Small Business Tariff Update: What to Know Now

In a recent special event for small business owners, U.S. Chamber of Commerce Executive Vice President, Chief Policy Officer, and Head of Strategic Advocacy Neil Bradley and Senior Vice President, Head of International, John Murphy, shared the latest on tariffs and how they are impacting small businesses.

The duo broke down trade tariffs, what is tariffed, what is not, and what might happen next.

Bradley explained that these tariffs differ from other previous tariffs.

“We’re used to some level of tariffs in history and commerce,” Bradley said. “The tariffs that are being imposed this year fall under the International Emergency Economic Powers Act (IEEPA). The benefit from the administration’s perspective is that it doesn’t require notice or public comment to make changes.”

“In the past, it has taken years to negotiate trade agreements with other countries. It’s very difficult to predict how many could be negotiated in 90 days and when they might take place,” Bradley said.

The administration has two options going forward, Bradley said. “They could extend the pause, or they could let the pause expire. It is difficult for us to predict where tariff levels for most countries and most products are going to be in 30, 60, 90 days and beyond.”

[Read more on how small businesses are being impacted by trade tariffs.]

Bradley said this uncertainty is creating practical issues for small businesses.

These include:

• Companies receiving notice that foreign suppliers are suspending delivery of products.
• Traditional customs bonds no longer covering their imports.
• Existing contracts at a fixed price are suddenly subject to higher tariffs.
• Trying to make decisions about whether it makes sense to change foreign suppliers.
• Supply chain problems if others in your supply chain are depending on foreign suppliers.

Bradley suggests small businesses revisit contracts to determine if there are clauses to allow for changes based on tariffs or other supply chain delays.

What are the latest tariffs affecting small businesses?

“Tariffs have been around for a long time,” said Murphy. “Some of them are just part of the landscape of international trade. But the tariffs imposed in the year to date have come in a number of waves.”

• 25% tariffs on goods from Canada and Mexico. These tariffs were imposed at the beginning of March on all goods that do not comply with the U.S.-Mexico-Canada (USMCA) trade agreement that President Trump negotiated in his first term. About half of everything coming in from Canada and Mexico today is tariffed.
• A series of tariffs on goods from China. We've seen an impressive series of six waves of tariffs imposed on all goods from China. There are 145% tariffs in force, and that's on top of the tariffs that President Trump imposed on goods from China back in his first term. So it's approximately 170% duty. It's almost impossible to trade under those terms, and this is having a big effect on many companies.
• 25% tariffs on steel and aluminum imports. The tariffs that have been imposed on imports of steel and aluminum from all countries also apply to so-called “derivatives.” These are products that have a lot of steel or aluminum in them, and the tariff applies to that share of the content of the product coming in.
• Tariffs on automobile imports. Tariffs have been imposed on all imports of automobiles from all sources as of April 3, and it's anticipated that on May 3, that duty will also be imposed on all auto parts coming into the country.
• 10% tariffs on all imported goods. On April 2, we saw the introduction of so-called reciprocal tariffs: a 10% duty imposed on all goods from all around the world, and for about 57 of our largest trading partners, considerably higher duties. For a period of a few hours, those duties soared as high as 20% on all goods from the European Union, 24% on goods from Japan, and well above 40% from many Southeast Asian countries.

[Small Business FAQ: What You Need to Know About Tariffs]

Which tariffs have been paused?

The tariff pause was only on the amounts above 10%. The 10% tariff is still enforced, and it’s still a pretty big deal. We now have some of the highest tariffs in recent history, and the United States is one of the most tariffed countries in the world.

How are these tariffs affecting the US economy overall?

Increased consumer costs

We anticipate the tariffs that have been imposed to date will cost the typical American household about $4,000, and they tend to have what economists call a regressive impact. This means they're heavier on lower-income households, which tend to spend a larger share of their income on traded goods.

Decreased global competitiveness of U.S. manufacturers

Fifty-six percent of everything the United States imports is actually raw materials, parts and components, and capital goods that manufacturers use to make their products here in the United States. Those higher costs go right into the margins of manufacturers and, in many cases, compel them to raise their prices.

When manufacturers’ costs go up, it undermines our global competitiveness. About half of everything that U.S. manufacturers make is actually for export markets. So, if their prices are forced up, they're not going to be as able to compete in international markets.

Potential global retaliation

Tariffs draw retaliation. Canada, which is our largest export market in the world and our closest trading partner, has retaliated against billions of dollars of U.S. exports. Notably, in the auto sector, they have mirrored the U.S. auto tariff. The European Union has retaliated against the steel and aluminum tariffs, and China has retaliated quite extensively. This is something that is going to trickle into the economy and have a broad impact.

Why is the current tariff situation so unpredictable?

What will happen in the future is particularly hard to predict because of the way in which tariffs are being implemented so far this year. Tariffs do change from time to time, particularly when there's a dispute or a new trade agreement with the country. But there are normally processes involved (i.e., notice and public comment), and then some period of time before there's a change in the tariffs or the duty rates.

What could happen next with tariffs?

In effect, given the authority that it's being done under, tariffs can change at almost any notice. But there are some things that we can look for as kind of guideposts.

The 10% tariff is likely here to stay

First, there seems to be a consistent message from the administration that this baseline 10% tariff is something that may be intended to remain in place. Notably, this 10% may be a lot lower than some of the tariffs that were talked about on April 2. But from a perspective of looking back just a few months ago, there are roughly four times the average tariffs that were being applied in most countries.

Additional tariffs may be put into effect

We also know that there are other tariffs that are moving through the process, including lumber and pharmaceuticals. There's talk of semiconductor tariffs, all of which are kind of going through a process, and that could be added to the tariffs we have now.

There may be bilateral trade agreement negotiations

With respect to the pause, it's been indicated that the administration would hope to negotiate bilateral agreements with other countries during this period. In the past, it has typically taken years to negotiate bilateral trade agreements between the U.S. and other countries. While we have no doubt that that can be expedited, it's very difficult to predict how many trade agreements actually could be negotiated in 90 days with how many countries, with which countries, and when they might take effect.

For more on the U.S. Chamber’s tariff coverage, visit:

U.S. Chamber Urges Swift End to Tariffs Set to Go into Effect; Highlights Real Harm to American Businesses, Workers, and Consumers   

 U.S. Chamber: Instead of Tariffs, It’s Time to Accelerate Pro-Growth Agenda  

How Broad-Based Tariffs Put U.S. Growth, Prosperity at Risk   

'A matter of survival': Small Businesses Speak Out on Tariffs

Share your small business tariff story with the U.S. Chamber of Commerce here: https://www.uschamber.com/action/share-your-story-trade

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