Navigating the US Tariff Landscape: Implications and Strategies for Businesses

The US tariff landscape is undergoing significant transformations, with potentially far-reaching implications for businesses, particularly manufacturers and distributors. This article explores these changes, the challenges they pose, and how businesses can successfully navigate this evolving landscape.

The Financial Accounting Standards Board (FASB) sets financial accounting standards for public and private companies, non-profit organizations, and state and local governments in the US. These standards are vital for ensuring transparency and consistency in financial reporting, especially in light of recent tariff changes.

The introduction of new tariffs can significantly impact manufacturing and distribution companies that rely on imported raw materials, components, and finished goods. Tariffs can increase production costs, disrupt supply chains, and introduce competitiveness challenges. Therefore, businesses with significant import or export activity should adapt their accounting estimates, adjust their financial models, and strategize to account for these changes.

The Trump administration’s aggressive stance on trade policy, which includes a baseline 10% tariff on non-Chinese imports and a 125% reciprocal tariff on Chinese goods, has profound implications. The overall tariff on Chinese goods were increased to a minimum of 145%. Effective on May 14, 2025, the US has temporary reduced the tariff on Chinese goods to 30% for 90 days. Despite the resulting tariff turbulence, there appears to be a continued global appetite for access to the American market. Today, 18 proposals for trade deals are currently under review.

Understanding these tariffs and their implications is crucial for businesses. For instance, tariffs act as a consumption tax, leading to increased prices for goods ranging from clothing and electronics to vehicles and medical supplies. This price surge filters through supply chains, resulting in inflation, shrinking disposable incomes, and potentially impacting consumer spending, a vital pillar of the US economy.

Moreover, the tariffs impact key nations differently. China faces supply chain disruptions and geopolitical isolation, while nations like the EU, Japan, Canada, and Mexico face pressure to reduce their trade barriers or risk exclusion from lucrative US trade deals. Emerging economies heavily reliant on exports to the US are reassessing their trade dependencies.
The US stock market has also shown volatility in response to the tariff regime. The concern isn’t just the tariffs but the lack of clarity about their duration, scope, and endgame. The ambiguity surrounding the administration’s tariff strategy has compounded investor anxiety, making the current situation different from historical instances in terms of magnitude and unpredictability.

Historical evidence suggests that tariffs rarely deliver on promises of economic revival or trade rebalancing. They function more as a tax on consumption than a radical reordering of trade flows. The efficiency loss is estimated at about 46 cents per dollar of tariff revenues—slightly worse than sales taxes.

Given the complex environment, manufacturers and distributors must stay informed, adapt swiftly, and consider the disclosure requirements set forth by FASB. Auditors and accountants can assist businesses in navigating this landscape, evaluating the financial implications of new tariffs, assessing the effectiveness of mitigation strategies, and ensuring the accuracy of financial statements. Furthermore, they can help ensure adherence to FASB guidelines, thereby accurately reporting and disclosing the financial impact of tariffs.

In conclusion, while the new tariffs and potential tax law changes present challenges for US manufacturers and distributors, they also offer opportunities. With careful planning and adherence to FASB guidelines, businesses can mitigate risks, seize potential benefits, and continue to thrive in this rapidly changing economic landscape. However, it’s crucial for businesses to stay vigilant, well-informed, and adaptable to navigate this complex terrain successfully.

About the Author

Macy joined GreerWalker LLP in December 2002 and is a director in the firm’s tax practice. She has many years of experience in providing tax planning and compliance services to clients in the manufacturing and distribution industries. Macy earned her Master of Science in Accounting with a concentration in Taxation from Appalachian State University in 2002.