As any tax professional knows, policy, regulations, and reporting requirements are constantly shifting. Still, the amount of change that we’ve seen during just the first three months of the Trump administration has been unprecedented. From tariffs to the anticipated legislation for a second Tax Cuts and Jobs Act, and the potential of certain initial Tax Cuts and Jobs Act provisions set to expire, there has been a lot to monitor in both the domestic and international tax landscapes.
In this webinar, Raymond Wynman, Managing Director and International Tax Practice Leader at GTM; Robert Miller, Director at GTM; and Nick Baker, Managing Director and Co-leader of Export Controls, Sanctions and Trade at FTI Consulting, shared their latest analysis on TCJA 2.0 and tariff policy and how tax departments may be affected.
Domestic Tax Policy: Tax Cuts and Jobs Act
One of the signature pieces of legislation from the first Trump administration was the 2017 Tax Cuts and Jobs Act. This bill, which permanently lowered the corporate tax rate from 35% to 21%, also contained a number of provisions that are scheduled to sunset at the end of 2025:
- Bonus depreciation (40% in 2025; 20% in 2026; zero bonus in 2027)
- S. international rates
- 250 GITLI deduction: reduced to 37.5% in 2026 (50% before 2026)
- FDII Rate: increase to ETR from 13.125% to 16.4% in 2026
- BEAT rate: increase to 12.5% in 2026 (10% before 2026)
- 199A
- Look-through rule (for dividends, interests, and royalties)
- Personal taxes (rates, brackets, standard deduction)
While the sunsetting of these provisions has produced some uncertainty for tax departments, the Trump administration and Congress are currently in the process of writing a new tax bill that would extend all of the provisions of the TCJA set to expire at the end of 2025. Still, we won’t know the final shape of tax policy until a piece of legislation is signed.
In addition to extending the expiring TCJA provisions, the Trump administration has proposed a range of new tax proposals as part of a $1.5 trillion additional tax cut. It remains to be seen which tax cuts may end up as law, but it’s worth highlighting a few that have been part of the discussion:
- Business income tax proposals
- Corporate tax rate reduction to 20% (15% for domestic manufacturers)
- Elimination of the 15% corporate alternative minimum tax imposed by the Inflation Reduction Act (IRA)
- Restoration of the ability to immediately deduct Sec. 174 expenditures
- Section 163(j) limitation for net interest deduction based on EBITDA
- Personal income tax proposals
- Elimination of tax on tips, overtime, and social security
- State and local income tax cap elimination
- Treatment of carried interest as ordinary income
Tariffs
Understanding the Current Landscape
Before delving more deeply into tariffs, Nick Baker of FTI Consulting explained the all-important formula for calculating tariffs:
Duty Payable = Value of Import Good x Duty Rate
As we look at this equation, there are three main components: what the good is, where it’s from, and what it costs. These are the three variables companies should consider changing if they’re looking to lessen their tariff burden.
Part of the challenge, however, is that the duty rate varies by country, by good, and by whether or not the tariff is currently in effect. Trying to determine the status quo can be head-spinning, which is why we wanted to share where the U.S. tariff agenda currently stands as of April 2025:
- Global 10% reciprocal tariff on all goods entering the U.S. (currently in effect)
- Targeted tariffs on a group of 57 different countries, including the European Union (20%), Japan (24%), and India (27%)
- These tariffs were announced on April 9, but have been paused for 90 days as of April 11
- One unique case is China, where higher reciprocal tariffs (125%) are currently in effect
Direct and Indirect Tariff Impacts
No matter how your company’s supply chain is set up, chances are it will experience a direct or indirect impact as a result of tariffs. We discussed the following examples:
- Direct importer: U.S. companies importing finished goods from abroad will be subject to direct tariffs.
- S. manufacturers: U.S. companies importing raw materials from abroad will be subject to direct tariffs.
- Domestic procurement: U.S. companies purchasing goods from domestic vendors may also be subject to indirect tariffs if those goods were originally imported by the vendor. In this case, the vendor is likely passing down the costs of tariffs to its client.
Tariffs and Risk Mitigation
When it comes to tariff mitigation, it’s important to first understand where your tariff exposure is coming from—whether directly or indirectly—so you can take strategic steps to counter it.
There are a range of options to consider when it comes to tariff mitigation, including supply-chain restructuring, Chapter 98 duty exemption provisions, and use of Foreign Trade Zones (FTZs). These zones, located in the U.S., allow companies to import foreign goods and manufacture them in the FTZ with suspended duties. Instead of being paid immediately upon entry, duties are only paid when the manufactured goods are removed from the FTZ for consumption.
There are two main benefits to FTZ manufacturing:
- Because duties are delayed until goods are removed from the FTZ, there may be cashflow benefits.
- Manufacturers can re-export finished products duty-free. In this scenario, manufacturing takes place in the U.S., but companies aren’t subject to import tariffs on the portion of finished products that leave the U.S.
These are uncertain times, which can be a real challenge for tax departments and corporations trying to discern their tariff exposure. But there are genuine strategies companies can deploy, both in the short term and long term, to minimize their tariff burden. By thinking proactively about tariffs now, you may be setting your company up to be more competitive in the market.
To learn more about these topics and how they may apply to your tax department, watch the full webinar here.
