Key insights
- President Trump's planned tariffs could reshape international trade dynamics — and additional announcements about tariffs could be forthcoming.
- Learn about the potential wide-ranging economic impact on key industries and how it could affect your business and operations.
- This is an evolving situation that could change daily.
Stay steady amid trade and tax policy uncertainty.
President Trump announced several new tariffs recently, which sparked intense negotiations with many affected countries — and there is the possibility of further tariff announcements on the horizon.
As we continue to monitor the situation, this comprehensive analysis delves into the potential far-reaching consequences of these tariffs and what they could mean for your business.
Visit the Tax Policy Watch page and subscribe to our tax policy newsletter to help you stay up to date and be prepared regardless of where trade and tax policy lands.
Trump administration moves to counter foreign digital services taxes
On February 21, President Trump announced measures to protect American digital and technology companies from taxes, regulations, and other actions specifically targeting them. Countries such as Canada, France, Italy, and the United Kingdom have either implemented or considered implementing digital services taxes (DSTs) affecting American companies.
To counter these actions, the U.S. government plans to impose tariffs, trade restrictions, or other measures against foreign companies to lessen the negative impact on U.S. businesses.
In the coming weeks, the U.S. trade representative, working with the Departments of Treasury and Commerce, plans to investigate DSTs and other discriminatory measures from various countries. They will assess how these measures impact American companies and recommend appropriate responses. Ultimately, the Trump administration may decide to combat foreign DSTs by imposing tariffs and trade restrictions on foreign companies.
DST impact on U.S. businesses
American businesses could experience reduced exposure to discriminatory taxes and regulations, which can enhance their competitiveness and operational efficiency. Alternatively, U.S. companies could also face increased costs due to potential retaliatory tariffs and trade restrictions.
To navigate these changes, closely monitor international trade developments and adjust your strategies accordingly. This includes diversifying supply chains, exploring new markets, and engaging in proactive lobbying efforts to influence policy decisions.
By staying informed and adaptable, your business can better manage risks and capitalize on opportunities arising from the evolving trade landscape.
With potential federal tax law changes and other legislation from the new administration, evaluating tax planning opportunities is crucial. View our Tax Policy Watch webinar covering TCJA, tariffs, and taxes.
The tariff impact on your business and beyond
How could tariffs impact the economy?
Higher prices could reduce consumer spending and slow economic growth. In addition, tariffs can disrupt supply chains and raise production costs for businesses.
This economic landscape could introduce more market uncertainty, which can lead to fluctuations in the stock market. Consider the potential impact of tariffs on the economy and your portfolio.
Which industries are most likely to be affected by Trump’s 2025 tariffs?
Tariffs can affect specific industries differently, with some potentially benefiting from reduced competition and others significantly impacted by higher costs.
The new aluminum and steel tariffs could significantly impact the construction industry, which uses fabricated structural steel and pre-stressed concrete strand, and the automotive industry, which relies on various steel and aluminum components. The manufacturing industry could also face tariff pressures.
How can I help protect my business from the impact of tariffs?
For businesses affected by the tariffs, taking immediate actions can help mitigate the impact. Consider these steps:
- Analyze both financial and physical flows of imports and exports to assess the potential total landed cost of goods against which tariffs (and baseline duties) will be applied.
- Review contracts with suppliers and customers to clarify contractual liability for duties, tariffs, and taxes, including an examination of sales terms and importer-of-record roles and responsibilities.
- Consider renegotiating supplier and customer pricing agreements and/or cost-splitting arrangements.
- Evaluate current domestic or alternative sourcing options for the impacted countries and consider country-of-origin planning to mitigate duties.
- Keep up with the latest news and developments in trade and tax policies so you can respond quickly to changes in trade regulations and tariff rates.
- Model currency exchange, direct and indirect taxes, and other drivers.
- Consider proactive steps to address margin erosion and adapt to tariffs.
Frequently asked questions about the Trump tariffs
Canada, Mexico, and China tariffs
President Trump invoked the International Emergency Economic Powers Act (IEEPA) to impose the tariffs. Enacted in 1977, the IEEPA grants the president authority to impose economic sanctions, control foreign assets, and undertake other measures to address threats to national security, foreign policy, or the economy.While the IEEPA serves as the legal authority for various export controls and sanctions-related regulatory actions, it has never before been invoked by a U.S. president to impose tariffs on imports. This unprecedented use of the IEEPA has sparked legal debates and potential challenges.
New steel and aluminum tariffs
The president's authority to impose new tariffs comes from Section 232 of the Trade Expansion Act of 1962, which allows him to take action to adjust imports if they threaten to impair national security. Additionally, Section 604 of the Trade Act of 1974 authorizes the president to embody in the Harmonized Tariff Schedule of the United States the substance of statutes affecting import treatment.
On February 13, President Trump announced a new plan to address trade imbalances by imposing reciprocal tariffs. That means if another country imposes high tariffs (and other barriers such as quotas, regulations, and licensing) on U.S. goods, the United States will do the same in return in an effort to protect American workers and businesses. The Trump administration shared examples of non-reciprocal tariffs:
- Brazil charges an 18% tariff on U.S. ethanol exports, while the U.S. tariff on ethanol is 2.5%.
- India's average applied Most Favored Nation (MFN) tariff on agricultural goods is 39%, while the U.S. average applied MFN tariff on agricultural goods is 5%.
- The European Union imposes a 10% tariff on imported cars, while the United States imposes only a 2.5% tariff.
President Trump further clarified in a Truth Social post that the policy will consider countries using the VAT system, which is more punitive than a tariff, to be similar to that of a tariff.
The plan does not exempt any countries or regions nor does it provide an implementation timeline. However, the administration plans to investigate and report on the negative effects of non-reciprocal trade arrangements by April 1, while the Office of Management and Budget will assess and report on fiscal impacts within 180 days — suggesting significant progress toward implementation could be made within that timeframe.
Stay informed
If your business is involved in international trade:
- Assess your exposure to reciprocal tariffs
- Consider strategies to mitigate potential risks
- Engage with trade associations
- Seek guidance from trade professionals to help navigate the changes and prepare for the implementation of reciprocal tariffs
What is an ad valorem tariff?
An ad valorem tariff is a type of tax imposed on imported goods based on their value, rather than weight or quantity. It is defined in terms of a fixed percentage of value.
On February 10, the Trump administration introduced tariffs on steel and aluminum imports, effective March 12, 2025, at 12:01 a.m. ET, in an effort to protect our national security by reducing imports and expanding domestic steel and aluminum production:
- 25% percent ad valorem tariff on steel articles and their derivatives
- 25% ad valorem tariff on aluminum articles and their derivatives
Steel and aluminum tariff exclusion updates
Although no country appears to be exempt from these new tariffs, the announcement leaves room any country that has a security relationship with the United States to discuss alternative ways to address threats caused by their imports. If they find a satisfactory alternative, the president may lift or modify the restriction.
Similarly, steel and aluminum articles processed in another country from steel and aluminum articles melted and poured in the United States also are exempt.
Despite this leeway, the previous avenues to tariff exemption appear to be closed as noted below.
- Product exclusions — Previously, the Secretary of Commerce was authorized to provide relief from additional duties on steel or aluminum if they were not produced in the United States in enough quality or high enough quality, or for national security reasons. This product exclusion process has been terminated as of the date of the proclamation.
- Countries with alternative agreements — Several countries had previously reached alternative agreements with the United States, which provided exemptions or different measures. These arrangements will be terminated as of March 12, 2025, and imports from these countries will now be subject to the additional ad valorem tariffs:
- Argentina
- Australia
- Brazil
- Canada
- Mexico
- South Korea
- European Union (EU) member countries
- Japan
- United Kingdom
- Ukraine — The temporary exemption for imports of steel and aluminum articles and their derivatives from Ukraine has been terminated. This decision was made because the benefits of the temporary exemption primarily accrued to producers in EU member countries, rather than supporting the Ukrainian steel industry.
The 25% tariff on imports from Mexico and Canada went into effect as planned on Tuesday, March 4. On March 6, President Trump signed an signed an order amending the tariff rates that went into effect just two days before. According to a fact sheet issued by the White House, the new duties are as follows:
- 25% tariffs on goods that do not satisfy U.S.-Mexico-Canada Agreement (USMCA) rules of origin.
- A lower 10% tariff on those energy products imported from Canada that fall outside the USMCA preference.
- A lower 10% tariff on any potash imported from Canada and Mexico that falls outside the USMCA preference.
- No tariffs on those goods from Canada and Mexico that claim and qualify for USMCA preference.
These revised rates may only last until April 2 at which time the Trump Administration has planned to impose reciprocal tariffs on countries with tariffs on U.S. imports. We will keep you posted on future changes to tariffs rates as they arise.
What products are affected by the new tariffs?
Tariffs can increase the cost of imported goods, leading to higher prices for consumers and potentially reducing their purchasing power. The tariffs affect a wide range of products across key industries and sectors.
| Canada | Mexico | China |
|---|---|---|
| Wine, spirits, and beer | Steel | All goods of Chinese origin, including: |
| Appliances | Aluminum | Electronics |
| Apparel and footwear | Copper | Clothing |
| Cosmetics | Computer chips | Household goods |
| Pulp and paper | Semiconductors | Medical supplies |
| Passenger vehicles and motorcycles | Pharmaceuticals | |
| Trucks and buses | ||
| Recreational vehicles and boats | ||
| Steel and aluminum products | ||
| Beef, pork, dairy, and certain fruits and vegetables |
How are tariffs applied to imported goods?
Once these tariffs are fully implemented, goods shipped from China will no longer qualify for entry into the United States under the “de minimis” Section 321 provisions, which grant duty-free entry if the aggregate fair retail value of articles imported by one person on one day does not exceed $800.Unlike Section 301 tariffs, these tariffs would not be eligible for duty-drawback. This means they would not be eligible to be refunded if imported tariffed goods are later destroyed or exported from the United States.
How CLA can help you navigate tariff impact
Our CLA tax professionals continue to watch tax and trade policy to help you stay informed and adaptable, navigate any challenges posed by new trade regulations, and continue to thrive in a rapidly changing global market.
Contact us
Stay steady amid trade and tax policy uncertainty. Complete the form below to connect with CLA.If you are unable to see the form below, please complete your submission here.