Industries doing business internationally are aware of the recent tariff changes and the sweeping implications for their business. With these new regulations comes a need for strategy related to tariffs and an understanding of how to ensure compliance.
What Is a Tariff?
As a refresher, a tariff is a tax paid on a type of import or export.
There are two different pieces of legislation affecting tariffs:
Section 232 Tariff Action:
In March 2018, the Trump administration added additional import tariffs on steel and aluminum products, based on national security concerns. Prior to this legislation, many of these products were duty free. Now, U.S. companies have an additional burden of 25 percent of the cost of imported steel products and 10 percent of the cost of imported aluminum products produced in most other countries.
Section 301 China Tariff Action:
Last summer, the Trump administration passed a large piece of legislation that increased import tariffs on thousands of Chinese products. China, in return, imposed additional tariffs on a variety of U.S. products. Due to this tariff war, U.S. companies may be looking at a 10 to 25 percent increase on the cost of imported merchandise.
Who Is This Affecting?
The legislation is having a direct impact on construction, dealership and manufacturing companies who are dependent on Chinese products or steel and aluminum products. Tariffs are also impacting other industries as well, such as ag producers. The tariffs not only result in higher production costs in this competitive environment, but also in companies moving operations overseas.
Economic Impact of Tariffs on $150 Billion in Chinese Imports
|Change in long-run GDP||-0.1%|
|Change in long-run GDP (Billions $2018)||-$20.6|
|Change in long-run wage rate||-0.1%|
|Change in full-time equivalent jobs||-79,000|
What Can You Do?
The first step is understanding the impact the tariffs will have on your business and your bottom line.
The following options may minimize the impact of tariffs on your business:
Assess the Impact
As you can imagine, the above scenarios are complicated and evaluate. The first step is understanding the impact of tariffs on your business and then identifying the necessary next steps to help lessen the burden these tariffs could cause.