Author:
Christopher Klug BA, JD, LLM
Basswood Counsel PLLC (formerly Klug Counsel PLLC)
E: [email protected]

Edited by:
Integra International Grant Gilmour, CPA (Canada, BC) CPA (USA, Arizona)
Integra Tax World Newsletter Editor
E: [email protected]

Planning for the New U.S. Tariffs in the U.S. and Worldwide

A significant part of President Trump’s policy is to use tariffs to increase production in the United States.  The tariffs are certainly controversial with United States trading partners and most country specific tariff rates are still being negotiated.  Recently, the United States and Japan agreed to a tariff rate of 15% and the United States and the European Union agreed to a general framework to also have a tariff rate of 15%.  The United States is the largest consumption country in the world, so the enactment of wide sweeping tariffs has a ripple affect across the world.

While still early on with few new country specific tariffs in force at this point, the threat of new tariffs in most countries has already had an impact.  The uncertainty of the tariffs has caused disruption in the markets and has caused some businesses to pause before making strategic decisions.

During the recent Integra Asian Regional Conference there was a panel discussion on the implication of the tariffs on the countries represented at the Conference.  This panel provided insightful information as to the impact of the tariffs on panelists’ clients and even planning opportunities.  One possible outcome of the tariffs is for more manufacturing and trade to be regionalized as opposed to global.

Through the presenters at the conference, we learned that the Philippines Peso became stronger against the U.S. Dollar since the announcement of the tariffs, which was contrary to the prediction earlier in the year that the Philippines Peso would weaken as compared to the U.S. Dollar prior to the announcement of the tariffs.  This is not limited to the Philippines Peso, in fact over the past six months the United States Dollar has declined more than 10 percent as compared to a basket of currencies that represents the United States’ major trading partners, something that has not occurred since 1973.

In order to help our clients plan for tariffs, it is important to understand what tariffs are, who they impact, and how tariffs impact businesses and individual consumers.  It is important for Integra member firms to proactively engage with each other to plan for the future in order to successfully guide our clients through international trade in these new times.

A general definition for a tariff is a tax levied on goods imported from a foreign country that is often used to protect domestic industries and jobs.  There are several different types of tariffs, but the most common are ad valorem and specific tariffs.  An ad valorem tariff is a tax that is levied as a percentage of the imported product’s value.  A specific tariff is a flat tax charged on each imported good.

Why and how are tariffs used:

• Protecting local jobs and industries: For developed nations, tariffs – also known as custom duties or import duties – tend to be protectionist measures.  The tariffs are intended to give a price advantage to domestic goods, thereby protecting a country’s businesses and workers from cheaper foreign competition.
• Revenue generation: Similar to other taxes, tariffs also provide income for the government that levies the tariffs.  Typically tariffs are a small source of income for developed nations.  Poorer countries tend to have higher tariffs as they are more dependent on tariffs for revenue.
• National security: A government may implement tariffs in order to avoid too heavily relying on different countries for goods deemed critical for national security, i.e., military supplies.  President Trump cited national security concerns when tariffs were hiked on steel and aluminum because both are used for weaponry and military equipment.  In the United States, Congress is typically responsible for levying tariffs and taxes, the President has the authority to enact tariffs for national defense.
• Influence other countries’ practices: Tariffs can also be used to discourage certain trade practices like “dumping”, which is when companies export products to another country and sell them at artificially low prices to gain a competitive advantage.  Tariffs are not a Trump phenomenon and have been used by the United States in prior administrations as well as around the world.  Former President Biden, who kept most of Trump’s early tariffs in place, accused China of dumping practices when he introduced new tariffs on Chinese goods.
• Retaliation: Sometimes when one country imposes a tariff on another country’s goods, the exporting country responds with retaliatory tariffs.

On April 2, 2025, President Trump signed an executive order imposing a minimum 10% tariff on all U.S. imports, with higher imports from 57 specific countries.  President Trump’s tariffs will impact the U.S. economy in at least three primary ways:

1. Direct Tax on Imported Goods: Tariffs impose a direct tax on imported goods.  The economic burden of the tariffs can fall on either the domestic businesses importing the goods or consumers.  The company importing the goods, not the exporting company, directly pays the tariff.  The duty is collected when the goods clear customs at the importing country’s port of entry.  The importing company may initially cover a substantial portion of the tariff, but with time will pass more and more of the burden to consumers.  So while not a direct income tax to the consumer, the tariff will be built into the price of the product and with time the consumer will pay more and more of the tariff, which results in the tariff being heavily funded by the consumer much like an income tax.  Tariffs are often levied with the goal that consumers will substitute domestic products for foreign made goods.  A country imposing tariffs may lack the infrastructure, resources, or cheap labor to produce comparable goods at the same cost, so buying local may be much more expensive.
2. Reduction in Imported Goods and Capital Flows: A reduction in imported goods means foreign businesses and governments will purchase fewer U.S. assets, including federal government bonds.  The decrease in value of imports directly corresponds to reduced foreign purchases of U.S. assets through standard accounting relationships.  This will result in U.S. households needing to increase their future investment in government bonds which will subsequently decrease their investment into productive capital.
3. Increased Economic Policy Uncertainty: President Trump’s tariff announcements have increased economic policy uncertainty, which generally depresses economic activity by prompting companies and households to postpone investment, hiring, and consumption decisions.  Economic policy uncertainty causes businesses to be conservative ultimately delaying action on growth decisions.

Whether one believes the tariffs are good or bad, the new tariffs enacted by the Trump administration unquestionably impacts the world markets.  Countries may not think the U.S. is a reliable trading partner any more and could look to form new relationships thereby moving economic activity outside the United States.

When there are significantly changing economic policies such as tariffs, there are new opportunities that Integra members should be ready to advise their clients on.  Whether it is forming new trading relationships, finding alternatives to getting products into the United States or exported from the United States, or shifting manufacturing and other production to the United States, the tariffs create important planning opportunities for our clients.

While implementation of the new tariffs are at the early stages, it is important for the Integra member firms to understand how the tariffs are impacting their clients in the United States and worldwide and coordinate amongst our network to provide the best options to our clients.  Proactively planning together will certainly benefit both the Integra member firms and their clients by being among the first to find the new opportunities that are created through the worldwide impact of the tariffs.

© 2025 Basswood Counsel PLLC.  All rights reserved.  Attorney Advertising.  This Article is not intended to provide legal or other advice and you should not take, or refrain from taking, action based on its content.  Prior results do not guarantee a similar outcome.

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About the Author:

Christopher Klug

Chris serves clients with domestic and international taxation, tax controversy, corporate/business planning, mergers and acquisitions, cross-border transactions, and domestic and international estate planning.  Chris has extensive experience working with companies with domestic and international income tax planning. This work includes inbound and outbound mergers and acquisitions and other transactional tax matters. As a former tax professor, Chris has a strong background in subchapter C and S corporate taxation and partnership taxation and uses this knowledge to develop tax strategies for clients. Chris represents companies, private equity funds, hedge funds, joint ventures, real estate funds, and family offices

Integra International Bio: 

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