By Jill Hurley
For businesses engaged in global trade, particularly those in North America, the onset of a new month is always cause for understandable trepidation.
Whether by design of not, the top of the month seems to be reserved for new announcements (and sometimes new actions) regarding trade and tariff policies. This month—with importers across America anticipating the end of the 90-day pause the Trump administration placed on so-called reciprocal tariffs—more announcements and more confusion.
Reciprocal tariff update
As a quick recap, reciprocal tariffs are those the U.S. administration announced on April 2, 2025, which it dubbed “Liberation Day.” The initial announcement imposed a universal 10% tariff on imports from goods originating outside North America and a much higher tariff rate on approximately 60 countries the administration identified as enjoying a trade surplus with the U.S. Within 48 hours those higher tariffs were put on pause for a period of 90 days (until July 9).
In the days leading up to the expiration of that pause, the administration announced it would be extending the pause to August 1 but in dramatic fashion announced that 19 countries (now up to 27 countries) from the original country list were sent letters notifying them that they would be subject to higher tariff rates on that same day. This seemed redundant since those countries would have been subject to those tariffs anyway.
It should be noted that at time of writing, that list of countries to which official letters were sent has not been noted through official government channels, leaving the impression that the letters were sent less as a form of policy and more as the latest salvo in the battle of wits between the U.S. and its trading partners.
North, South and West
In almost every direction, America’s largest trading partners found themselves back in the hotseat with separate announcements—again, in the press but not on official government channels—that their tariff rates would be increased. The U.S. administration has announced a possible increase in Canada’s tariff rate from 25% to 30%, and from 25% to 30% for both Mexico and the European Union. The increased tariff rate is presumably not applicable to Canadian energy products or potash (which currently have a tariff rate of 10%), nor to goods that qualify under the United States-Mexico-Canada Agreement (USMCA). I say presumably because there is no official announcement or guidance from the government to date. Again, this seems less like official policy and more like a new shot across the bow to compel these larger trading partners to agree to U.S. trade terms.
It’s worth pointing out that Canada recently capitulated to Washington’s threat of imposing a fresh round of tariffs in response to Canada’s scheduled implementation of a Digital Services Tax (DST)—similar to the one imposed by European countries—that would have significant financial repercussions to America’s tech giants.
From steel and aluminum to copper
On June 4, the Trump administration announced it would be doubling to tariff rate on steel and aluminum from 25% to 50%. Two weeks later it announced that imports of aluminum derivatives without a declared country of smelt and cast would subject to a tariff rate of 200%.
This month the administration has turned its attention to copper, announcing a universal 50% tariff on the high-priced metal effective August 1. Much like steel and aluminum, the tariff is being imposed under Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on the grounds of national security. The administration contends that as a critical element in the production of technology, aircraft, ships and munitions dependency on foreign sources of copper could compromise national security.
Again, nothing official has been published. As of the date of this writing, the 232 Investigation is still open with the Department of Commerce, and recommendations have not yet been provided by the Secretary to the President. As such, the tariff rate announcement is seemingly premature, and the specific details around the tariffs, including official exemptions, opportunities to apply for exemption, opportunity for drawback and documentation requirements, remain ambiguous.
Why July 31st may be more important that Aug. 1st
Given that so many new tariffs are slated to take effect Aug. 1, one might think it should be the most important upcoming date for trade observers, but the day before Aug. 1 may actually be far more important. On July 31 oral arguments will be presented in the Court of Appeals for the Federal Circuit in Washington D.C. to determine the legality of the tariffs being imposed against America’s trading partners under the International Emergency Economic Powers Act (IEEPA).
In late May, the U.S. Court of International Trade (CIT) blocked the tariffs, but the White House quickly appealed, sending the case to the appellate court on July 31, allowing the tariffs to remain in place for the time being.
Should the appellate court rule against the U.S. administration, there’s a strong possibility the case will find its way to the Supreme Court. But it might also prompt the administration to double-down on some of its trade policies beyond what’s already been announced.
What did this mean for businesses dependent on trade?
In short, more waiting, more wondering. Much of the challenge in the current administration’s approach to trade policy has been less about the tariffs themselves (although their impact shouldn’t be understated) and more about the uncertainty surrounding them.
Businesses are understandably unsure of what actions to take given the volatility in the trade environment. In some sectors, importers that rely on components from outside the U.S. for production, there’s been a move to stockpile goods in anticipation of tariffs. Ironically, this has been a boon to industrial manufacturers who produce those components.
Companies with distribution models that extend to Canada and/or Mexico, should be considering cost-savings through transport by either splitting overseas shipments so that Canada- or Mexico- destined goods go directly to those countries, or that they are shipped in-bond to those countries when they reach the U.S. Doing so prevent the importer from having to pay tariffs on those Canada- and Mexico-destined goods.
Margin and price elasticity
Of course, the key question has been what impact the tariffs will have on pricing. Will inflation spike, or will businesses absorb the cost. The truth is it’s too soon to tell. The various exemptions and pauses placed on the tariffs thus far have allowed businesses to withstand the worst of the tariffs. Dramatic spikes in pricing are by no means widespread. That could change should the reciprocal tariffs come into effect as outlined by the White House on Aug. 1.
Goods such as appliances, which rely on heavily on components from overseas, have seen modest price increases (less than 1%) in Q2 but, given the threat of higher tariffs on critical sourcing spots such as Thailand, Malaysia and Indonesia, there’s a possibility those prices could spike further.
In the tech sector, the copper tariffs could have an impact on prices but, as the details of the new tariff are still ambiguous, it’s too soon to say. Similarly, lower value goods such as apparel and footwear could see price spikes but just how much is difficult to say.
How much companies will be forced to raise prices will depend on how much they’ve stockpiled and how much buffer they have in their margins. As a result, larger companies with more buffer are likely to be able to absorb the cost more than their smaller counterparts, allowing them to remain price competitive both domestically and internationally.
The question, however, is how long these companies can withstand that cost absorption before it begins to impact financial performance.
Six questions businesses should be considering
Wishing and hoping and praying isn’t sound strategy in today’s environment. Major changes might be premature but, at the very least, businesses impacted by tariffs should be asking themselves:
- Do I have enough redundancy in my international supply chain to scale production up or down in one place as necessary in response to tariff policies?
- Is my production model flexible enough to allow me to alter the manufacturing of components to reduce my tariff exposure (or flexible enough to use alternative materials that are tariffed at lower rates)?
- Am I maximizing my use free trade agreements (not just the USMCA by the free trade deals available in those countries where my production is taking place)?
- How much buffer do I have in my margins and can my business withstand the volatility of the current trade environment?
- Do I have the ability to split sourcing and/or overseas production to tailor to U.S. markets versus foreign markets (particularly important for those with overseas production destined for markets in Asia Pacific).?
- Is domestic sourcing even an option for my businesses? (If not, there might be a case for a case for tariff exemption).
Many of the businesses we work with are already investigating these matters in depth with the understanding that the volatility of the current day may become a new normal, at least for the foreseeable future.
I’ve often made the analogy that today’s trade environment is like a chess board where every business engaged in import and export has to try to attempt to predict what the next change might be and what move it might make in response. This is truer than ever today.
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.