By Jill Hurley
On April 3, 2025, the world woke up to a new global order. Precisely how orderly it will be only time will tell.
For now, enterprises globally will need to reckon with a dramatic overturn of the global trading system. What was once familiar, is now foreign. What was predictable is now uncertain.
For most importers, it’s that uncertainty that is ultimately at the heart of their trepidation. Too much change. Too fast. Too inconsistent.
At Livingston, a recent survey of our clients shows the toll this is taking. Nearly one-third (29%) are reporting 10-25% of their revenue has already been impacted by enacted tariffs, 18% have had between a quarter and half their revenue impacted and 13% have had more than half their revenue affected. When looking ahead, those numbers get bigger, not smaller. And it’s the smaller to mid-range importers who are disproportionately hemorrhaging dollars.
A scan of headlines shows companies are already taking actions ranging from temporary layoffs to consumer incentives, to reshoring and nearshoring.
There’s no panacea; no universal solution. Each business will have to determine how best to cope with the tariffs based on its supply chain configuration and end markets. But there are key considerations that all businesses should be taking when making those determinations.
The nutshell
In the past six weeks we have seen a flurry of tariff activity originating out of Washington and reverberating throughout the world. Let’s do a quick summary to wrap up how much tariff action we’ve seen.
• 25% tariff on all Canada-origin and Mexico-origin goods entering the U.S. (with the exception of energy resources and potash) that DO NOT satisfy the United States-Mexico-Canada Agreement (USMCA) Rules of Origin.
• 10% tariff on all Canada-origin energy resources.
• 10% tariff on Canada-origin potash
• 25% tariff on all Mexico-origin goods (with the exception of potash).
• 10% on all Mexico-origin potash
• An additional 10% tariff on all China-origin goods entering the U.S. from China was imposed on February 4, 2025 (note that this tariff is above and beyond any existing tariffs against imports from China that have been imposed since 2018).
• Another 10% tariff was added to China-origin goods effective March 4, 2025.
• A tariff of 25% was imposed on all steel and aluminum tariffs (irrespective of origin) on March 12, 2025.
• A tariff of 25% was imposed on countries that import Venezuelan oil, effective April 2, 2025 (applicable countries to be determined by the Secretary of State).
• A tariff of 25% was imposed against all imports of passenger vehicles, irrespective of origin, effective April 3, 2025.
• A tariff of 25% is set to be imposed on all automobile parts, effective May 3, 2025.
• A tariff of 10% was imposed on all imports into the United States, irrespective of origin and product, effective April 5, 2025.
• Varying tariff rates were imposed on goods originating from approximately 60 countries, effective April 9, 2025 (excluding Canada and Mexico)
So, there you have it. A flurry of tariff action within two short months and most of it just in the past five weeks. Businesses that made an attempt at strategizing on March 4th likely found themselves back at the drawing board by April 3rd. And what’s to come is anyone’s guess.
Even so, importers and exporters have to start somewhere and leverage fundamentals to guide their decision making. In many cases, they’re looking at core costs – labor, transportation, material inputs—and understandably so. But finding supply chain cost savings amidst trade wars also requires delving into the customs considerations that are often overlooked when trade is liberalized.
- Don’t write off the trade deals just yet
When the tariffs against Canada and Mexico hit on March 4th, many were ready to toss the United States-Mexico-Canada Agreement (USMCA) into the dustbin of economic history.
As it turns out, that trade deal is more valuable today that it’s ever been for North American importers and exporters. That’s because all the tariffs listed above are in addition to, not in place of, already existing tariffs. That means the USMCA is still doing its original job of neutralizing Most-Favored Nation (MFN) tariffs.
But more importantly—at least for now—the USMCA is every North American importers ticket to mitigating the impact of the new tariffs, many of which provide for either a full exemption of tariffs on USMCA-qualifying goods, or at the very least an exemption on the U.S.-originating content. In today’s environment, that adds up to massive cost savings on duty outlay, particularly for high-volume or high-value importers.
But to take advantage of avoiding duties on U.S.-originating content, importers will need to put much more emphasis on origin determination and origin verification than they may have in the past. Much of the leg work we do as trade consultants involves reviewing bills of materials and supplier solicitation to get to the heart of what’s made where and how it’s breaks down as a percentage of content. That may have seemed unnecessarily tedious and superfluous for a 2.5% MFN rate, but now that rates are 25% or more, the value seems suddenly self-evident. - Make cash flow considerations king
Amid spiking tariffs, the number one goal is to stay liquid. That’s an increasingly difficult proposition in the face of perpetually stacking tariffs, resulting in ballooning duty outlay. To retain cash for as long as possible, importers will want to find ways to defer that outlay for as long as they can.
That’s where foreign trade zones or FTZs come in. For the uninitiated, FTZs are warehouses and manufacturing hubs where goods intended for re-export can be brought into a country for storage or production without duty obligation. There are about 3,500 FTZs in the world; 200 of them are in the U.S.; more than 20 in China and more than 250 in India.
Using FTZs allows importers to hang onto the large sums of cash they’re now being asked to dole out in increasing amounts for longer. That’s more money for growth and more of a cushion for the unexpected.
At my firm, when we conduct Trade Optimization Studies (TOS)—studies of trade data to identify opportunities to optimize trade operations—on behalf of a client, the use of FTZs is always a core consideration when examining how to reduce cost and time in transit. - Engineer your way to cost savings
No, not the kind of engineering the folks at auto companies do. In my line of work, there’s a lot of time spent on tariff and origin engineering. The first is finding ways to alter the state of a product so that it falls under a different tariff code that has a lower tariff rate. The second is finding ways to use geography to your advantage by shifting production steps or component sourcing to countries that have more favorable tariff terms with your end market.
Origin engineering will be particularly helpful to U.S. importers who currently source supply from one of the 57 countries on which the U.S. just targeted with substantial universal tariffs, ranging from 11 percent to as high as 50 percent. Shifting production or sourcing to non-targeted countries can help importers avoid the worst of the tariffs, but customs consideration should be balanced against other considerations, such as skill and availability of labor, corporate tax rates, transport and port infrastructure and more. - Know your value
Valuing a product might seem like an intuitive process, but like most things related to customs compliance, the devil is in the details. In the case of tariff-impact mitigation, so is the angle. Precisely what gets calculated into the value of your product can have a profound influence over what the final number looks like (and the associated duty). There are multiple mechanisms importers can use to reduce the cost inputs tied to the value of their imports.
As a simple example, the First Sale Rule, allows importers to deduct from the value of their product any markups from transactional middlemen. Of course, this won’t apply for those who purchase goods directly from a manufacturer, but there are other valuation deductions available. Given that the tariffs introduced over recent weeks are stacked tariffs (i.e., they are in addition to all other existing tariffs, not in place of), effective valuation can substantially lower duty outlay.
Stay nimble and carry on
Exactly what will come of the recent explosion of tariffs, reciprocal tariffs and trade protectionism remains the trillion-dollar question. Maybe the tariffs get lowered, altered or canceled altogether. Maybe there will be even more. It’s precisely because of this uncertainty that importers and exporters should be employing best practices to strengthen their resilience to change.
Beyond this, the key will be to establish enough redundancy in global supply chains to be able to pivot quickly in the event of an unexpected turn of events. Nimbleness will be key to navigating this new environment. Those who dig in their heels could find themselves significantly disadvantaged, possibly even in the near term.
Jill Hurley is Senior Director, Global Trade Consulting at Livingston. As the practice leader, she spearheads U.S. import and export projects, offering comprehensive reviews of clients’ business models for risk assessment, crafting, and implementing import/export compliance programs, conducting audits, navigating export licensing requirements, and providing support in U.S. trade remedy matters.