By Alex Martin | Principal, Transfer Pricing
President Trump signed an executive order on April 2, 2025, implementing a new “Reciprocal Tariffs” policy, aimed at what the administration describes as unfair trade practices. See tariff rates for select trading partners below.
Tariff Rates for Selected Trading Partners
- China: 54% (20% current tariff rate + 34% reciprocal tariff)
- Vietnam: 46%
- India: 26%
- Japan: 24%
- European Union: 20%
- United Kingdom: 10%
- Canada/Mexico: 0% for qualifying US Mexico-Canada Trade Agreement products, otherwise 25%
Initial tariffs are due to take effect on April 5, 2025, while additional country-specific reciprocal tariffs are due to begin on April 9, 2025.
Business Impact
These tariffs are expected to significantly disrupt global supply chains and increase costs for companies operating in the United States. For example:
- Apple components purchased for $100 from China will now cost $154 at the border
- Nike shoes made in Vietnam for $100 will cost $146 at the border
Some notable exceptions include qualifying imports under the USMCA, which will remain duty-free, while automobiles, automotive parts, steel, and aluminum continue at 25% duties. The White House noted rates could change based on the outcome of trade negotiations or retaliation from trading partners.
Conclusion
KBKG recommends companies model the likely cost impact on their supply chains. In addition, some tax and duty mitigation strategies are still available for some companies while complying with both authorities. More specifically, some companies can justify lower pricing for customs duty purposes while simultaneously increasing non-dutiable service fees and royalties. In tandem, a company pays less in customs duty while managing income tax payments via non-dutiable higher royalties and services.
More detailed analysis will follow in the coming days as details emerge.
About the Author
Alex Martin | Principal – Transfer Pricing
Alex Martin is Principal and Transfer Pricing Practice leader at KBKG, a nationwide tax specialty firm. KBKG was named one of the world’s leading transfer pricing consultancies by International Tax Review for the last four years…. Read More