Outpace Uncertainty with Tax-Smart Moves

by David Zaiken

Despite numerous tariff threats, announcements and extensions since early this year, many companies did not believe President Trump would pull the trigger, but higher duties were locked and loaded as of Aug. 14 with higher individual country reciprocal tariffs. Then, the federal appeals court held last week that these tariffs could not be implemented and indicated an October termination date.

This case is headed to the Supreme Court, and it should decide in the near future whether or not tariffs can move forward. If the court decides to uphold the tariffs, there may be additional tariffs implemented. Countries to keep a watchful eye on include China, India, Canada and Mexico.

If there is one certainty in all this uncertainty, it’s that companies no longer have the luxury of waiting for tariff impacts to come into sharper focus. If they remain in effect and you don’t take the right steps now, tariffs are going to dramatically impact your business. It’s crucial that you ascertain the financial impact and develop alternative strategies as we enter the final quarter of the year.

Key issues remain, however. One is the U.S. tariffs on Chinese goods. The president on Aug. 11 extended the trade truce for another three months, giving both countries more time to work out their differences and keeping in place (for now) the 30% tariff on Chinese imports. Indian tariffs are currently at 50% and could be raised higher. There are certain exemption areas, like pharmaceuticals, which might be subjected to tariff in the future. These key into the larger tariff situation.

Even in this unresolved situation, modeling out scenarios will reveal information that can guide your decision-making. Timelines are tight, and this could be a major decision-making effort for you over the next few months.

Plan Your Next Move Now

The most important question to answer is how tariffs affect the cost of goods sold, and how they impact pricing and margins. If you haven’t projected your costs for the year ending Dec. 31, 2025, the time to do it is now. Modeling it out with the assumption that reciprocal tariffs stay in place will give you a good idea of where you stand. And once you make that determination, is the answer acceptable?

If not, it’s time to make some simple, short-term moves. Consider: Should I change my country of origin? Should I renegotiate my buy contract? Should I raise my prices? Should I import components and assemble goods here? Should I investigate free trade zones? Are my goods properly classified? There are numerous strategies that can be considered, as outlined in the chart below.For related parties, it is critical to also reassess transfer pricing and its impacts.

Commendable Actions and Cautionary Tales

Though some middle-market companies are watching and waiting, many have jumped into planning for numerous outcomes and are making moves to ease the impacts.

One company modeled numerous scenarios and determined that no move would be the right one. After all the “what ifs” were factored in, including the early proposal of a 145% tariff on Chinese goods, it still would be cheaper to buy goods there than other options. Another company is considering forming a joint venture procurement company with three of its competitors to gain leverage in negotiating the price of chemicals that can be sourced only from Vietnam and China. Another company, which imports its products from China, is now seeking suppliers in Malaysia and Hong Kong. Additionally, bankers are reporting an uptick in borrowing for assembly operations here, showing that some companies are importing components rather than fully finished goods.

While these companies have done the groundwork needed to move ahead in the new tariff environment, Procter & Gamble and Apple show that even deep-pocketed, behemoth companies can be caught off guard.

Apple, in an effort to avoid high Chinese tariffs, is moving its iPhone production from China to India by the end of next year, according to multiple media outlets. The tariff rate in India, however, recently doubled to 50%, in part because India refused to limit purchases of Russian oil. Further, Procter & Gamble said in its most recent earnings report that estimated tariffs will increase its costs by about $1 billion before taxes for fiscal 2026 and that it therefore will raise U.S. prices on a quarter of its products. The higher-priced products will hit shelves this month.

The tariff debate will soon be finalized, but you don’t want this to happen to you.

Interplay of Tax Reform and Tariffs

Any decision you make on tariffs will have to be considered within the context of the One Big Beautiful Bill Act (OBBBA). You may find that the cost hit from tariffs may be offset by tax savings, but it’s a good idea to talk with your tax advisor to discuss the possibilities, as each business is unique.

Here are the three biggest changes that can help your business.

1. R&D expenses. You can now expense research and development costs immediately instead of capitalizing and amortizing them over a period of years.
2. 100% bonus depreciation. OBBBA allows for immediate 100% bonus depreciation on qualified property and equipment acquired and placed in service after Jan. 19, 2025. Also, qualified production property – real property used in manufacturing or production – now qualifies for a 100% immediate depreciation.
3. Section 179 expensing. The maximum Section 179 deduction has been raised to $2.5 million, with the phase-out threshold increased to $4 million. This is effective for property placed in service in tax years beginning after Dec. 31, 2024. This applies to qualifying tangible personal property, off-the-shelf software and certain improvements to nonresidential real property.

Your Competitive Edge Starts with What You Do Next

In today’s environment, tariffs and tax reform aren’t separate conversations. Every sourcing decision you make will ripple through your tax strategy, and every tax-saving opportunity can help blunt the impact of higher duties. The companies that will come out ahead aren’t waiting to see what happens. They’re running the numbers now, modeling multiple scenarios and making moves before their competitors do.

CEOs are looking for direction from their CFOs, chief supply chain officers or operations officers. This is the moment to pull your experts into the same room and map out a coordinated plan. The tariffs are here. The tax rules are in place. The winners will be the companies that respond decisively, look for creative solutions and leverage every provision available to offset the costs and protect margins.

If you haven’t started, the clock is already ticking.