May 2025
PwC Sounds the Alarm on Tariff Shock
According to PwC’s US Tariff Industry Analysis (April 2025*), newly implemented reciprocal tariffs under President Trump’s April 2 executive order could push annual U.S. tariff costs from $76 billion to $989 billion, a 13-fold increase. This shift, driven by introducing a 10% base tariff on most imports (up to 125% on targeted goods from China), will fundamentally alter the cost structure of global sourcing. The implications span procurement, pricing strategy, supply chain design, and ultimately, economic growth.
What was once categorized as “non-dutiable”, accounting for $2.1 trillion of U.S. imports in 2024, is now within tariff scope.
PwC estimates an average applied tariff rate of 32%, up from a pre-policy average of just 2.5%.
The Economic Repricing of Global Trade
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➤ Business Cost Inflation at Scale
For multinationals, the tariff impact is not a rounding error, it's a rewrite of operating assumptions. The Technology, Media & Telecommunications (TMT) sector, for instance, is facing a $311 billion increase in annual duties, while the industrial manufacturing sector sees an added $245 billion. This isn’t just margin pressure; it’s category-wide financial restructuring.
Industry Projected Tariff Increase (Fig. 1):
TMT: $311B
Industrial Manufacturing: $245B
Consumer Products: $144B
Automotive: $70B
Pharma & Medical Devices: $55B
Energy & Utilities: $32B
Companies that historically built low-cost sourcing networks optimized for duty-free flows now face tariffs applied retroactively on frameworks they assumed were risk-free.
Consumer Pricing vs. Demand Elasticity
Higher landed costs will eventually be reflected in consumer prices. However, with inflation already straining purchasing power, firms face a trade-off: absorb the cost and shrink margin, or pass it through and risk erosion in volume.
The apparel sector, for example, is already bracing for fallout as low-value import exemptions from China and Hong Kong are removed on May 2, undercutting e-commerce and fast fashion models reliant on slim unit economics.
The Collapse of “Non-Dutiable” as a Concept
PwC’s analysis underscores a foundational shift: goods previously considered exempt due to free trade agreements or programmatic carve-outs (such as the USMCA or de minimis provisions) are no longer safe.
Tariffs apply even to imports from Canada and Mexico unless they meet strict origin rules. Reuters reported that in 2024, only 37.8% of Canadian and 48.9% of Mexican imports met USMCA criteria. The rest now fall under a 25% tariff.
Key Insight: The “FTA-optimized supply chain” is now a point of fragility, not strength.
Why This Matters: Supply Chains as Strategic Risk
This is not a trade skirmish. It’s a shift toward permanent cost volatility forcing executives to revisit assumptions about location strategy, tax exposure, and working capital.
What’s emerging is a new set of priorities:
- Country-of-origin now dictates pricing power.
- De minimis removal distorts e-commerce unit economics.
- Transfer pricing teams are scrambling to model profit reallocation.
- Nearshoring and regionalization, long discussed, now have cost-justified urgency.
What Comes Next: No-Regret Actions
This isn’t a policy issue that gets solved at the next summit. For companies, the timeline for mitigation starts now.
FunctionPriority ActionProcurementRenegotiate vendor terms tied to affected HTS codes.Supply ChainBegin country-of-origin mapping tied to tariff thresholds.FinanceBuild dynamic cost forecasting models tied to tariff exposure.Legal/TaxReassess transfer pricing models to reflect margin shifts.
Companies that approach this as a cost-center problem will fall behind. Those who treat it as a strategic realignment will find opportunities in supplier arbitrage and regional consolidation, with potentially shared gains as competitors stumble. (Fig. 2)
Resilience Will Be Quantified
Tariffs are becoming a line item. And with nearly $1 trillion in new duties on the table, this is a wake-up call for companies that treated trade policy as background noise.
Those who act now, with data, coordination, and precision, will preserve margin and earn market trust. The rest will pay the price, both literally and competitively.
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