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7 April 2025

‘Reciprocal’ tariffs and a rising tide of trade barriers: What businesses should know

By Stella Nalwoga, Tobias Dolle, and Paolo R. Vergano

On 2 April 2025, US President Trump’s signed an Executive Order announcing a baseline 10% tariff on all countries, which took effect on 5 April 2025, and higher “country-specific reciprocal tariffs”, which incorporate the baseline 10% duty, to be imposed from 9 April 2025, on countries with which the US has the largest trade deficits. The US Administration linked these measures to the 2025 National Trade Estimate Report on Foreign Trade Barriers (hereinafter, Trade Barriers Report), published on 31 March 2025 by the Office of the United States Trade Representative (hereinafter, USTR). The report follows the US’ 2025 Trade Policy Agenda and 2024 Annual Report, which was published in February 2025 and laid out the US Administration’s plan to rebalance US trade.

This article reviews the recent US measures, assesses the compatibility of ‘reciprocal’ tariffs with the rules of the World Trade Organization (hereinafter, WTO), and reviews how businesses and governments work towards formulating their response to mitigate the impact of the reciprocal tariffs.

Tariffs as a trade policy tool

Basing his actions on the US’ International Emergency Economic Powers Act of 1977, US President Trump announced ‘reciprocal’ tariffs ranging between 10% and 50% in order to “rebalance global trade flows”. More concretely, the Executive Order justifies the reciprocal tariffs as a response to “large and persistent annual U.S. goods trade deficits”, which it attributes to a lack of reciprocity in trade relationships with trading partners, manifested in unequal tariff rates, non-tariff barriers, and foreign economic policies that affect demand or market access for US exports, as further explained in the USTR’s Trade Barriers Report.

While the US has chosen a unilateral path, the WTO framework does provide several avenues to implement tariff increases on trade in goods. However, such actions must be consistent with a number of key WTO Agreements, starting with the General Agreement on Tariffs and Trade (hereinafter, GATT). All WTO Members have established, on the basis of Article II of the GATT, their respective Schedule of Concessions, which are the result of tariff negotiations with the other WTO Members and reflects the tariff concessions that a WTO Member has committed to apply as a maximum ceiling (i.e., the ‘bound rates’). Section I of each of these Schedules sets out the most-favoured-nation (hereinafter, MFN) concessions of the respective WTO Member, referring to the commitment not to raise the ordinary Customs duties above the limits set therein for each tariff line and Customs code.

The Customs duties in these Schedules, once agreed upon, become “bound”, which means that the WTO Member that has conceded them, may not apply ordinary Customs duties in excess of the bound rates. In this sense, the ‘reciprocal’ tariffs announced by the US Administration that exceed the bound tariff-rates of the US are clearly inconsistent with WTO rules. Additionally, selective tariff increases that discriminate between countries violate the WTO’s non-discrimination principle under Article I:1 of the GATT. At the same time, WTO rules under Article XXVIII:1 of the GATT 1994 offer a legitimate framework for modifying tariff concessions through negotiation and compensation. While not politically expedient, a WTO-consistent renegotiation could have provided a more stable, rules-based path forward, preserving the credibility of the multilateral trading system at a time when it is needed most.

As a justification, the Executive Order states that the lack of reciprocity in trade relationships with trading partners had weakened the US manufacturing base and rendered the US defense-industrial base “dependent on foreign adversaries”, thus, allegedly constituting a national emergency that the reciprocal tariffs are to address. While Article XXI(b)(iii) of the GATT allows a WTO Member to take an otherwise WTO-incompatible measure, “which it considers necessary for the protection of its essential security interests”, and “taken in time of war or other emergency in international relations”, it is highly questionable whether the US trade deficit would indeed be considered a risk to the US’ national security.  

The USTR’s Trade Barriers Report and its relevance

The Trade Barriers Report focuses on the US’ largest export markets, reviewing nearly 60 trading partners, including the EU. The report defines trade barriers as “government laws, regulations, policies, or practices—including non-market policies and practices—that distort or undermine fair competition”, including “measures that protect domestic goods and services from foreign competition, artificially stimulate exports of particular domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights”. These trade measures are classified into 14 categories and include ‘traditional’ trade barriers, such as import policies (e.g., tariffs and other import charges, quantitative restrictions, import licensing), technical barriers to trade, sanitary and phytosanitary measures, but also digital trade barriers, trade in services-related barriers, and market access restrictions related to the failure of governments to address labour-related concerns, such as “discrimination in respect of employment or occupation”, as well as environmental protection policy measures.

The Trade Barriers Report is particularly noteworthy given the potential imposition by the US Administration of further sector-specific additional tariffs. Such sector-specific tariffs are already in place for steel and aluminium, as well as for automobiles and automobile parts, and may be forthcoming for other sectors, such as pharmaceuticals and lumber. Notably, the Executive Order indicates that the ‘reciprocal’ tariffs would remain in effect until the US Administration determines that the underlying conditions leading to their imposition, have been “satisfied, resolved, or mitigated”. Therefore, the Trade Barriers Report can offer valuable insights to governments seeking to negotiate with the US on what concessions could be made to address the ‘reciprocal’ tariffs and potentially to avert further sector-specific tariffs.

Preparing for compliance and possible retaliation

While many governments around the world have initially signalled a preference for negotiation over escalation, the risk of retaliatory measures remains high. In a statement, the President of the European Commission Ursula von der Leyen called the tariffs “a major blow to the world economy” and underlined the EU’s ongoing engagement with the US Administration. China has taken a more immediate step by already announcing an additional tariff of 34% on all imports into China originating from the US to be imposed from 10 April 2025. The UK launched a formal process to assess options for retaliation, inviting businesses’ input on possible responses and publishing an indicative list of goods imported from the US that may be considered in a future UK response. These developments suggest a growing risk of unfortunate ‘tit-for-tat’ trade actions, with potentially significant consequences for businesses and consumers.

While the reciprocal tariffs would apply in addition to “any other duties, fees, taxes, exactions, or charges applicable to such imported articles”, the Executive Order provides for several exemptions to the tariffs. These exemptions concern goods already subject to existing tariffs on steel, aluminium, and automobiles, and selected products listed in Annex II to the Executive Order, including pharmaceuticals, semiconductors, copper, critical minerals, and energy products, as well as goods that may later become subject to tariffs under Section 232 of the US’ Trade Expansion Act. Imports into the US from Canada and Mexico will continue to be subject to additional 25% tariffs that have been imposed on 4 March 2025, while goods that fall within the scope of the United States-Mexico-Canada Agreement (hereinafter, USMCA) continue to receive preferential treatment. Businesses importing into the US non-USMCA compliant energy products and potash from Canada will be subject to the additional 10% tariff.

For business with supply chains in US, the ‘reciprocal’ tariffs will “apply only to the non-U.S. content of a subject article, provided at least 20 percent of the value of the subject article is U.S. originating”. In this regard, the Executive Order defines ‘US-content’ as “the value of an article attributable to the components produced entirely, or substantially transformed in, the United States”. This exemption offers an opportunity for businesses to reassess supply chains, align with the origin determination rules, and reduce the financial impact of the new tariffs. Engaging expert guidance to make best use of the exemptions can help minimise exposure to the additional tariffs.

Way forward

In this uncertain trade landscape, businesses should proactively assess their exposure to new tariffs and engage closely with business associations and governments to help shape responsive trade negotiations. Accurate US-content determination and full compliance with Customs and trade rules will be critical to navigating the continuously shifting regulatory environment. Above all, a coordinated, rules-based approach arguably remains the most effective path to mitigate disruption and restore legal certainty and commercial predictability in global trade.

For any additional information or legal advice on this matter, please contact Paolo R. Vergano

Towards a more sustainable future? The Government of Viet Nam unveils the National Action Plan for Circular Economy Implementation by 2035

By Alya Mahira, Caitlynn Nadya, and Paolo R. Vergano

On 23 January 2025, the Government of Viet Nam unveiled its National Action Plan for Circular Economy Implementation by 2035 through Decision No. 222/QD-TTg (hereinafter, Circular Economy Action Plan). The Circular Economy Action Plan details a roadmap towards a more circular economy in Viet Nam, focusing on the development of a sustainable production and consumption system that effectively utilises natural resources, while maximising the use of recycled materials. The Circular Economy Action Plan identifies several priorities and outlines specific circular economy targets to be achieved by 2030 and 2035, respectively.

This article discusses the Circular Economy Action Plan, explores the broader circular economy developments across the Association of Southeast Asian Nations (hereinafter, ASEAN), and highlights potential challenges related to the implementation of measures towards a more circular economy.

From a linear economy to a more circular economy

Viet Nam’s economic activities have primarily relied on a linear economy, following the “take-make-dispose” model, which results in significant waste. In 2024, Viet Nam generated approximately 60,000 tonnes of daily waste and, according to 2023 data, only 10% of waste was properly treated and recycled. To address this issue, the Government of Viet Nam has been progressively transitioning towards a more circular economy, as reflected in, inter alia: 1) Law No. 72/2020/QH14 on Environmental Protection, which requires ministries to incorporate circular economy considerations into their respective planning strategies; 2) Decree No. 08/2022/ND-CP, which outlines the criteria, roadmap, and mechanisms for encouraging circular economy development; and 3) Decision No. 687/QD-TTg, which approved a scheme for circular economy development and assigned specific tasks for government agencies, including to “review and develop policy framework and legal affairs in order to facilitate circular economy development”.

Unpacking the Circular Economy Action Plan: Objectives, key sectors, and programmes

The Circular Economy Action Plan outlines Viet Nam’s circular economy objectives to be achieved by 2030, namely to: 1) Reduce the exploitation and use of non-renewable resources and water resources, such as by striving to reach a share of at least 47% of renewable energy in the overall primary energy consumption; and 2) Focus on, inter alia, enhancing economic aspects and increasing benefits of circular economy implementation, including by applying circular economy principles in business production. By 2035, Viet Nam aims to, inter alia, position itself as a key hub for innovation, the provision of technology, equipment, products, services, and mobilisation of investment capital for circular economy within the ASEAN Economic Community (AEC).

The Circular Economy Action Plan targets nine prioritised sectors and fields for circular economy implementation by 2035, including: 1) Agriculture, forestry and aquaculture; 2) Energy; and 3) Construction. The focus of circular economy implementation varies across sectors and fields. With respect to energy, for instance, emphasis is placed on the development of renewable electricity sources, such as hydropower and solar power. The Circular Economy Action Plan recognises that implementation requires coordination among various government agencies, each being tasked according to its respective functions.

The Circular Economy Action Plan also outlines specific tasks and timelines, including those related to trade. The tasks include: 1) “Review, amend and issue mechanisms, policies, laws, and penalties to encourage [circular economy] implementation” (2025-2026); 2) “Encourage and enhance the consumption of products and services that meet [circular economy] criteria” (2025-2035); 3) “Support in the implementation of ecological design towards meeting [circular economy] criteria” (2025-2027); and 4) “Support the development of the secondary raw material market; the market for products and goods generated from [circular economy] application”.

In general terms, trade may provide economic incentives to increase circularity within a country and among its industries, thereby reducing environmental impacts. Trade can also provide opportunities for businesses to obtain the necessary skills, equipment, and technology to implement circular business models. By outlining concrete actions to develop markets for circular economy goods and services, the Circular Economy Action Plan could incentivise industries to adopt circular business models and eco-friendly design principles, increase the demand and cross-border trade of sustainable products, and facilitate access to markets for secondary raw materials.

ASEAN’s transition to a more circular economy

In ASEAN, a more circular economy was highlighted as a priority during the ASEAN-EU High-Level Dialogue on Environment and Climate Change in July 2019. On 21 October 2021, ASEAN adopted the Framework for Circular Economy for the ASEAN Economic Community (hereinafter, Circular Economy Framework), which outlines an ambitious long-term vision for a circular economy. The Circular Economy Framework highlights the role of trade in ASEAN’s circular economy transformation, and focuses on five strategic priorities, including “Standard harmonisation and mutual recognition of circular products and services” and “Trade openness and facilitation in circular goods and services”.

Despite the adoption of the Circular Economy Framework and national plans related to circular defined by several ASEAN Member States, including Indonesia and Cambodia, the level of circular economy development across ASEAN still varies, partly due to the lack of a concrete, coordinated regional approach. For example, while  addressing plastic pollution is a key issue that is frequently highlighted, ASEAN has yet to develop harmonised product and packaging design standards for plastic circularity.

The formulation and coordination of policies at the regional level is crucial for enabling individual ASEAN Member States, including Viet Nam, to achieve an inclusive circular economy. ASEAN Member States should consider implementing the strategic priorities outlined in the ASEAN Circular Economy Framework, including by harmonising standards for circular products and services, aligned with relevant international standards and practices, as well as developing related mutual recognition agreements. The harmonisation of standards is a key element for trade facilitation, promoting interoperability and ensuring product assurance across ASEAN markets, which would reduce costs for businesses and enhance market confidence. ASEAN Member States could also start removing unnecessary barriers to trade, investment, and innovation in sustainable goods and services, which would facilitate the diffusion of the best available circular technologies.

Possible challenges and way forward

The implementation of circular economy approaches in Viet Nam faces various challenges that would need to be addressed, such as limited awareness, a fragmented adoption of circular economy models across sectors, inadequate infrastructure, and limited investments. In addition to effective coordination between government agencies, emphasis should be placed on: 1) Adopting an inclusive approach to policymaking by facilitating active participation by all relevant stakeholders; 2) Developing incentives to encourage the private sector to adopt circular economy practices; and 3) Engaging with domestic and international stakeholders to secure investments for circular economy initiatives, particularly through public-private partnerships.

If properly implemented, Viet Nam’s Circular Economy Action Plan could enhance resource efficiency, strengthen economic resilience, and promote sustainable growth. At the same time, a more coordinated approach at ASEAN level would deliver important benefits for businesses, which are currently obliged to navigate different approaches in the various ASEAN Member States, complicating compliance.

For any additional information or legal advice on this matter, please contact Paolo R. Vergano

The European Commission proposes new labelling requirements for “no/low-alcohol” wine to boost Europe’s struggling wine sector

By  Amanda Carlota, Ignacio Carreño García  and  Tobias Dolle

On 28 March 2025, the European Commission (hereinafter, Commission) presented its Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 1308/2013, (EU) 2021/2115 and (EU) No 251/2014 as regards certain market rules and sectoral support measures in the wine sector and for aromatised wine products. The purpose of the proposal is to support the EU’s struggling wine sector, which faces multiple challenges, such as declining consumption, changing consumer preferences,  climate change, geopolitical tensions, and uncertain export markets. Notably, the Commission acknowledges the increasing popularity of “no/low-alcohol” wines and aims at harmonising the labelling of such wines to make it easier for consumers seeking alternatives to traditional wines with higher alcohol content.

This article reviews the proposed rules, which would allow the wine sector to benefit from this new consumer demand with dedicated labelling and marketing tools.

The increased demand for “no-alcohol” and “low-alcohol” wine

Concerns surrounding the health impacts of alcohol have contributed to a significant decrease in consumption in recent years. According to data gathered by the International Organisation of Vine and Wine (hereinafter, OIV), in 2023, global wine consumption was at the lowest level since 1996. In 2023, within the EU, which accounted for 48% of global wine consumption, the OIV observed an overall reduction in wine consumption in “major traditional wine-producing countries”, such as France, Germany, and Italy. At the same time, there has been growing demand for no/low-alcohol beverages. According to research by analytics firm International Wine and Spirits Research, the global no/low-alcohol market is expected to grow by 4% annually from 2024 to 2028, with the no-alcohol segment growing by 7% annually in the same period. 

The current regulatory framework

Lower-alcohol wines are already subject to EU rules. In 2021, Regulation (EU) 2021/2117 of the European Parliament and of the Council amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products, (EU) No 1151/2012 on quality schemes for agricultural products and foodstuffs, (EU) No 251/2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatised wine products and (EU) No 228/2013 laying down specific measures for agriculture in the outermost regions of the Union provided new rules for the EU’s wine sector, including mandatory labelling requirements regarding the nutritional information and the list of ingredients of wine products. These rules took effect on 8 December 2023.

Notably, Regulation (EU) 2021/2117 harmonised the use of the terms “dealcoholised” and “partially dealcoholised”. “Dealcoholised” is to be used if the actual alcoholic strength of the product is no more than 0.5% alcohol by volume (hereinafter, ABV), while “partially dealcoholised” is to be used if the actual alcoholic strength of the product is above 0.5% ABV and below the minimum alcoholic strength of the category before dealcoholisation, as defined in Annex VII to Regulation (EU) No 1308/2013. Pursuant to Regulation (EU) No 1308/2013, “dealcoholised” and “partially dealcoholised” wine must be identified as such in the labelling and presentation of wine products marketed in the EU and for export.

New terms: “0,0%”, “alcohol-free”, “alcohol-light”, and “produced by dealcoholisation”

The Commission’s proposal foresees, inter alia, to establish clear marketing rules for lower-alcohol wine products, which would provide “consumers the opportunity to reduce their alcohol intake while still enjoying wine”. With its proposal, the Commission intends to refine the terminology for no/low-alcohol wines by harmonising the use of terms that “are widely used but regulated differently in various Member States”. More specifically, the Commission proposes to require the use of the following terms for wines that meet the criteria:

“0,0%”If the actual alcoholic strength of the product does not exceed 0,05% ABV
“alcohol-free”If the actual alcoholic strength of the product does not exceed 0,5% ABV
“alcohol-light”If the actual alcoholic strength of the product is above 0,5% ABV and is at least 30% below the minimum actual alcoholic strength of the category before dealcoholisation
“produced by dealcoholisation”If a dealcoholisation treatment has been applied to the totality or to part of the product

Therefore, if the Commission’s proposal were adopted, it would become mandatory for producers of wines with an actual alcoholic strength that falls within the thresholds provided, or to which a dealcoholisation treatment had been applied, to include the applicable terms in the labelling of such wines. The new labelling requirement is intended “to better inform the consumer of the characteristics and production methods”, thereby “allowing the Union wine sector to benefit from this development in consumer demand while maintaining high quality production standards”.

Potentially misleading claims?

There are concerns that the proposed labelling requirements for “alcohol-light” wine could potentially mislead consumers about the alcoholic strength of the wine. The “alcohol-light” label is to be used if the actual alcoholic strength of the product is above 0,5% ABV and “at least 30% below the minimum actual alcoholic strength of the category before dealcoholisation”. Under Regulation (EU) No 1308/2013, the minimum actual alcoholic strength for standard wine generally ranges from 8,5 to 9% ABV, depending on the zone in which the grapes were harvested. Thus, under the proposed rules, a wine labelled “alcohol-light” could contain as much as 6,3% ABV (30% below 9% ABV), an amount that is actually higher than that contained in other alcoholic beverages, notably beers, which typically contain 2 to 6% ABV.

Too trade-restrictive?

Mandatory labelling requirements for certain no/low alcohol wines may be considered “technical regulations” within the meaning of the World Trade Organization’s (hereinafter WTO) Agreement on Technical Barriers to Trade (hereinafter, TBT Agreement). Under the TBT Agreement, WTOMembers have the obligation to notify other WTO Members about draft measures that may have a significant effect on trade. Given the trade impact of new labelling requirements on alcoholic beverages, the EU would, arguably, be required to notify the proposal to the WTO TBT Committee, allowing other WTO Members to comment on it.

If the EU co-legislators were to adopt the Commission’s proposal, the impact of such labelling requirements on the EU’s obligations under international trade rules must be considered. Wine exporters from third countries would be obliged to create specific labels for their EU exports of no/low alcohol wines. Article 2.2 of the TBT Agreement requires WTO Members to ensure that technical regulations “are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade” (see Trade Perspectives, Issue No. 17 of 19 September 2022). In case of a dispute, the EU would have to demonstrate that the new labelling requirements not be “more trade-restrictive than necessary to fulfil a legitimate objective“. Such legitimate objectives are, inter alia, the prevention of deceptive practices and the protection of human health or safety.

Positive industry response to the proposal

The wine industry’s response to the proposal has generally been positive. The Comité Européen des Entreprises Vins (hereinafter, CEEV) has emphasised that the proposed rules, if adopted, would more easily enable consumers to make more informed choices. The CEEV considers that, while no/low-alcohol wines currently represent “a small fraction of the market”, the market is continuously growing, which means that wine producers must be able to “propose a qualitative wine-based alternative” to consumers. The CEEV notes that the Commission’s proposal to facilitate the valorisation of dealcoholised and partially dealcoholised wines would “allow a harmonised and better presentation of these products” and, therefore, would provide “good support for wine companies willing to enlarge their offer to consumers”.

Next steps

The Commission’s proposal will now be submitted to the Parliament and the Council of the EU for consideration. Once the co-legislators have agreed their respective positions, inter-institutional trilogue negotiations can commence. Interested stakeholders, such as economic operators in the wine sector, should closely follow the related developments and contribute to the legislative process and related public debate.

For any additional information or legal advice on this matter, please contact Ignacio Carreño Garcia

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Amanda Carlota, Ignacio Carreño García, Tobias Dolle, Alya Mahira, Caitlynn Nadya, Stella Nalwoga, and Paolo R. Vergano contributed to this issue.

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