There’s a new administration in the U.S. Perhaps you’ve heard. The Trump-led new guard has promised sweeping changes across many fronts, with significant changes in the area of trade policy – specifically, the enactment of additional tariffs on foreign imports. Trump believes these tariffs will fund his planned tax cuts and balance the unfair trade policies of certain U.S. trade partners, making U.S. manufacturers more competitive.
We like to start each year with a trade compliance review, highlighting key issues importers and exporters should focus on. Let’s start by looking at potential changes the administration has hinted could happen very quickly, making sure you understand these proposals and suggesting strategies to mitigate the impact.
Potential Near-Term Changes to U.S. Import Tariffs
In his first day in office, President Trump announced the potential for a 25% tariff on goods from Canada and Mexico, and a 10% increase on goods from China. To accomplish this quickly, he could declare a national economic emergency (through the International Emergency Economic Powers Act, or IEEPA), or use any number of other legal options. The additional tariffs are not a sure thing. The President has indicated that if the governments of Canada, Mexico and China address certain immigration and drug trafficking issues, he may not impose the new tariffs. And he has, since being inaugurated, indicated he will travel to China to meet with President Xi, presumably to open a dialog toward elimination of the tariff threat.
If enacted, these new tariff levels would not replace the current tariffs, they would increase the tariffs by the stated percentages.
There has been much speculation about the start date for these tariffs, if in fact they do happen. It’s a moving target, but the potential is very real and importers cannot afford to “wait and see what happens.” In any trade compliance review, careful planning is important.
The most logical, and most common, strategy to lessen the impact of the tariffs, particularly for China-made goods, is to diversify sourcing to more “tariff-friendly” countries – the so-called “China Plus One” strategy. Businesses should seek advice before going all-in on such a strategy.
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t’s not as simple as shipping parts to another country and slapping a “Made in Vietnam” or “Made in Mexico” sticker on the box. The determination of Country of Origin is more complex. You don’t want to invest considerable time and money to relocate operations only to find your products are still subject to the new tariff.
Vietnam, in particular, is in the crosshairs. One reason is that it’s among the countries running the highest trade deficits with the U.S. (see chart). Another reason has to do with Country of Origin. When Chinese companies create business units to sell out of Vietnam using mainly Chinese component parts, but do little actual production there, U.S. Customs and Border Protection (CBP) might deem goods to be Made in China – despite the “shipped from” address. The new administration has a watchful eye on these cases.
It’s complicated. Read our article “Tariff Wars: Understanding Country of Origin” to better grasp this complex Country of Origin issue.
Advice when Pursuing a China Plus One Strategy
- Don’t limit your diversification effort to just one country. When looking for new suppliers and new production sites, it’s hard to predict which countries will remain “tariff-friendly” under this new administration. A broader diversification strategy limits your risk.
- Don’t spend your own money building an infrastructure in a new country. Tariffs and enforcement policies are constantly changing. Until you are confident your chosen new location is a place you will stay, leverage the existing infrastructure of logistics providers for required warehousing and transportation across Southeast Asia, India and other emerging markets. Global 3PLs like Dimerco let you pursue diversification strategies without a large capital outlay.
- Understand the logistics-related implications of relocating operations. You may be relocating to avoid tariffs, but doing business in Thailand or India or Malaysia or Vietnam is completely different than operating in China. You’ll want to explore things like transportation costs, transit times, customs processes, freight capacity, labor cost and availability, licensing requirements. Read our eBook on “The Logistics of China Plus One” to get smarter.
- Build close relationships with your freight forwarder and customs broker. Leverage their knowledge of local customs and logistics to facilitate your diversification strategy.
- Calculate the impacts. Don’t make assumptions about potential savings or new duty expenses. Put some hard numbers to your plan. Dimerco’s new Tariff Impact Calculator can help!
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New Tariff Impact Calculator
To assist shippers doing a trade compliance review to figure out how new tariffs will impact their businesses, Dimerco has created a “Tariff Impact Calculator.” If you provide us your trade data – what you’ve imported in what volumes – we will run it through our calculator and, in just three days and at no cost, we will calculate the potential financial impact of increased tariffs on your business.
New tariffs typically are announced through 1,000-page, sleep-inducing rulings that even lawyers struggle to understand. International forwarders like Dimerco read these documents carefully, because the devil is in the details, and we want to provide customers with the best advice. But, frankly, C-level executives just want to understand the bottom line. Our new Tariff Impact Calculator can help you fast-forward past the complexity to answer the boss’s burning question quickly. Request an analysis.
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Within hours of taking office, President Trump issued the America First Trade Policy Memorandum on his administration’s trade priorities. In that memorandum, he directed executive agencies to conduct reviews of current trade policies, with agency reports due to the President by April 1, 2025. We may have a clearer read after that point on broad trade policy changes.
Trade Compliance Review: Looking Toward Q2 2025 and Beyond
In additional to specific tariffs on Mexico, Canada and China, let’s review other notable trade-related issues for 2025 that might have a significant impact on your business.
Potential Elimination of De Minimis for Some Imports
Currently, if the aggregate fair retail value of articles imported into the U.S. to a single person or company on a single day is $800 or less, the goods are not subject to duties and taxes and more onerous reporting requirements. Most shipments claiming the de minimis exemption originate from several China-founded e-commerce platforms. The Biden Administration’s measures on de minimis have been put on hold while the new administration’s investigation is completed by April 1. It’s important to note that there’s bipartisan support for eliminating de minimis privileges for commodities subject to Section 301 duties (mostly goods from China) and other trade remedies, and to gather more data and enhance reporting requirements in the de minimis environment for import-sensitive goods. If you are currently using de minimis for your imports, you’ll want to watch developments carefully.
The Future of USMCA
The America First Trade Policy Memorandum also ordered a review of the United States-Mexico-Canada Agreement (USMCA). The President directed government agencies to analyze how USMCA has affected American workers and businesses to determine whether the U.S. should remain in the agreement. Some were already concerned about the scheduled 2026 joint review of the trade agreement between the three parties. This earlier Trump-requested assessment has caused even greater concern, particularly among companies leveraging Mexico as a resource. The full scope of the U.S. wish list for USMCA changes has not yet been developed, but initiatives under discussion in Washington include modifications to the automotive industry rules of origin, strengthened forced-labor import prohibitions, and new restrictions on Chinese companies operating in North America.
Antidumping and Countervailing Duties
The America First Trade Policy Memorandum also requires a review of anti-dumping and countervailing duty regulations, potentially tightening and/or expanding the current regulations and rate calculations. This issue is still very much a priority in terms of U.S. trade policy enforcement with CBP, which has a helpful Q&A on antidumping and countervailing duty issues.
Antidumping duties are taxes imposed on imported goods to compensate for the difference between the export price and what the product might be sold for in its home market. Governments use these tariffs to protect their industries from unfair trade practices. The antidumping duty is intended to raise the price of the imported product to a more normal level. Countervailing duties address subsidies provided by foreign governments to their exporters to help them lower their prices and expand their markets.
In 2025, we will see more products subject to antidumping duties as ongoing investigations conclude. Products under review today, for example, include glass wine bottles from Chile, China, and Mexico, steel racks from China, steel trailer wheels from China, paper plates from China, Vietnam, and Thailand, and many more.
Additional Duty on Products from BRICS+ Countries
While this one was not included in the President’s trade policy memorandum, he has previously threatened new tariffs on the BRICS+ Alliance – countries looking to displace the U.S. dollar as the world’s most widely used trade currency. Pre-election, President Trump pledged a 100% tariff against BRICS+ nations if they continue to undermine the U.S. Dollar.
The alliance was formed by Brazil, Russia, India, and China in 2009, with South Africa added the following year. Countries added since include Egypt, Ethiopia, Iran, the United Arab Emirates and, most recently, Indonesia.
Consensus is that the bloc is still too loose and unorganized to create any substantial threat to the U.S. dollar’s position in the near term, however some believe the President could also use the threat to strategically isolate Iran. While the Trump administration has not yet taken any action against the BRICS+ alliance, this is also one to watch in your trade compliance review.
Global Tariffs
The previously mentioned assessment of U.S. trade policy by government agencies, to be concluded by April 1, could also be the basis for a new tariff on all imported goods. The new President has previously advocated for a 10-20% global tariff. Whether there will be carve outs for specific countries or products if this universal tariff is implemented remains unknown.
Potential New Trade Agreements
Administration officials have indicated an interest in new trade agreements with India, the UK and the Philippines. Details are unclear, but one might guess that the administration’s view of these potential trading partners is, at the moment, positive, or that he sees them as potential allies against U.S. adversaries.
Export Controls
Trump’s memorandum on trade also instructs government agencies to review the Export Control System to potentially tighten regulations to stop the transfer of technology and other strategic goods to U.S. adversaries. If you are exporting, watch for developments on this point carefully.
What can you do in 2025 to prepare for the wave of trade compliance changes that are expected?
Global trade used to be kind of boring – in a good way. The World Trade Organization set the standards, and everyone understood the rules and played by them. Any changes were introduced with lots of advanced warning so importers and exporters could prepare.
But those days are over. Tariff changes are often introduced with little warning, creating a huge burden for importers and exporters, particularly small and mid-sized businesses that don’t have dedicated trade compliance resources.
So, what can you do?
If you’re diversifying production to new countries to minimize tariffs, follow the advice noted earlier in our trade compliance review on how to effectively implement a China Plus One strategy.
This involves another critical step you can take, which is to forge a strategic relationship with your freight forwarder and customs broker. Historically, these relationships have been more transactional, but the increasing complexity of trade compliance and the huge financial implications of getting it wrong demand that you align with trade compliance experts like Dimerco who can advise you on questions like:
- Is shifting production to a new country a smart move?
- What regulatory and legal requirements must I meet to expand to a particular country?
- Are there any pending measures in my new source country that could impact my plans?
- Are my imports into the U.S. eligible for exclusions under Section 301 or any of the new tariffs?
- Are my imports eligible for free trade agreements?
- Are any of my new source locations on the new U.S. administration’s radar for unfair practices?
- What is the financial impact to my business of any new tariff changes? (see new Tariff Impact Calculator, noted earlier)
Other initiatives to consider for 2025, if you haven’t already:
- Advocate for your company. Either directly or through your trade associations, explore possible exemptions from any new tariffs or other trade barriers.
- Automate your trade compliance program. The pace of change in trade compliance has made it nearly impossible to keep up without help from at least some automation. That could mean investing in trade compliance software or, at the very least, leveraging CBP’s free ACE portal (Automated Commercial Environment) that gives you free access to your import and export data. Read more on trade compliance automation in our article on the role of technology in international trade compliance.
- Create a more organized and professional trade compliance program, internally. Businesses hesitate to sink more money into a function they already consider a cost center. But there is too much risk in leaving this function to chance or delegating it to one person who, frankly, could leave tomorrow. The cost of investing in a trade compliance review is far outweighed by the benefits of such a review: reduced duty payments, fewer delays linked to inaccurate paperwork, and happier customers. The right global transportation and trade compliance partner, like Dimerco, can help you in this process.
Get Help with Your Global Trade Compliance Needs
The pace and complexity of trade compliance changes are beyond the ability of most global businesses to manage the function on their own. A strategic partner like Dimerco can help by combining global shipping and logistics capabilities with an expert knowledge of trade compliance. To discuss how Dimerco can assist with your trade compliance needs, contact us today to start a discussion.
