President Trump's latest tariffs are likely to become an inevitable and expensive reality for those relying on American businesses and foreign goods.
Shoppers who buy clothes from Chinese retailers may soon pay more than twice as much as the special exemption for less valuable imports has disappeared. And companies involved in international trade must do more complicated calculations to determine how much they owe to tariffs.
“Maybe 3% of people are well prepared,” said Jeremy Page, founding partner at Page Fura, an international trade law firm. “And that could be charity.”
Imports from China are hit by 145% tariffs. This means that you have to pay the federal government $145 for every $100 worth of goods your business purchases from that country. Products from most other countries will have a new 10% tax, but could rise if the country does not reach a trade agreement with the US by July. There are also separate customs duties on cars, steel and aluminum. Trump also says he wants to impose new tariffs on drugs and computer chips.
Trump argues that tariffs encourage businesses to produce goods in the United States. Tariffs on Chinese products almost certainly reduce imports from the country. However, American companies cannot immediately obtain products from other locations. US imports from China totaled $439 billion last year.
Who will pay the customs duties?
Trump says tariffs are taxes on other countries, but American companies that import goods pay tariffs to customs and border protections when goods enter the United States. Importers can hand over some or all of the tariff costs to consumers at a higher price.
“In the short term, prices will definitely rise,” said Daniel J. Barabino, chief operating officer at Top Banana, a fruit distributor based in the Hunts Point Agricultural Market, which imports bananas and other produce from Central America.
Importers may also try to negotiate a lower price with foreign suppliers. This reduces tariffs.
How are customs duties paid?
Most importers employ customs brokers that calculate unpaid duties based on the value of the goods and the location where they were exported. Other factors, such as whether the product has components from China, can complicate customs calculations.
Payments are made electronically from either the importer or broker's bank account, and later collecting money from the client. With Trump loading tariffs, some brokers are becoming more cautious and customers are paying faster.
“As tariff changes and increased risk, many brokers are tightening their credit policies, requiring them to pay upfront or ask for funds,” said Adam Lewis, co-founder and president of Customs Brokers.
Where will the money go?
The tariffs end at the Ministry of Finance. The Ministry of Finance also receives taxes and other government fees, spending money on salary, weapons, equipment and more.
What if the business is less than paying?
It is difficult to calculate tariffs, especially if the tariff rate changes significantly over a few days, as recently as it has been.
Trade rules allow for some leeway, said lawyer Page. Importers who realize they have made a mistake and have notified customs or border security are usually allowed to pay what they owe and interest.
But Page said Trump's recent executive order on metal tariffs is even tougher than that. The order said customs and border protection could impose much higher monetary penalties if importers misclassify goods and, in Page's opinion, is an approach that rejects the law.
“The mission is to say, 'We're going to hit you no matter what,'” he said.
Will the new tariffs cause delays?
The customs and border security system already shows signs of tension.
On Friday, the agency said it was unable to file customs duties that importers would bear on certain goods. The glitch appeared to prevent importers from applying lower tariff charges on goods that had been in the US before some of Trump's new taxes took effect.
Customs and border protection said it would release goods affected by the issue and allow importers to file customs duties later.
“This is not the last time something like this happens,” Lewis added that there may be a backlog when customs officials do further checks to see if tariffs on Chinese goods are being paid correctly.
Countries that do not attack trade deals with the United States by July could face higher tariffs, and Trump may suddenly decide to introduce new tariffs. Such fear of taxation could introduce goods into the United States in a single month's rush before the new tariffs take effect.
Supply chains have so far handled higher volumes without large snuggles.
According to Motive, trucking activities around Laredo, Texas, one of the busiest border crossings in the United States, retrieve data from tracking devices they provide to trucking companies. Local truck drivers said their network was not tense.
At Long Beach and Los Angeles ports, trucks took an average of 71 minutes to pick up cargo from the terminal in the first three months of the year. It rose slightly from 68 minutes in the first three months of last year. In the first quarter of 2022, when the pandemic trade boom caused a backlog at the port, it took an hour and a half to pick up.
Daniel Kay Reports of contributions.
