With the United States of America electing President Donald Trump for a second term, many economists are considering how this will affect both global and local economies.
Incoming US President Donald Trump has suggested he will introduce tariffs on all foreign imports up to 20 per cent, while also pledging 25 per cent tariffs on key trading partners Mexico and Canada and nearly 60 per cent for China. This week, 100 per cent tariffs were proposed for BRICS nations (Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates), should they go ahead with the proposal to create a new currency.
While there is no real timeline for the proposed tariffs, there may be implications for Australian businesses that have not prepared ahead of time. Generally, Australian exports to the US account for a very small portion of GDP – however if blanket tariffs of up to 20 per cent for all countries importing to America go ahead, some of Australia’s key industries will be affected. Similarly, tariffs imposed on China could cause China’s economy to slow, which would subsequently reduce demand for Australia’s key exports such as iron ore, coal, and other minerals necessary as part of the manufacturing process. This not only has ramifications for the Australian dollar, but also key Government budgetary tax revenue.
However, whether potential tariffs come to fruition, Australian businesses should take this opportunity to review their supply chain, transfer pricing policies and export strategies and prepare ahead of time to lessen any potential impacts to their business.
What do businesses need to consider?
- Current supply chains: how will tariffs impact your current supply chains?
- Is your supply chain agile enough to be able to source and assemble goods in countries not impacted by the Tariffs? If so, consider how this may impact your transfer pricing policy via scenario planning from both a transfer pricing and customs perspective. A proactive approach will help businesses to navigate a shifting landscape with greater agility and foresight.
- Related party or intercompany transactions: For related party or intercompany transactions, it's essential to review and possibly revise the transfer pricing policies that underpin the declared value to USA Customs. Ensuring compliance and alignment with the new tariff regulations will be key to avoiding any potential discrepancies or penalties.
How we can help
Reach out to one of Grant Thornton’s customs, duty, and transfer pricing experts for a review of your businesses existing transfer pricing policies. By conducting a thorough review, we can identify areas for optimisation and ensure your business is well-positioned to mitigate the financial impact of these tariffs.
Learn more about how our Transfer pricing services can help you
