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It was only two months ago when I first blogged about the Trump Administration’s initial round of tariffs, which were announced as many larger companies were finalizing their annual reports on Form 10-K for the year ended December 31, 2024. Now, as those companies are beginning to prepare their earnings reports and quarterly reports on Form 10-Q for the first quarter, the Trump Administration has announced sweeping new tariffs that are more broadly applicable than the initial round of tariffs, which had targeted specific countries and goods. Companies will now need to revisit the disclosure implications from these tariff actions in the context of preparing their earnings releases, as well as the Risk Factors and Management’s Discussion and Analysis sections of their upcoming SEC reports.

Yesterday, President Trump declared that foreign trade and economic practices had created a national emergency under the International Emergency Economic Powers Act of 1977 (IEEPA) and imposed across-the-board tariffs on all countries, along with individual reciprocal higher tariffs for certain countries, subject to certain exceptions. The White House Fact Sheet regarding the latest tariff action notes:

– Using his IEEPA authority, President Trump will impose a 10% tariff on all countries.
– This will take effect April 5, 2025 at 12:01 a.m. EDT.

– President Trump will impose an individualized reciprocal higher tariff on the countries with which the United States has the largest trade deficits. All other countries will continue to be subject to the original 10% tariff baseline.
– This will take effect April 9, 2025 at 12:01 a.m. EDT.

– These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated.

– Today’s IEEPA Order also contains modification authority, allowing President Trump to increase the tariff if trading partners retaliate or decrease the tariffs if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters.

– Some goods will not be subject to the Reciprocal Tariff. These include: (1) articles subject to 50 USC 1702(b); (2) steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs; (3) copper, pharmaceuticals, semiconductors, and lumber articles; (4) all articles that may become subject to future Section 232 tariffs; (5) bullion; and (6) energy and other certain minerals that are not available in the United States.

– For Canada and Mexico, the existing fentanyl/migration IEEPA orders remain in effect, and are unaffected by this order. This means USMCA compliant goods will continue to see a 0% tariff, non-USMCA compliant goods will see a 25% tariff, and non-USMCA compliant energy and potash will see a 10% tariff. In the event the existing fentanyl/migration IEEPA orders are terminated, USMCA compliant goods would continue to receive preferential treatment, while non-USMCA compliant goods would be subject to a 12% reciprocal tariff.

As with the prior tariff actions taken this year, the new tariffs will undoubtedly prompt retaliatory action by other countries and escalate the ongoing trade war. With these latest across-the-board tariffs, more companies that depend on international trade will be impacted, and as a result disclosures will need to reflect the scope of the impact. As I noted back at the beginning of February, companies should consider the following factors when updating their disclosures:

– Whether the new US tariffs or new tariffs to be imposed by the other countries will be collected on the company’s goods or goods that are utilized in production of the company’s goods.

– How the tariffs will impact the price that is charged for the company’s goods.

– How the tariffs will impact the cost of goods utilized in producing the company’s goods.

– Whether the imposition of tariffs may impact the availability of goods, including goods in the company’s supply chain.

– Whether the imposition of tariffs will impact the demand for goods that are subject to the tariffs.

– Whether the imposition of tariffs will cause inflationary pressures in the economy and will otherwise have negative economic impacts that could in turn impact the demand for a company’s goods and services.

– Whether mitigation strategies could increase costs that a company may not be able to recover.

As the earnings season for the first quarter plays out over the next few weeks, we are likely to see the impact on companies of the initial round of tariffs, which could offer insights on how these latest tariff actions could impact a broader range of companies in the second quarter and beyond.

– Dave Lynn