The latest executive orders impose new United States tariffs on steel, aluminum and key imports from Canada, Mexico and China, which can increase costs and disrupt supply chains. Co-authored with alliantgroup Director Justin McAnally and originally published by alliantgroup, this article outlines the latest tariff developments, their economic impact and key strategic considerations for businesses managing global trade, tax planning and supply chain risks. 

President Trump announced new tariffs on steel (25 percent) and aluminum (25 percent), in addition to what was previously imposed on the countries of Canada (25 percent), Mexico (25 percent) and China (10 percent). Citing a national emergency, the tariffs for Canada and Mexico are set to take effect in early March, while China’s tariff increase went into effect as of Feb. 4, 2025.  

In response to these U.S. tariffs, Canada announced $155 billion in retaliatory tariffs, Mexico is considering a "Plan B" and China is challenging the move at the WTO while imposing retaliatory duties on coal, liquefied natural gas and agricultural machinery among other things.  

Below we provide an outline of the latest executive orders as well as key strategic considerations for businesses. 

  • Shifting Trade Policies and Global Uncertainty
    • Recent tariff increases on key imports (e.g., China, EU) impact supply chains
    • Potential new tariffs or trade restrictions could disrupt sourcing and costs
  • Rising Costs and Inflationary Pressures
    • Tariffs add to import costs, affecting pricing and profitability
    • Businesses must find ways to reduce duty exposure through supply chain adjustments
  • Supply Chain Risks and Restructuring
    • Companies can consider diversifying suppliers to reduce dependency on high-tariff regions
    • Strategic customs planning (e.g., tariff engineering, free trade agreements) can lower costs
  • Government Incentives and Trade Agreements
    • New trade deals, tax credits – like the R&D credit and duty drawback programs, offer cost-saving opportunities
    • Businesses should explore tariff exemptions and alternative sourcing 

LATEST ORDERS: U.S. TARIFFS IMPACT ON CANADA, MEXICO AND CHINA 

  • Steel and Aluminum
    • 25-percent Tariffs on all Steel and Aluminum imports
  • Canada (delayed to March 2025, exact date TBD)
    • 25-percent Tariffs on Imports: Affects steel, aluminum, and consumer goods
    • 10-percent Tariff on Energy: Increases U.S. import costs for Canadian oil/gas
    • Canadian Retaliation: CA$155 billion in counter-tariffs on U.S. goods (food, beverages, autos)
    • Trade Disruptions: Higher costs and supply chain delays
    • 30-Day Delay: Temporary relief, but long-term uncertainty remains
  • Mexico (delayed to March 2025, exact date TBD)
    • 25-percent U.S. Tariffs: Hits auto, electronics and agriculture exports
    • One-Month Postponement: Short window for negotiations
    • Potential Mexican Retaliation: Tariffs and non-tariff barriers under review
    • Impact on Maquiladoras: Higher costs for U.S. nearshoring operations
    • USMCA Uncertainty: Trump may renegotiate terms, adding risk
  • China
    • 10-percent Additional Tariffs: Increases costs on top of existing Section 301 duties
    • Geopolitical Tensions: Focused on opioid supply chain; unlikely to ease soon
    • China’s Response: 
      • 15-percent border tax on coal and liquefied natural gas
      • 10-percent tariff on crude oil, agricultural machinery and large-engine cars; 
      • Imposing export controls on 25 rare metals
  • Supply Chain Shifts: U.S. companies may look to Southeast Asia or domestic sourcing 

SHORT-TERM VS. LONG-TERM BUSINESS AND TAX CONSIDERATIONS 

  • Short-Term 
    • Supplier and product changes to manage cost and availability
    • Pricing negotiations with suppliers and customers for cost optimization
    • Risk realignment via intercompany agreements to manage financial exposure
    • Stakeholder management as to who owns the risk
  • Long-Term 
    • Reevaluate Manufacturing locations (onshore vs. offshore manufacturing) for efficiency
    • Product re-engineering to optimize cost and supply chain resilience
    • Operating model transformation, such as establishing centers of excellence in cost-efficient locations
    • Selective business exit strategies from unsustainable markets, particularly in Mexico, Canada and China  

OTHER CONSIDERATIONS 

Companies should reassess transfer pricing (TP) policies in response to new tariffs to ensure compliance and proper documentation. Additionally, recent executive actions have introduced uncertainty regarding IRS Notice 2025-04, impacting the use of the Simplified and Streamlined Approach (SSA) as a TP safe harbor for pricing certain distribution transactions. 

While SSA remains optional in the U.S., taxpayers should at least be aware of how the SSA could impact their transactions and whether any adjustments may be necessary to remain compliant and competitive. 

  • Key Considerations:
  1. Align import pricing with TP policies to minimize disputes to avoid lop-sided transfer pricing permanent tax adjustments
  2. Maintain robust TP documentation to justify pricing adjustments
  3. Reconcile intercompany transactions to allow for necessary adjustments
  4. Migration Cost can impact IP considerations
  • Mitigation Strategies:
    • Utilize Foreign Trade Zones (FTZs) to defer or reduce duties
    • Apply first sale for export strategies to lower customs values
    • Engage tax planning professionals if planning to relocate/liquidate manufacturing operations back to the U.S.
    • Review export tax benefits such as IC DISC, FDII
    • Work closely with tax practitioners located in Canada/Mexico/China to address potential local country tax issues (e.g., withholding), which could be enacted in retaliation of the tariffs
    • Review possible tax controversy issues arising as a result of liquidating or reorganizing subsidiaries located in Canada/Mexico/China
    • Duty Draw Back: Businesses that import goods from Canada, Mexico and China and later export these products may qualify for duty drawback program and receive a refund of the 25 percent tariff  

Taxpayers should evaluate SSA’s applicability to their cross-border transactions, considering potential regulatory changes and tax compliance requirements. 

CONCLUSION 

The new tariffs will significantly impact global trade and prompt retaliation and regulatory scrutiny. At this point there may be no need for aggressive policy changes, but businesses should remain in the know on how they can adjust supply chains, reassess tax planning and ensure compliance with intercompany pricing to mitigate risks and costs. 

For guidance on how these tariffs impact business operations and tax planning, GHJ’s Corporate Tax Practice and alliantgroup can provide insights and solutions tailored to specific needs. Contact our experts to discuss strategies for minimizing risk and optimizing tax positions in response to the latest trade developments.