Financial merit of Liberation Day tariff refunds could be minimal for some US importers
The financial merit of Liberation Day tariff refunds could be minimal for some US importers, say leading audit, tax and business advisory firm, Blick Rothenberg.
John Havard, a US/UK private client consultant at the firm, said: “$100bn (£78bn) of the ‘Liberation Day’ tariffs has now been refunded. However, for some US importers, the financial merit of refunds will be minimal due to new US tariffs and the increasing cost of both goods and shipping. The value of refunds will also vary depending on the country they imported goods from.”
He added: “The UK had a 10% Liberation Day tariff rate, but the replacement Section 301 of the 1974 US Trade Act tariff is being applied at the same rate. As UK imports and exports have not notably changed in volume since the enactment of the Liberation Day tariffs, US importers may find their refund money goes immediately into paying for the cost of the new tariffs.”
John said: “Conversely, the rate of China’s Liberation Day tariff was 34%. Hence US businesses who imported Chinese goods while the tariff was in place might receive a substantial refund. However, after the Liberation Day tariffs, US imports from China in millions of US dollars reduced from about $40,000m per month to $20,000m per month or lower. Moreover, Chinese goods have also been subject to a 12½% tariff under the Section 301 of the 1974 US Trade Act since 24 July, meaning that even those importers who receive significant refunds need to accept that realistically it will not be the full gross value of the initial tariffs that they paid.”
He added: “Furthermore, US import businesses, even if they receive a substantial tariff refund, may find that increases to the base price of goods and supply chain disruptions caused by the Iran war effectively wipe out the potential financial relief from tariff refunds.”
John said: “The previous flat 10% tariffs, enacted between Liberation Day and the introduction of the Section 301 tariffs are subject to litigation and may see US import companies receiving further refunds – however, as with the Liberation Day tariffs, the financial merit will ultimately depend on the origin of the goods and global trade health during the time the tariffs were in place.”
He added: “Although there is already a court challenge, the current 10% or 12½% Section 301 tariffs are not going away in a hurry. But if the Democrats gain control of both House and Senate in the mid-term elections, things could change at pace.”