possible to reduce taxable base Leverage trade agreements: Identify applicable FTAs on qualifying goods and ensure compliance with rules of origin to qualify for lower or no tariffs under USMCA, CAFTA-DR, and others Utilize FTZs and bonded warehouses: Defer or reduce duties through creative inventory management Contract negotiation and supplier agreements: Assess the liability for tariff increases to help negotiate tariff burden-sharing with suppliers
Step 4: Build robust internal processes	Regularly monitor tariff changes and regulatory updates Educate staff on the evolving regulatory environment Proactively engage with customs authorities to clarify uncertainties and ensure compliance

Building a future-proof sourcing and compliance strategy 

It pays to remember the old adage, “Don’t put all your eggs in one basket.” For global trade managers, a diversified, transparent supply chain and the ability to rapidly adapt products or sources are your lifeline in this high-stakes game. 

What can you do right now? 

• Evaluate your end-to-end sourcing chain. Who are your highest-risk suppliers? Where are your biggest exposure points according to the latest reciprocal tariffs? 

• Invest in trade compliance technology. Platforms like e2open automate HTS assignment, monitor for tariff changes, and ensure your teams stay ahead of new regulatory pitfalls. 

• Engage proactively with customs authorities. Clarify compliance uncertainties before they become compliance disasters. 

A roadmap to resilience 

Reciprocal and derivative tariffs aren’t going away. Staying compliant now requires more than just checking boxes; it’s an ongoing, cross-functional effort between sourcing, legal, finance, and compliance teams. 

When it comes to global trade compliance, fortune favors the prepared. Will you be ready when the next trade wind shifts? 

It’s time to transform uncertainty into strategy. Download our white paper, Navigating the New U.S. Import Tariff Landscape: A Comprehensive Guide for Trade Compliance Professionals, and arm yourself with the expert analysis, practical tools, and actionable steps you need to keep your company one step ahead in global trade.