Updated 3/6/25

President Trump has imposed a 25% tariff on nearly all imports to the United States from Mexico and Canada, triggering retaliatory tariffs. Canadian energy imports will be levied at a lower rate of 10%. The president also added another 10% tariff on all imports from China on top of the 10% he imposed in February. On March 6, the White House announced a one-month tariff exemption for automakers whose vehicles comply with the United States-Mexico-Canada Agreement’s rules of origin.

The response from these countries has been swift:

• Mexican President Claudia Sheinbaum communicated her plans to respond by Sunday, March 9 with tariff and non-tariff measures.
• Canadian Prime Minister Justin Trudeau will impose 25% tariffs on $107 billion of American goods, with some taking effect immediately and others within three weeks.
• China retaliated with tariffs up to 15% on a wide range of U.S. farm imports and will impose additional tariffs on U.S. goods on March 10, ranging from 10%-15%, depending on the item.

CBIZ will continue to share updates as the tariffs evolve.

Since taking office in January, President Trump has imposed tariffs on certain U.S. trading partners, including China, Mexico and Canada. Though he has delayed some of these tariffs, he has announced plans for additional tariffs, including those on specific imports. Ranging from 10% to 25%, these tariffs are more restrictive than those imposed during the president’s first term. The administration has indicated there may be more to come, including tariffs on countries in the European Union and those producing goods in Chinese-owned factories. Additionally, a proposal is pending to make merchandise subject to trade or national security actions ineligible for the de minimis exception. This tariff law allows duty-free entry for most shipments under $800 daily. 

While some tariffs are being imposed as a negotiation tool to motivate trading partners to act on border security and the flow of illegal drugs, the administration also views tariffs as the best way to boost U.S. manufacturing, reduce trade deficits and boost job growth.

Considerations for Middle Market Companies

Middle market companies, often more vulnerable to tariffs due to thinner margins and less negotiating power, must assess the impact of tariffs on their ability to maintain competitiveness, remain profitable, expand operations and make investments. Those heavily relying on imported components will likely be more severely impacted. 

Consider the following questions:

• How do tariffs, including retaliatory tariffs, affect your production costs and pricing strategies?
• Which products do you source from countries impacted by the tariffs?
• Is it time to reexamine your key supply chain partners? Would alternative suppliers make sense?
• Should you consider relocating production to offset costs?
• Do we need to review your transfer pricing policies?
• Are we in compliance with all tariff regulations?  

Whether the tariffs will be fully implemented or not, middle market companies must prepare for operational changes, at least for the short term. The following are initial steps to consider.

Mitigation Strategies

CBIZ international tax professionals can work closely with you to:

Diversify Your Supply Chain

• Vendor-vetting services can help companies evaluate supply chain risks and determine which suppliers are too risky to continue working with.
• Consider shifting production to other regions with favorable trade agreements but remember that the proposed tariffs on Chinese-owned factories in those countries could interfere.

Evaluate Your Manufacturing Footprint

• Consider whether it makes sense to change the location of any of your manufacturing facilities
• Assess the impact of the current and alternative manufacturing footprints on intercompany transactions and tariffs.

Focus on Manufacturing Relationships

• Analyze the relationship and characterization of manufacturing facilities in different countries.
• Modify the intercompany pricing between the U.S. and facilities in countries like Canada or Mexico for optimal planning.

Integrate Your Customs and Tax Department

• Recognize that customs traditionally fall under the logistics department’s responsibilities, but they must be integrated within your tax and transfer pricing strategies because of broad tax implications.

Understand the Basics of Transfer Pricing and Customs

• Ensure that prices between the manufacturing facility and the destination country are at arm's length to manage tariff liabilities properly.
• There is significant planning potential in aligning transfer pricing strategies with custom duties to minimize overall costs. Proactively planning with your tax advisers can optimize intercompany pricing and customs duty liabilities.

Negotiate Lower Prices With Manufacturers

• Some importers of retail and consumer goods may be able to negotiate lower prices with manufacturers to absorb some of the cost of tariffs.
• Examine pricing for intangibles to isolate non-dutiable charges to lower overall duty costs.

While the effects of tariffs may lag until new products are needed to replenish inventories, remember the quality of earnings reports for M&A deals must now factor in higher costs due to tariffs. Additionally, import duties are assessed at the port of entry, so even if your company has committed to pricing before tariffs were imposed, you may now face unexpected costs. It remains to be seen whether shipments already in transit will be subject to new tariffs.

CBIZ will work with middle market leaders subject to the new tariffs to understand the impact on their operations and explore mitigation strategies. We begin by comprehensively assessing your supply chain vulnerabilities, transfer pricing, and cost structure to determine mitigation strategies. CBIZ closely tracks executive actions regarding tariffs and will keep you informed in the coming weeks and months to provide additional insights.

If you have questions, please connect with us.