Trump’s Tariffs and Business Implications

President Donald Trump recently announced new tariffs on imports from China, Canada, and Mexico, citing economic and national security concerns. A 10% tariff on all Chinese goods took effect on February 4, while proposed 25% tariffs on Canadian and Mexican imports have been delayed for 30 days as negotiations continue. The full impact on businesses remains uncertain, but higher costs and supply chain disruptions are likely. With over 40% of U.S. imports coming from these three countries, industries that rely on foreign materials and goods are watching closely. To help clients, prospects, and others, Klatzkin has provided a summary of the key details below.

What Are Tariffs?

Tariffs are taxes on imported goods, imposed by governments to regulate trade, protect domestic industries, or generate revenue. While governments collect tariff revenue, the costs are often passed down to businesses and consumers through higher prices.

In theory, tariffs encourage domestic production by making foreign goods more expensive. In practice, they often lead to higher costs for manufacturers, retailers, and consumers, particularly when businesses rely on imported materials or products. Supply chains can also be disrupted as companies seek alternative sources or absorb additional costs.

Tariffs by Country — Updated February 4, 2025

• China — On February 4, 2025, the U.S. implemented a 10% tariff on all Chinese imports, affecting electronics, textiles, machinery, and industrial components. In response, China announced 15% tariffs on U.S. coal and liquefied natural gas and 10% tariffs on crude oil, agricultural machinery, and large-engine vehicles. Additionally, China is restricting exports of certain metals, essential for electronics, military equipment, and renewable energy technology. These tariffs are set to raise costs for U.S. manufacturers, energy companies, and farmers. Businesses that rely on Chinese-made computer chips, plastics, and machinery will likely pay more for these products, while U.S. energy exports to China could decline. China’s tariffs are set to take effect on February 10 unless a deal is reached.

• Canada and Mexico — The U.S. announced 25% tariffs on imports from Canada and Mexico, with a 10% tariff specifically on Canadian energy products. However, these tariffs have been paused for 30 days following several rounds of negotiations. In retaliation, Canada and Mexico have prepared countermeasures, including tariffs on U.S. goods and other economic responses.  The automotive industry is particularly exposed, as cross-border production increases costs for U.S. automakers. Analysts estimate the average car price could rise by $3,000. The energy sector is also affected — Canada supplies 4.3 million barrels of oil per day to the U.S., about 21% of total consumption, and tariffs on Canadian crude could increase fuel prices, especially in the Midwest. Tariffs on lumber, steel, grains, and produce would further impact the construction, agriculture, and retail industries.

• European Union and United Kingdom — Trump has warned that tariffs on EU goods are imminent, though no specific details have been announced. Regarding the United Kingdom, Trump has suggested a deal “can be worked out,” implying a potential exemption or softer trade terms compared to the rest of the EU. Possible targets include automobiles, aircraft parts, and agricultural products.

Potential Economic Impact

Economists widely agree that tariffs are likely to increase inflation, slow economic growth, cut jobs, and lower wages in the U.S. The effects will be felt by both businesses and consumers. Retaliation from Canada, Mexico, and China may escalate economic disruptions and create ripple effects in global trade.

• Rising Costs and Inflation — Higher tariffs will raise the cost of imported goods, potentially pushing inflation from 9% to 4% and reducing the likelihood of federal interest rate cuts in 2025. The average U.S. household could pay $1,000–$1,200 more per year as businesses pass higher costs to consumers.
• Slower Growth and Market Volatility — Higher costs may also reduce economic growth. Small businesses will be particularly vulnerable, with limited ability to absorb price increases. Uncertainty over the trade policy may delay investment and expansion, making it harder for businesses to plan for the long term.
• Economic Disruptions — Economists warn that tariffs will not drive U.S. manufacturing growth unless paired with a comprehensive industrial policy. Without immediate subsidies or incentives to help American producers, the tariffs will likely raise costs without providing viable alternatives.

Practical Strategies for Businesses

With tariffs creating uncertainty, businesses will want to take a proactive approach to managing risk and should consider the following:

• Reassess Supply Chains: Identify alternative suppliers and look to diversify sourcing.
• Adjust Pricing & Costs: Review pricing models and explore cost-cutting measures.
• Plan for Changes: Monitor price trends, adjust contracts, and anticipate rising costs for key materials.
• Stay Informed: Track policy changes, engage with industry groups, and prepare for further trade announcements.

Contact Us

Tariffs are causing businesses to assess their exposure and plan accordingly. Some measures may be reversed or adjusted, but the potential for ongoing trade volatility remains. Staying informed and preparing for shifts in supply chains and pricing will help businesses navigate the changes ahead. If you have questions about how these policies may affect your business or need assistance with another tax or accounting issue, Klatzkin can help. For additional information call 609-890-9189 or click here to contact. We look forward to speaking with you soon.