00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes. Joining me now
00:07is Jonathan Todd, vice chair of the Transportation and Logistics Practice Group at Benesh Law.
00:12Jonathan, thank you so much for joining me once again.
00:15Thank you, Brittany. These are exciting times.
00:17There's certainly a lot going on because it has been one week since President Trump's
00:20revised reciprocal tariff rates on dozens of countries officially went into effect.
00:25To start off the conversation, what's the impact you're seeing so far?
00:29Right. I think that immediately before the reciprocal tariffs came back into effect,
00:34a lot of clients that I talked to were in a cautious optimism mode. I think that a lot of
00:40the shock from April had wore off and folks were getting adjusted to the idea of, at the time,
00:48a 10 percent baseline tariff on most imports around the world. And there was some expectation that we
00:55would, of course, pay more as importers into the United States, but also the possibility of,
01:00you know, some delay. And what happened is kind of a mixed bag. So the reciprocal tariffs
01:06came back into effect. For the most part, those were directionally higher than the 10 percent that
01:13importers were paying during the pause period. But then, as we've seen even recently, there's a new
01:19pause on negotiations with China so that those talks can continue and arrive at a place that the
01:27government believes is acceptable. So that cautious optimism kind of, you know, bore out and folks were
01:34accustomed to where this was going. That doesn't mean that everyone's in a good place. You know,
01:39there's certainly challenges today, but it's a different tone than it was in April, for sure.
01:45And you work with retailers and manufacturers. How did they adjust to this news really since
01:52the reciprocal tariffs were announced months ago to when they finally went into effect in August?
01:59Right. I think that it's kind of been a learning curve for a lot of clients, anyone that imports
02:04heavily into the U.S. or that relies heavily on imported goods. There was the learning curve of
02:10compliance and awareness. What is happening? Does it really impact us? What ways can we maybe change
02:17up our sourcing and supply chain to help manage burden? And how do we deal with suppliers and customers
02:23under our purchase agreements or terms to help manage burden? A lot of that was kind of a learning period,
02:29I think, in second quarter. And beyond that, the general idea of, look, companies that import to the
02:35United States need to be more savvy of how they're sourcing, how they're approaching supplier risk on
02:42a global basis and in compliance. Because one thing is certain, we're entering not only a higher
02:47cost operating environment because of the tariffs, but a higher enforcement environment from a government
02:52enforcement perspective, because U.S. Customs is on the lookout for evasion and is going to take that
02:58very seriously. So I think there was a lot of this kind of back to basics understanding of what our
03:03tariffs, how do they impact our companies, how are we sourcing around the world and how are we
03:08managing compliance. And I think that that factored into kind of where we are today. You know, a lot of
03:14companies I talked to had game plans, some even had war rooms for how they were going to deal with the
03:20tariff environment. And they're playing out those plans right now as we speak. And when you're looking
03:26at companies, when you're looking at retailers and manufacturers and even the consumer, who do you
03:31think, if you can list it as simply as this, as buckets of winners, buckets of losers, who do you
03:37think is winning and losing when it comes to this tariff plan? Yeah, it's interesting because there are
03:44some pockets of the economy that are feeling pretty good right now. I've talked with some folks in the
03:51steel industry, for example, or in companies that service the steel industry. And a lot of those that I
03:57talk to, at least anecdotally, are very happy with the direction of things today. But then you talk
04:03with some in the consumer retail space, or even, let's say, automotive suppliers, you know, other
04:10industries. And it really is a challenge. One of the things that you'll notice is that the way this is
04:16talked about in the media is as if this is essentially free found money to the federal government. And it
04:23simply isn't. There are headlines where, you know, the real cost of this is clear, you know,
04:28GM and Stellantis announced multi-billion dollar impacts because of the tariffs. Volvo announced a
04:35billion dollar impact because of the tariffs. Ford announced an 800 million dollar impact because of
04:40the tariffs. And these are very real impacts that are being felt by importers in the US. And they're
04:47dealing with those. I mean, business does what business does. And folks have to run good shops and
04:52make a profit. But it is very challenging for some sectors of the economy. And what about the consumer,
04:58just your everyday average American? I mean, when will they be feeling the impact? Are we already?
05:05And how much will we really be burdened by this, if at all? Yeah, I think one misconception is that
05:12many folks talk about this as if it's a one for one impact. It's not exactly. Let's suppose that an item
05:20you buy was made in a country where now there's an additional 15 percent reciprocal tariffs. That
05:25doesn't exactly mean that there will be a 50 percent change in retail cost of the good. And there are a
05:32few reasons for that. One is that that 15 percent is paid on the value given by the importer for the
05:40good. That's usually not retail value. Also, there could be other changes or value adds even in the US.
05:46So it's not exactly one for one. But the one thing is clear, and that's that for imported goods, there is
05:51a higher cost to land those goods in the US today than there was in the past. And that has to go
05:58somewhere that either comes out of the bottom lines of domestic US companies or they renegotiate with
06:05foreign suppliers. We're seeing a lot of that where maybe, you know, the purchase price of a good is lower than
06:10it was to help offset some of the burden lawfully or it's passed on to a customer, whether that's
06:17a consumer or an industrial customer in the United States. It has to go somewhere. It's not found money.
06:24And it remains to be seen how that will play out. That's a decision for every company, right? Every
06:29company has to make that choice and compete against their competitors and do the best they can to run a
06:35good shop. There's been this sense of uncertainty ever since President Trump announced the tariffs
06:40on Liberation Day back in April. And I'm curious, there's still a big sense of uncertainty when it
06:46comes to China because President Trump this week extended the pause on tariffs on China for another
06:5290 days. What are your thoughts on that? I think that it makes sense in the sense that, you know,
06:59China is a very significant trading partner with the United States. And there are other geopolitical
07:05factors going on that the president, of course, needs to manage with respect to China. So the idea
07:11that additional time will be taken does make sense. I think that the broader question of where we're
07:19headed directionally with the other tariff programs is a big open question. I mean, we have
07:26litigation right now on appeal over the legal basis for most of these tariffs, the IEPA. And that is
07:35really the foundation for what the president did with the reciprocal tariffs. Another thing is that we
07:41have sectoral tariffs happening. The president is rolling out. They're called Section 232 tariffs,
07:46but those are on a number of industries. Very recently, there was a 50% increase on imports for copper.
07:54We'll see those in pharmaceuticals and semiconductors and heavy duty trucks and maybe other industries.
07:59So there are a lot of these programs being rolled out. The timing has really been the big variable
08:05all year, as well as the percentage where these tariffs land. Those are still up in the air. And
08:12there is still a degree of uncertainty, which, of course, has been the business challenge in 2025.
08:17And the tariffs on China are going to be paused until November 9th. And I know it's still the
08:23summer, but we are headed towards the holiday season and November 9th. I mean, people will
08:27be thinking about Christmas shopping, buying presents ahead of the big holidays in December. I mean,
08:33is there going to be a big impact on the holiday season? So remember that a lot of the inventories
08:41for the holiday season are landed in the US well in advance. And it's going to be a challenge for a
08:50lot of importers. This isn't just a China story. China is a big part of the story. But bear in mind that
08:56from the first Trump administration through the Biden administration,
08:59there have been heavier tariffs on imports from China. And a lot of the consumer products
09:05clients and retail clients that I talked to have spent these last few years diversifying their
09:10suppliers. And they'll have suppliers in Europe, they'll have suppliers elsewhere in Asia and in
09:15North America. And essentially, any import from anywhere into the US has a higher tariff burden today
09:23than it did in the past. So the real additional cost is there. The other variable from a pure supply
09:29chain perspective that I think is very interesting is the way that inventories are managed.
09:34If you're inside these companies, the question of what inventory levels you need to maintain
09:40and what the demand side of the equation, what the consumer will have an appetite to purchase and
09:45at what price is very challenging from my perspective in this environment. But that's what good supply
09:51chain folks and good executives within companies do. And right now they're running good businesses as best
09:58they can and sharpening those pencils and preparing for that peak season moment.
10:02And you and I spoke about tariffs back in March. And you said that this isn't just about the United
10:07States, that trade is reciprocal and trading is a relationship like any other relationship.
10:14How do you think those relationships between the United States and our trading partners have really
10:18changed over the past couple of months? It is certainly more transactional today than it was
10:24in prior administrations and moving much more fast than it was in prior administrations. One thing that
10:30that is is happening, which, from my perspective, kind of signals of the end of the post close, I'm sorry,
10:38the post war era that we saw through most of our lives is the idea that there will be trading networks and
10:45trading partners that are key but completely outside of the United States. I think there's a very real
10:53possibility of new trading relationships that are very significant between partners that have nothing
11:00to do with the United States, simply because of this experience in working with the United States on trade.
11:06I'm not going to make a call on whether that's, you know, good or bad. That's just the future that we're
11:11walking into here. But it's a new change, a new dynamic coming out of this era where, at least from our
11:18perspective, most trade was US dollar centric and certainly to some degree US centric.
11:24I know we're still waiting to see what happens with China. I know you said you're still waiting to see
11:30what those sectoral tariffs really look like. What else are you looking out for next? What else should we be keeping our eye out on?
11:36Right. The big question that no one can reasonably answer right now is what will happen with the
11:44litigation. So the basis for these reciprocal tariffs is something called IEPA. The president
11:52declared an emergency and then based upon that emergency imposed these tariff figures on countries
11:58around the world. And as we all saw, because we lived through it, adjusted those as the president saw fit.
12:04There are cases on appeal right now where importers of the United States, again, importers pay the
12:09tariffs, not foreign countries. Those importers are challenging whether, statutorily, the president
12:15and the White House had the authority to do what they did. The oral hearings happened very recently. The
12:21questions that were asked, I think, were the right questions focusing on whether this was a proper
12:28delegation from Congress and what the role of the presidency relative to the role of Congress should
12:34be. It's fundamentally a balance of powers question. This will develop here in third quarter and going
12:42into fourth quarter. At some point, there will be a Supreme Court case on this. At this point in time,
12:48it's completely a crystal ball question of where this will end and how what I tell my clients is
12:54to maintain status quo. Nothing is changing until until it does. So we'll continue needing to pay
13:01these duties and continue needing to maintain compliance with an intense focus on compliance because
13:07there will be dramatic enforcement for any any type of duty evasion in the future. And at some point
13:14that may change, but we don't know when and we don't know how. So we all need to maintain awareness
13:19until that point in time. I think that's tough as a business to hear. Nothing is changing until
13:24it does. I mean, how do you adequately prepare for that? Right. Fundamentally, this is an awareness
13:31challenge and in a compliance challenge. You know, I hear from clients all the time who ask me, what is the
13:36source of truth? Everything is changing so quickly. I don't know what rules I'm even playing by. And in this
13:42environment, we've seen that announcements often happen first on true social and then they're announced on on
13:48whitehouse.gov. And then they appear in the Federal Register. Finally, US Customs announces its
13:54implementation guidance. So there is kind of this this drip, drip, drip of information about this.
14:00And it is hard to get a grip on it. We do our best as a law firm to help clients stay on top of that and
14:05maintain compliance. But that's the very first step is staying aware of what is happening. And the next
14:10step is to to run a good shop. Like I said, the next step is to understand what we need to do and to do it as
14:17as compliantly as we can, because from a pure supply chain and customs perspective, this is what keeps
14:24containers moving into the United States and not being seized or detained by US Customs. This is
14:29what keeps us out of the headlines and out of the hot seat in terms of civil penalties and liquidated
14:35damages to US Customs. That's really fundamental to avoiding supply chain interruption. So it's good
14:41old fashioned business practice from my perspective in a higher cost environment and a higher compliance
14:47environment until we know that these figures change. But I think that it would be foolish at
14:51this point in time to plan on the possibility of lower tariffs in the future without any certainty that
14:58that may indeed pan out. And I know you said we don't have a crystal ball, but as we see things that
15:04are uncertain, maybe materialized to becoming more certain, I hope you can come back on and continue
15:09the conversation. Jonathan Todd, thank you so much for the time. Thank you, Brittany. I appreciate it.
Comments