In recent months, the global trade environment has been disrupted by a sweeping 10% global tariff that now applies to most imports into the U.S., with exemptions limited to North American goods and certain sectors. Increased country-specific and industry-specific tariffs, along with fluctuations in policy, are generating significant uncertainty. For middle market companies, proactive and agile planning is not just advisable but critical.
Taking actions that provide value and enhance resilience, no matter how tariff scenarios develop, is necessary to help your business both address current challenges and ensure future stability. Below are three ways tariffs might affect your business and how WilliamsMarston can help to prepare for them:
Accounting Implications
Rising tariffs are increasing the cost of imported goods, affecting both inventory valuation, cost of goods sold and, if selling prices are not raised, margin. This may result in businesses holding higher-cost inventory that becomes difficult to sell if price-sensitive customers reduce demand. The risk of inventory obsolescence grows as market dynamics shift, potentially triggering asset impairments.
Organizations must evaluate impairment indicators and assess whether fixed assets and intangible assets are recoverable and if goodwill may be impaired.
For publicly traded companies, these impacts can lead to increased disclosure requirements including the potential adverse effects of tariffs on their future profitability in Risk Factors or known impacts in MD&A. WilliamsMarston’s experts can help you address accounting and disclosure related challenges.
Tax and Transfer Pricing
The evolving tariff regime is creating increased complexity across tax and financial planning functions. Divergent tariff rates by jurisdiction and product category are driving up the costs of global trade and compliance burden, with expanded requirements for customs documentation, classification and origin accuracy, and cross-border reporting.
Tariffs are adding immediate pressure on pricing strategies and profit margins. Companies face the decision of whether to transfer higher costs to customers, which may risk demand, or to absorb these costs, risking the erosion of margins. This issue is further complicated by its effects on financial forecasting and investor confidence.
Companies should review their transfer pricing policies to address rising intercompany costs and assess the effectiveness of current structures. Altering the value of goods at time of import through transfer pricing by shifting functions and risks and reviewing supply chain, origin and character of goods are effective ways to mitigate tariff costs. WilliamsMarston’s tax experts can help identify feasible options for your industry and group in this respect.
Operations and Financial Forecasting
Beyond financial and compliance considerations, tariffs are also creating new operational hurdles across global supply chains. Rising freight costs, new customs protocols, and increased border delays are adding both expense and uncertainty. As a result, many businesses are discovering that their supply chains are more fragile than expected, and that existing contracts often don’t address who is responsible for these unanticipated costs. Businesses need to account for these increases in operational expenses and prospective costs of instability in their financial forecasting.
By focusing on taking these proactive steps, businesses can address key areas of exposure and build resilience in the face of ongoing market volatility. Taking these steps not only helps navigate the complexities of the evolving tariff environment but can also reveal opportunities to drive efficiency and strengthen long-term performance. At WilliamsMarston, we are committed to helping clients manage this complexity and achieve the strongest possible financial outcomes.
