Even if your company’s never been subject to tariffs before, and even if you don’t do business with China, Canada, or Mexico, you need to prepare for potential impacts from the second Trump administration’s tariffs, experts from PwC said at the firm’s 2025 Tax Policy Media Breakfast.
They’ve crunched the numbers, and found that tariffs could potentially be “a big shock to the operating model” of companies that haven’t dealt with them before, as Chris Desmond, PwC’s US global trade services principal, put it.
Emphasis on potentially. There’s great uncertainty right now as to what countries’ goods will face tariffs, how large those tariffs will be, when they’ll be levied, and even whether they’ll materialize at all. As Krishnan Chandrasekhar, PwC US tax leader, pointed out, one of the uses of tariffs is as a bargaining chip in negotiations between countries. This can heighten uncertainty, as we saw on January 26 when the US and Columbia threatened to place tariffs on each other and then backed down, following negotiations, over the course of a single day.
In such a volatile climate, the best course of action for business leaders is to model various scenarios, PwC experts said. Finance leaders should know what the impacts of different tariffs will be on their “supply chain operating model down to the country, country of origin, and product,” Desmond said. “It will be a difficult exercise but you need to have that in order to be able to dynamically respond to what happens.”
America First muddies the waters. The Trump administration’s major trade proposals include tariffs of 25% on Canada and Mexico; a 60% or higher tariff on China; 100%–200% on vehicles from Mexico; and 10%–20% on the rest of the world, PwC noted in its report.
But on January 20, the administration released an executive memo called the America First Trade Policy, which directs government officials to investigate “unfair trade practices” between the US and other countries and find possible ways to mitigate them.
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Desmond called the scope of America First “eye-opening.” It entails “examining every single free trade agreement we have, to see if it’s fit for purpose,” he said. And it could have some serious implications for global trade. Countries that have historically not been subject to many tariffs, such as Vietnam and Ireland, may now face them, and they could be larger than expected, as the trade imbalance between them and the US is so lopsided, Desmond suggested. He hypothesized that, instead of a flat 10% or 20% tariff on the “rest of the world,” we could see “surgical tariffs” tailored to individual countries.
Newcomers to tariffs could be in for a shock: About $2.3 trillion of the $3.3 trillion in tangible goods that the US imports each year is duty-free. That could change under Trump 2.0. The formerly duty-free category could go from zero to nearly $550 billion in tariffs, Desmond said, and companies that have never had to contend with tariffs before will need to contemplate them.
One industry poised for an especially big shock is pharmaceuticals and life sciences. These companies have typically received exemptions from tariffs in the past, Desmond said. Potentially, they could go from “$80 million with an M” to “over $56 billion with a B” in tariffs, he said.
Transportation, including autos and planes, could be hit especially hard, Desmond said. That sector could go from about $4 billion to about $68 billion in tariffs a year.
Desmond suggests that companies think about mitigation strategies, including deferral programs, duty drawbacks, and transfer pricing. Changing the sourcing of their products is a possibility but would be one of “the bigger lifts,” he said.
Ultimately, though, he thinks the uncertainty will continue. “Where is this movie going? I’m not too sure,” he quipped. “Get some popcorn, because it might be a multiseries.”