On April 9, President Trump paused most reciprocal tariffs for 90 days, providing relief to beleaguered financial markets. While the reprieve was widely considered welcome news, it is temporary, and the future of United States trade policy remains in flux.
Continued Fluidity
The president invoked the International Emergency and Economic Powers Act (IEEPA) to impose the global and reciprocal tariffs, declaring the “large and persistent trade deficit” a national emergency. The IEEPA gives the president broad authority to regulate international commerce and does not require investigations or studies, allowing the president to respond to developments quickly and unilaterally.
The combination of the use of the IEEPA and the nature of Trump’s stated trade policy goals creates an inherently fluid environment. Tailoring levies to incentivize a reduction in the trade deficit is likely to lead to numerous shifts in tariff levels over the coming weeks and months, if not years.
Current Trade Policy
Here is the current state of trade policy after this week’s announcements:
- The 10% baseline global tariff remains in place.
- The reciprocal tariffs, as outlined in Trump Announces Sweeping Reciprocal Tariffs, have been paused for 90 days for all countries other than China.
- Chinese tariffs have risen to 145%.
- The 25% tariffs on steel, aluminum, vehicles, auto parts, and all Canadian and Mexican goods that are not covered under the U.S.-Mexico-Canada Agreement remain in place.
Reciprocal tariffs could return, at previous or new levels, at the end of the 90-day period, depending on how negotiations proceed. We are also anticipating potential new tariffs on imports of lumber, copper, pharmaceuticals and semiconductors in the near future. The implementation of these new tariffs is not guaranteed, but Trump has ordered studies on copper and lumber and has made public and private statements on pharmaceuticals and semiconductors.
Navigating Uncertainty
To successfully navigate this uncertain and variable economic environment, businesses must be proactive and nimble. Businesses may be wondering:
- Do we understand our supply chain alternatives and the timeline for implementing a change?
- How will changes to tariffs throughout our supply chain affect product costs?
- How do we maintain profitability in an uncertain environment?
- Is our technology positioned to access supply chain information and help us respond quickly to changes?
- How do we compare to our competitors? Do we have a competitive advantage in responding to changing prices, or are we at a disadvantage?
How DS Can Help
To help businesses ensure they’re able to respond to fluctuations in trade policy, Cherry Bekaert is advising clients on the following topics:
Onshoring and Reshoring of Manufacturing Facilities
Building manufacturing facilities in the United States can help with stability and predictability. In some industries, onshoring or reshoring may reduce costs, simplify logistics, and offer financial and tax incentives. A detailed analysis of initial and ongoing operating costs can help businesses determine which options to pursue. Cherry Bekaert advisors can help with analysis of and planning in this area.