US reciprocal and current tariffs: Potential impact for the Energy, Utilities, and Resources industry

What happened?

The Trump administration’s implementation of “reciprocal tariffs” continues to be dynamic, prompting a challenging trade landscape for many multinational companies. The President signed an executive order on April 2, made announcements, and released memoranda on this matter. In summary, the new tariffs in place as of the date of this Insight include the following (this list does not reflect all previously existing tariffs):

• A 10% base tariff on most imported goods (with the exception of certain exempt goods included in Annex II of the April 2 executive order such as oils, lumber, copper, zinc, and minerals) from all countries (except Canada, Mexico, and China).
• Adjusted country-specific tariffs of up to 50% (with certain exceptions as noted above), however, a 90-day pause (ending July 9) is in place for the adjusted country-specific tariffs to allow time for individual country trade negotiations. The exempted goods are expected to be addressed in separate forthcoming executive orders on tariffs, and the US Department of Commerce has initiated a Section 232 investigation to assess their impact on national security. The comment period closed on May 7 and the expectation is that implementation of specific tariffs on semiconductors and semiconductor manufacturing equipment will be accelerated well before the 270-day requirement.
• All goods from Canada and Mexico that do not qualify as originating under the United States-Mexico-Canada Agreement (USMCA) remain subject to earlier 25% tariffs. Duty free status under the agreement remains for those goods that qualify. Certain imports from Canada are currently subject to a lower additional ad valorem duty of 10%. The April 2 executive order specifies that upon the termination or suspension of the earlier orders specific to Canada and Mexico, the 25% tariff will revert to a 12% reciprocal tariff rate. In addition, a 10% tariff is applied to Canadian energy and energy resource imports that fall outside USMCA coverage.
• Tariffs on Chinese imports of 125% have been implemented (up to 145% with existing tariffs included.) The elimination of the de minimis exemption for low-value imports from China and Hong Kong went into effect May 2.

A wider industry perspective can be found in PwC’s US Tariff Industry Analysis Tax Insight published on April 22 and additional information can be found in the US Customs and Border Protection CBP tariff requirements released May 2. The administration recently noted that more than 100 countries wish to negotiate trade imbalances with a drive towards an economic level playing field and fair-trading system. As of the date of this Insight, no change in previously noted rates has been announced.

The administration’s trade policies are prompting significant implications for companies operating in or trading with the United States, including companies within the Energy, Utilities, and Resources industry. While certain goods within this industry are currently exempt, these exempt goods are expected to be addressed in separate forthcoming executive orders on tariffs. Assuming these executive orders will be issued, PwC’s Industry Analysis data reflects that the total tariff measures could increase from $400 million to almost $33 billion per year (with the implied tariff rate increasing from 0.2% to 13% on US imports), although that figure does not take into account countermeasures that trading partners may impose, or behavioral adjustments that companies may make, in reaction to US policy changes. 

This Tax Insight serves as an update to our March 17 Industry Analysis, which previously included forecasted reciprocal tariff rates at that time. Note: PwC’s updated Industry Analysis utilizes the tariffs that have been implemented by the United States as of April 15 (based on guidance and specific factors explained in the next section) as well as potential tariffs on so-called Annex II products.

Multinational companies around the world, including companies within the Energy, Utilities, and Resources industry, should assess the impact of these trade policies on their global business footprints — with respect to both imports and exports — as well as the potential related opportunities. Close coordination between procurement, supply chain, tax, and other C-suite leaders to formulate short, medium, and long-term strategies is critical, along with data-driven analysis. For example, advanced tools are available that companies can leverage using their US customs data to quantify the impact — often with unexpected results. This analysis can serve as a powerful foundation to identify “no-regret” actions and to help mitigate risks.

For more details, read the full Tax Insight linked below.