Executive summary

This edition of Trade Talking Points provides updates on the United States (US) trade policy, the signing of the European Union (EU) - Mercosur agreements, the United Kingdom's (UK's) improved Rules of Origin under the Developing Countries Trading Scheme and global trade developments on Canada-China strategic partnership.

Latest US trade policy announcements

Tariffs imposed following Section 232 investigation into semiconductors

On 14 January 2026, the US Trump Administration imposed a 25% tariff on defined advanced computing chips, following the completion of the Section 232 Trade Expansion Act 1962 (Section 232) investigation into semiconductors, semiconductor manufacturing equipment and their derivative products.

According to the findings in the report presented by the US Department of Commerce (Commerce), imports of these products occur in quantities and circumstances that threaten to impair the national security of the US.

The report also found that the US capacity to manufacture semiconductors is too low to meet projected national defense needs or to match the demand and requirements of industry.

As a result, Commerce has recommended a "two-phase plan" to overcome the issue.

• Phase 1:
• The US will impose a 25% tariff on "covered products" (named categories of semiconductors that are not intended for use in the US supply chain).
• The 25% tariff will not apply when equipment is imported to support the buildout of the US domestic technology supply chain.
• The US will continue negotiations with foreign trade partners to strengthen the domestic industry.
• Phase 2:
• After the US has finished negotiations with foreign trade partners, the US will consider broader tariffs on semiconductors.
• These broader tariffs will be offset to enable companies investing in US semiconductor production and certain parts of the US semiconductor supply chain to obtain preferential tariff treatment.

The 25% tariff became effective for goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:00 a.m. Eastern Standard Time on 15 January 2026. (See also EY Global Tax Alert, US Section 232 proclamation imposes 25% tariff on certain semiconductors, dated 15 January 2026.)

Policy steps imposed following Section 232 investigation into critical minerals

On 14 January 2026, the US Trump Administration released the findings of its Section 232 investigation into processed critical minerals and their derivative products (PCMDPs).

According to the findings in the report presented by the Department of Commerce, imports of these minerals and products occur in such quantities and circumstances that they threaten to impair the national security of the US.

The report also found that the US is overly dependent on foreign sources for key critical minerals and lacks a secure, reliable supply chain for them.

The report highlighted a weakened domestic manufacturing base for PCMDPs and outlined instances in which the US maintained domestic mining capacity — for cobalt, nickel and rare earth elements — but lacked the domestic processing capacity to avoid downstream net-import reliance.

As a result of the findings, Commerce has recommended that the US government:

• Negotiate agreements with foreign trading partners to ensure the US has adequate critical mineral supplies and to mitigate the supply chain vulnerabilities as quickly as possible
• Consider future import restrictions (including tariffs) if satisfactory agreements are not reached in a timely manner
• Consider minimum import prices for specific types of critical minerals

US-Taiwan trade deal

On 15 January 2026, the US and Taiwan announced an agreement to ensure that US tariffs on Taiwanese goods do not exceed 15%, and existing Section 232 tariffs on automotive parts and timber, lumber and wood derivate products do not exceed 15%.

The agreement contained an investment commitment to support at least US$250b in new Taiwanese investment in US-based semiconductor and technology manufacturing.

In return, the US will apply a 0% tariff to defined Taiwanese-originating imports — such as generic pharmaceuticals, aircraft components and select natural resources — while also offering favorable treatment to Taiwanese chipmakers expanding production on American soil.

Latest EU trade policy announcements

Signing of EU-Mercosur agreement

On 17 January 2026, the EU and Mercosur signed the EU-Mercosur Partnership Agreement (EMPA) and an Interim Trade Agreement (ITA), despite opposition from France, Poland, Austria, Ireland and Hungary. Mercosur is a trading bloc made up of Argentina, Brazil, Paraguay and Uruguay.

The agreements will remove over 90% of tariffs on traded goods.

It is expected that once the EMPA enters into force, it will support the simplification of customs procedures, facilitate exports, allow EU firms to bid for public contracts on equal terms with Mercosur companies, and provide preferential access to defined critical raw materials and green goods.

Before both agreements enter into force, the ITA and EMPA will follow separate ratification procedures within the EU. There is no confirmed or expected timeline for entry into force.

The ITA is a limited-scope agreement drafted to enable faster ratification and ensure the benefits of increased trade and investment liberalization occur while the broader EMPA is negotiated.

Once the EMPA enters into force, the ITA will expire.

Latest UK trade policy announcements

Improved Rules of Origin under the Developing Countries Trading Scheme

The UK has implemented improvements to the Rules of Origin (RoO) under the Developing Countries Trading Scheme (DCTS), making it easier for developing countries to qualify for preferential access when exporting to the UK.

New regional cumulation groups have been created for Africa and Asia, allowing businesses in DCTS countries to source inputs from a wider range of countries. RoO for exports of garments have also been made more flexible for Enhanced Preference tier countries (eligible Low-Income and Lower-Middle Income Countries).

Since 1 January 2026, businesses in the UK and DCTS partner countries can benefit from these changes when importing goods under the scheme. Goods eligible for the scheme that were shipped or in customs warehousing before 1 January 2026 can still receive DCTS preference as long as they are declared for free circulation on or after 1 January 2026 and accompanied by a valid proof of origin dated on or after 1 January 2026.

Latest global trade developments

Canada-China strategic partnership

On 16 January 2026, Canada and China announced a Preliminary Agreement-in-Principle to Address Economic and Trade Issues as part of their renewed strategic partnership.

Canada's Prime Minister, Mark Carney, visited Beijing to launch the partnership, and the two countries agreed to deepen cooperation in energy, clean technology, climate competitiveness and investment, with a focus on expanding two-way energy collaboration and accelerating Chinese investment in Canada.

As part of an effort to strengthen domestic auto-manufacturing, Canada will allow up to 49,000 Chinese electric vehicles (EVs) per year into its market under the most-favored-nation 6.1% tariff rate, a move expected to spur joint-venture investment and expand Canada's EV supply chain.

The partnership also includes significant steps to lower trade barriers in agri-food sectors, such as China reducing its tariffs on Canadian canola seed to approximately 15% and removing anti-discrimination tariffs on other specific Canadian agricultural goods from 1 March 2026 to the end of 2026.

Canada is also extending its previous remission measures for certain Chinese steel and aluminum products that are in low domestic supply. The remission measures now cover more product categories, including several types of steel, aluminum and related products, and will run until the end of 2026. The expanded list will take effect by 1 March 2026 but will be applied retroactively to 1 January 2026.