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The latest round of tariffs are officially in place, reshaping the economic landscape for businesses of all sizes across America. On April 2, 2025, President Trump declared a national emergency to address what he described as a "large and persistent US trade deficit," invoking the International Emergency Economic Powers Act (IEEPA) to impose sweeping new tariffs. This includes a universal 10% tariff on all imports effective April 5th, followed by targeted "reciprocal" tariffs on specific countries starting April 9th, which have been paused for 90 days.
Here's what business owners should understand about this new reality and how to navigate it.
The latest tariffs have substantially increased America's effective tariff rate. While the severity of tariffs has been eased with the recent 90-day pause on new tariffs for most countries, there’s great uncertainty about how the situation will evolve on a country-by-country basis. These changes affect virtually all import categories with limited exceptions.
Even American supply chains, often seen as insulated from international trade disputes, are facing significant disruption. According to the National Association of Manufacturers, approximately 60% of industrial inputs are tied to global markets, meaning even "Made in USA" products rely heavily on imported components. This interconnectedness means higher prices are inevitable across nearly all supply chains.
Inflation concerns are mounting, with Goldman Sachs forecasting core inflation at 3.5% in 2025, significantly above the Federal Reserve's 2% target. Should tariff increases resume after the current 90-day pause, they will represent the largest tax increase in over 40 years, with estimates suggesting the average American household will face increased costs of $1,500-$4,000 annually, representing nearly 10% of post-tax median income for many families.
For businesses, this translates directly to pricier inventory, utilities, and operational costs. Equipment prices are particularly vulnerable, with industry forecasts suggesting 15%-20% price increases for industrial equipment and technology by mid-2025. As consumer purchasing power diminishes, many businesses may also face softening demand precisely when their own costs are rising.
Federal Reserve Chair Jerome Powell has acknowledged that the tariffs will likely fuel inflation and slow economic growth, describing the measures as "significantly larger than expected." While the federal funds rate currently holds at 4.25%-4.50%, the market is increasingly uncertain about future rate movements.
Prior expectations of rate cuts starting in June have been thrown into question as the Fed balances recession risks (JPMorgan now forecasts a 60% chance of recession by year-end) against persistent inflation concerns. Bond yields have responded accordingly, with 10-year Treasury yields surging higher in recent days as debt holders demand more return for their risk and bonds are being sold at accelerated rates.
For business owners, this uncertainty directly impacts borrowing costs. Small business loans are likely to remain somewhat elevated throughout 2025 compared to recent years, making financing for equipment or expansion increasingly expensive just as equipment prices themselves are climbing due to tariff impacts.
With equipment prices expected to rise significantly, capital expenditure (capex) decisions take on new urgency. The 15%-20% price increase forecast for industrial equipment, technology, and other business essentials means that delaying purchases could significantly impact your bottom line.
Even domestic suppliers are raising prices as their own imported inputs become more expensive. Industry analysts suggest that waiting just three to six months on major equipment purchases could mean paying substantially more for the same items.
For businesses that rely on imported equipment or technology with significant foreign components, the argument for accelerating planned purchases becomes even stronger. Acting now on capex, whether upgrading technology, replacing aging equipment, or expanding capacity, could secure current pricing before further increases take effect.
The international response has been swift and significant. China announced plans to substantially increase tariffs on U.S. goods beginning April 10th. Canada, South Korea, and numerous other trade partners have either announced or are preparing retaliatory measures. However, the European Union recently paused plans to increase tariffs on U.S. goods in response to the 90-day pause announced by President Trump on April 9th.
These moves will directly impact U.S. exporters but will also create broader supply chain complications as global trade patterns adjust. Some countries are already pursuing trade diversification strategies to reduce dependence on both U.S. and Chinese markets, potentially creating new competitive dynamics.
The combination of higher input costs, rising equipment prices, and elevated borrowing costs creates a challenging business environment but also an opportunity for proactive companies to gain competitive advantage through strategic decision making.
