Businesses Prepare for Rising Tax Hurdles as Tariffs Dominate Global Agenda

U.S. Businesses Navigate Rising Tariffs and Trade Compliance Challenges

As the United States continues to implement a series of new tariffs under President Donald Trump’s trade policies, businesses across the country are scrambling to ensure they comply with the highest import duties in decades. These measures have created a complex landscape for companies looking to maintain competitive advantages while adhering to federal regulations.

Mike Sanders, CEO and co-founder of CereTax, a company that specializes in sales tax automation, highlighted the growing concern among businesses of all sizes. He explained that while companies aim to minimize their tax liabilities, compliance with federal laws remains a top priority. This can be particularly challenging given the intricate nature of international trade and the evolving tariff structure.

One strategy that some companies are exploring is tariff engineering. This involves making minor adjustments to product materials, dimensions, or compositions to qualify for lower tariff categories. For example, Converse modified the soles of its iconic All Star shoes by adding fuzzy fabric, allowing them to be classified as slippers rather than athletic shoes, which significantly reduced their tax burden. While such practices are legal if justified, there are also gray areas where misclassification, undervaluation, and even fraud can occur.

Sanders emphasized that businesses are increasingly evaluating their options to reduce tariffs through various strategies. These include rethinking supply chains, diversifying sourcing strategies, and bringing manufacturing back to the U.S. Another option is the use of Foreign-Trade Zones (FTZs), which are designated areas near ports where goods can be imported, stored, and processed without being subject to immediate duties.

In addition to these strategies, companies are also reviewing their tax compliance efforts, ensuring that any changes in product classification do not lead to additional scrutiny or penalties. Sanders noted that even small errors, such as misclassification or omissions, can result in significant financial consequences due to increased regulatory attention.

Increased Enforcement and Trade Compliance Efforts

The U.S. Customs and Border Protection (CBP) has ramped up its enforcement efforts under the Enforce and Protect Act (EAPA). This initiative empowers CBP to investigate and stop trade evasion schemes. According to recent reports, CBP uncovered over $400 million in unpaid trade duties through EAPA investigations during the first half of 2025. The agency also identified 89 cases with "reasonable suspicion of duty evasion" during this period.

CBP Commissioner Rodney Scott stated that the agency is working diligently to prevent trade evasion and ensure a fair playing field for U.S. companies. As part of these efforts, CBP investigated 23 U.S. importers and a network of Chinese shell companies that were funneling goods through Indonesia, South Korea, and Vietnam. The scheme was discovered in May and involved more than $250 million in revenue owed, with the figure expected to rise as the investigation expands.

CBP teams conducted port inspections, analyzed trade data, and performed on-the-ground verifications in Indonesia and Taiwan as part of the probe. All the importers investigated were found to be in violation, leading to the exposure of more companies and the discovery of new evasion tactics.

Impact of New Tariffs on U.S. Commerce

Last week, new tariffs on products from 66 nations, including the European Union, took effect. These tariffs have already generated significant revenue, with an analysis of federal data showing that the U.S. collected $58.5 billion in tariff revenue between January and June of this year before accounting for income and payroll tax offsets. The average effective tariff rate increased to 9.14% in June, up from 2.2% in January when Trump returned to office.

Trump has consistently argued that these tariffs are essential for restoring manufacturing jobs lost to lower-wage countries, shifting the tax burden away from American families, and reducing the national debt. A tariff is essentially a tax on imported goods, typically paid by the importer. Depending on the situation, the importer may absorb the cost or pass it on to consumers through higher prices.

As businesses navigate this complex and evolving trade environment, the need for strategic planning, compliance, and vigilance has never been greater. With ongoing enforcement actions and rising tariffs, companies must remain adaptable and proactive in managing their trade obligations.