Businesses from Wall Street to Main Streets are increasingly strained as they attempt to comply with President Donald Trump’s sprawling and labyrinthine tariff system, which has sharply driven up costs and, for many firms, offset the intended benefits of the corporate tax cuts enacted earlier in the year. Over the past year, the administration has effectively dismantled the long-standing US tariff framework, replacing it with a multilayered and highly intricate structure that imposes differing tariff rates based on the country of origin.
Under the previous system, an industrial product faced a near-uniform tariff of about 5 per cent. Now, the same product could be taxed at 15 per cent if imported from the EU or Japan, 20 per cent from Norway or several African nations, 24 to 25 per cent from parts of Southeast Asia, and more than 50 per cent if sourced from India, Brazil or China. Industry groups say the transition has been exceptionally burdensome. Gary Shapiro of the Consumer Technology Association, whose organisation represents more than 1,300 companies ranging from major retail and technology names to small firms and start-ups, said executives across the country have spent an extraordinary amount of time dealing with tariff compliance rather than focusing on innovation.
The pressure has grown as the US Department of Justice has announced plans to prioritise the prosecution of customs fraud. In response, many firms have expanded their compliance teams and allocated what could amount to tens of millions of dollars to ensure they meet the administration’s requirements. Combined with the substantial sums already being paid in new duties, these administrative and financial demands pose a significant burden on industries heavily dependent on imported goods. Executives report that, for some firms, the pressure has eroded the gains expected from the sizeable tax reductions offered under the administration’s flagship corporate tax legislation.
Tariff complexity forces executive-level decisions and halts innovation
Professional services firms are observing the strain first-hand. A recent KPMG survey found that nearly 90 per cent of chief executives expected tariffs to significantly affect their business performance and operations over the next three years, with a similar proportion indicating they were prepared to raise consumer prices in response. At PriceWaterhouseCoopers, trade specialists report that many clients now spend a third to more than half of their internal discussions on tariffs alone. This has compelled senior executives to involve themselves in import-sourcing and compliance decisions at levels rarely seen before, while firms scramble to recruit personnel trained in trade and customs matters. PwC advisers say the demand for such professionals far exceeds supply.
Beyond immediate staffing problems, businesses warn that the uncertainty and complexity surrounding tariff rules are reducing investment in capital equipment and long-term growth initiatives. Industry officials, speaking anonymously due to concerns about provoking the administration, say many companies feel unable to invest meaningfully in research and development or in new US manufacturing facilities because they cannot predict the future trade environment. The White House has not commented on these concerns, though administration officials have previously defended the tariff strategy as essential to reviving domestic manufacturing, complementing tax cuts and deregulation. Treasury Secretary Scott Bessent has argued publicly that new investments inspired by the tariff regime will take time to yield visible benefits and that stronger economic outcomes are expected by 2026. However, business representatives contend that whatever benefits firms have gained from deregulation and tax cuts have been substantially weakened by the operational burden of complying with the new tariff rules. Industry groups say the system is extremely complex and continually evolving, creating significant uncertainty for long-term planning.
Unpredictable tariff framework undermines corporate planning
Experts note that no comprehensive study yet exists to quantify the financial and administrative cost of compliance under Trump’s revamped trade rules. Matthew Aleshire of the Milken Institute’s Geo-Economics Initiative says preliminary findings suggest the burden is substantial, varying across sectors but often comparable to the disruption companies experienced during the early phases of the Covid-19 pandemic. The institute’s newly released report indicates that the unpredictability of tariff policy has severely constrained corporate decision-making capacity.
Central to the administration’s trade overhaul is the concept of “reciprocal” tariffs, imposed under the 1977 International Emergency Economic Powers Act, which is now being challenged in court. Under this system, roughly 100 trading partners face a baseline tariff of 10 per cent, while nearly another 100 countries, including the entire European Union, have been assigned higher rates ranging between 15 and 41 per cent. These duties are layered atop existing “most-favoured nation” tariffs. Two notable exceptions are the EU and Japan, which have negotiated special arrangements with the administration.
Complicating matters further, companies risk an additional 40 per cent penalty tariff if US authorities determine that goods from high-tariff countries are being routed through third countries to disguise their origin. Businesses say they are still awaiting clear guidance on how this rule, initially outlined in an executive order earlier in the year, will be implemented. The president has also separately imposed tariffs on China, Canada and Mexico under the same emergency law, intended to pressure those governments to curb the flow of fentanyl and precursor chemicals into the United States. Goods from Canada and Mexico are exempt if compliant with the US-Mexico-Canada Agreement, but the exemption has created significant extra paperwork for firms seeking to demonstrate conformity with the trade pact.
Expanding metal-based duties deepen compliance burdens for firms
The administration has also expanded “national security” tariffs on steel, aluminium, autos, auto parts, copper, lumber, furniture and heavy trucks under a different trade statute. While some relief has been granted, such as lowering the auto tariff to 15 per cent for imports from the EU, Japan and South Korea, the government has largely refused to grant exemptions from the 50 per cent tariffs on steel and aluminium. It recently broadened these duties to cover more than 400 derivative products, including chemicals, plastics and furniture, that either contain steel or aluminium or are shipped in metal containers. This expansion has effectively required companies with no direct connection to the metals industry to track and report precise quantities of steel or aluminium in their imports. Industry representatives warn that even minor errors or delays in reporting could expose an entire product to the full 50 per cent tariff, creating potentially severe financial consequences.
Officials say the administration is preparing to widen similar tariff coverage to copper-containing products and is conducting multiple trade investigations that could lead to new duties on a range of goods, including pharmaceuticals, semiconductors, critical minerals, commercial aircraft, polysilicon, unmanned aircraft systems, wind turbines, medical supplies and robotics equipment. For many businesses, this ongoing uncertainty over future tariffs has intensified the challenge of planning operational or investment strategies.
Small businesses report acute hardship as they attempt to navigate these rules. Cassie Abel, who runs an outdoor clothing company in Idaho, told a recent virtual press briefing that her firm has diverted resources away from innovation, hiring and growth simply to manage tariff compliance. She said employees had collectively spent hundreds of hours adjusting production schedules, reassessing suppliers and conducting repeated price and cost analyses. Abel noted that prior to the current administration, tariffs required virtually none of her attention.
The severity of the burden on small firms is reflected in the legal challenge against Trump’s use of emergency powers to impose tariffs. Small businesses have taken a leading role in bringing the case before the US Supreme Court, arguing that the president’s broad authority under the 1977 act has enabled erratic and unpredictable tariff changes. Crutchfield Corporation, a family-owned electronics retailer, has filed a supporting brief stating that the unpredictability of the tariff regime has left the company unable to plan for either the near or long term. The firm urged the Court to restore stability, warning that constant changes based on presidential discretion have created untenable conditions for sustaining business growth.
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