With “Day One” of the Second Trumping just two weeks away, businesses are bracing for the impact of the new administration’s promised tariff policies. During the election campaign, Trump frequently spoke of imposing across-the-board 10–20% duties on all imports to the United States. On Truth Social last November he threatened to increase tariffs by 10% on goods from China and impose 25% duties on imports from Canada and Mexico if those countries refused to cooperate on stemming the flow of drugs and migrants into the United States. At other times the returning president has proposed tariffs of 60% or more on Chinese goods. He has also threatened to impose 100% levies on imports from the BRICS countries should they proceed with plans to move away from the US dollar in international trading, and has often voiced support for tariffs in general.
The exact shape of the new trading regime remains unclear. Just today a Washington Post article claimed that Trump aides are exploring tariff plans that would cover all countries but only “critical” sectors — a report that Trump promptly labeled “Fake News” in a Truth Social post.
Until the outlines of the new policies come into sharper focus it will be difficult to gauge their impact in any detail, but it could clearly be massive. The targeted countries include America’s most important trading partners: trade with Canada and Mexico within the USMCA amounts to $1.5 trillion per year, while US-China trade is on the order of $600 billion annually. In the past, the infamous Smoot-Hawley Tariff Act of 1930 is widely held by economists to have exacerbated the Great Depression. And a Brookings article cites findings from multiple studies indicating that the US-China trade war during Trump’s first administration, with a far smaller scope than what is now being proposed, cost the United States between 0.3 and 0.7% of GDP, with most of the costs borne by US companies. China will not pay for Trump’s tariff wall.
Higher tariffs will supercharge inflation, not only by adding directly to the price of imported goods purchased by consumers, but also by raising the cost of imported production inputs such as ingredients and components for products manufactured in the United States. These intermediate goods account for the majority of US imports. Supply chains in sectors such as the North American automotive industry have become so densely intertwined that many assemblies cross the border multiple times during the production process, blurring the distinction between imports and exports. These industries will be especially hard hit.
With the threat of a US dockworkers’ strike already looming, a further concern is that logistical bottlenecks will form as importers seek to stockpile inventory before the tariffs take effect. The resulting disruptions could lead to spiking freight charges and critical material shortages that could take months to clear.
Beyond the first-order inflationary effects, a high-tariff regime is practically certain to trigger retaliation by our trading partners, just as punitive tariff policies did during Trump 1.0. Mexico’s president and economy minister have already vowed to retaliate, and China’s move last week to impose restrictions on 28 American companies is widely seen as a signal that it will respond aggressively to any US moves against its economic interests.
If partner countries retaliate, tariffs in foreign markets will present US exporters with a sliding scale of curtailed demand and lower margins, depending on how much of the duties they are willing to offset with lower prices. Along with potential non-tariff measures, retaliatory tariffs could put American companies at a significant disadvantage in overseas markets against local and third-country competitors, harming not only major players such as the US auto industry, but also thousands of small exporters.
Alongside retail price increases, squeezed margins, and increased supply chain complexity, the biggest impact on American businesses may be from planning uncertainty on both the purchasing and marketing sides simply from the threat of unpredictable major policy shifts. The erosion of rules-based free trade in favor of lobbying, subsidies, and favoritism also raises the long-term potential for corruption worldwide. (A study published in 2021has already found a correlation between tariff exemption application approvals and Republican political donations during Trump’s first term.)
Moreover, many of the tariffs’ effects will hit smaller organizations disproportionately. Small businesses have fewer administrative resources to deal with compliance burdens, far less lobbying clout for securing tariff exemptions, and less financial capacity to quickly reconfigure supply chains.
Given their prominence during the president-elect’s campaign appearances, it’s unlikely that the tariff plans are mere Trumpian bluster in their entirety, but there are indications that the more extreme and targeted measures are intended largely for negotiating leverage. Indeed, in his announcements on Truth Social, he explicitly tied tariffs aimed at China, Canada, and Mexico to the flow of drugs and illegal immigrants entering the United States. Still, Trump has also touted tariffs as a major potential source of tax revenue and on many occasions voiced his attachment to them, so it seems near-certain that some form of expanded tariff policy will be implemented.
Some commentators have suggested that the president lacks the power to levy tariffs unilaterally. In principle the power of taxation, including tariffs, rests with Congress, but a number of laws adopted since the 1930s delegate authority to the executive branch in various circumstances, and presidents from both parties have made use of that authority. While most of the president’s options would either be temporary in nature, require a prior investigation and finding, and/or require action by Congress, the International Emergency Economic Powers Act gives the president broad authority to regulate international transactions upon declaring an emergency. The law has been applied many times since its adoption in 1977, most recently by Joe Biden, although never to implement across-the-board tariffs of the kind the Trump campaign has proposed. Any action under the IEEPA will probably be challenged in the courts, but a prompt injunction to block the tariffs while the case is heard is unlikely.
Importers do have options to mitigate the damage. Even where full reshoring of production is impractical, some may be able to employ “tariff engineering” to fine-tune their manufacturing processes so that components are imported under classifications subject to lower duties than may be the case for goods nearer to or farther from the finished product. Likewise, in complex multinational supply chains, various stages of manufacturing processes can be shifted to different countries to manipulate the value-add percentages that define the “country of origin” and determine which duty rates apply.
Another tactic is to employ a trading company as middleman to import the product and pay duty based on a lower first-sale invoice value before reselling at a markup to the final purchaser. Needless to say, this approach is subject to restrictions lest the first-sale valuation be deemed fraudulent.
Where goods are imported for transit or further processing before reexporting, it may be possible to avoid duties by storing and/or processing them within a foreign trade zone.
Exporters facing retaliatory tariffs may have fewer options, primarily involving market diversification. So far, for example, Trump has not threatened new tariffs targeted specifically at the United Kingdom or European Union countries. If a trade war does break out, countries that remain outside the path of the storm may prove to be more attractive markets. In other cases, companies may be forced to accept thinner margins or, ironically, move some production outside the United States to hold on to their position in key markets.
With multiple rounds of tariffs, counter-tariffs, and negotiations to be expected, it will likely be months if not years before any new trade regime stabilizes. It may be tempting to take a wait-and-see attitude until things shake out. But with stakes this high, businesses large and small would do well to map out possible scenarios and prepare contingency plans for a range of potential higher and lower tariffs on both imports and exports, universal or targeted.
The deal helps Europe diversify away from over‑reliance on Russia and China, bolsters India’s status as a major manufacturing and tech hub, and embeds environmental, labor and regulatory standards in a more calibrated form of globalization. Despite domestic concerns on both sides, the agreement is a signal that carefully negotiated open trade remains possible amid rising economic nationalism. 
Barring last-minute breakthroughs, the Canada and China tariffs are set to take effect tomorrow, February 4. Implementation details can be found in Customs and Border Protection notices for 
This looks useful: the Houston District Export Council is holding a 
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