The Impact of U.S. Reciprocal Tariffs on Global Supply Chain

On April 2, 2025, the Trump administration imposed one of the largest set of tariffs in U.S. history, dubbed “Liberation Day.” These so-called reciprocal tariffs are another step in the administration’s broad imposition of tariffs since Inauguration Day 2025. In his first three months in office, the administration imposed a 25% tariff on auto imports, an additional 10% tariff on Chinese imports, a 25% tariff on steel and aluminum, and a 25% tariff on all products from Canada and Mexico not covered by the U.S.-Mexico-Canada trade agreement.

The tariffs imposed on April 2 were touted as “reciprocal,” matching what other countries charge the United States dollar for dollar, even taking into account non-tariff barriers like value-added taxes and other such measures. However, the administration reportedly used the following calculation to determine tariff rates: the country’s trade deficit divided by its exports to the United States times 1/2.

As announced, a 10% minimum tariff will apply to goods from all countries. Certain trading partners will face higher, “reciprocal tariffs” aimed at penalizing them for their trade barriers. Those taxes on imported goods are calculated on a country-by-country basis, and the levels President Trump announced for some trading partners are substantial: 34% tariffs on China, 26% on India, 25% on South Korea, and 20% on the European Union. Senior administration officials said the 10% worldwide tariffs take effect April 5, 2025, at 12:01 a.m. EDT, and the higher reciprocal tariffs go into effect on April 9, 2025, at 12:01 a.m. EDT.

These new tariffs do not apply to steel, aluminum, automobiles, and auto parts. Rather, the recent tariffs imposed on those goods still apply. In addition, the new tariffs will not apply to Canada and Mexico, although the preexisting steel, aluminum, and auto tariffs do heavily affect those countries. For other goods, the tariffs are additive, meaning they will be imposed in addition to any previous tariffs already in place, unless a specific good is exempt under Section 232 of the Tariffs Act. For example, the new 34% reciprocal tariff rate on Chinese goods will apply in addition to the 20% tariffs already imposed on goods from that country, meaning that Chinese goods are now set to face a 54% tariff rate.

The administration also issued an executive order closing the de minimis exemption that has allowed packages from China and Hong Kong worth less than $800 and shipped directly to a consumer to enter the United States free of duties. From and after 12:01 a.m. EDT on May 2, 2025, such imports would be subject to a duty rate of either 30% of their value or $25 per item, with that rate increasing to $50 per item after June 1, 2025.

Tariff Rates by Country

The list below indicates the specific tariffs based on information currently available to the public.

World leaders swiftly condemned the tariff announcement and threatened swift trade retaliation. Officials from Australia, Ireland, and elsewhere argued the move would harm international trade, disrupt relationships, and strain domestic industries. Critics also noted that developing countries would be disproportionately impacted, citing potential negative impacts on global economic stability. The administration defended the tariffs by framing them as an effort to bring foreign manufacturing back to the U.S. and offset the national debt. However, economists warned that tariffs may spark inflation, hurt consumers, and potentially lead to further market volatility.

Key Recommendations for Businesses Addressing Tariff Changes

Supply Chain Risk Assessment

• Identify current suppliers in high-tariff regions and evaluate their impact on your overall cost structure.
• Develop contingency plans, including alternative or domestic suppliers, to reduce exposure to future tariff escalations.
• Update contracts and evaluate insurance coverage to ensure you have adequate protection in the event of supply disruptions.

HTS Code Review

• Verify that you are applying the correct Harmonized Tariff Schedule (“HTS”) codes to your products.
• Evaluate whether reclassification of certain parts or products may yield lower duty rates, while still adhering to all compliance requirements.
• Maintain thorough documentation to substantiate HTS classifications and facilitate smooth customs clearances.

Country of Origin Analysis

• Perform a comprehensive audit of the production process to confirm the accuracy of any country-of-origin claims.
• Investigate whether shifting a portion of manufacturing or assembly to a different locale could offer more favorable duty treatment.
• Keep robust records that detail each stage of production, enabling you to respond quickly to audits or inquiries from customs authorities.

By proactively conducting a supply chain risk assessment, performing a careful HTS code review, and conducting a country-of-origin analysis, companies can better insulate themselves from sudden tariff hikes and remain adaptable in a rapidly evolving trade environment. Such diligence not only helps secure current operations but also sets the stage for long-term resilience in global markets.

For further guidance on how these changes may impact your business, please contact AGG partners Allison Raley and Mike Burke. AGG will continue to monitor developments and will update as needed.