TRANSFER PRICING AND TARIFFS As of February 1st, a 25% tariff on imports from Mexico and Canada is now a reality. This measure will have significant economic and trade implications for the United States, affecting consumers, businesses, and global supply chains. Understanding its impact is crucial for companies that rely on cross-border trade. A 25% tariff will make imported goods more expensive, likely leading to higher prices for American consumers, particularly in industries that depend heavily on products from these countries, such as automotive, agriculture, and manufacturing. For example, increased costs on auto parts from Mexico could raise vehicle prices in the U.S., while tariffs on agricultural imports may drive up food costs. Similarly, industries reliant on Canadian raw materials, such as lumber and aluminum, could see higher production expenses, potentially leading to job losses or reduced competitiveness. Beyond domestic effects, this tariff could strain diplomatic and economic relations with Mexico and Canada, both key U.S. trade partners under the USMCA (United States-Mexico-Canada Agreement). In response, these countries might impose retaliatory tariffs on U.S. exports, making American goods less competitive in their markets. This could hurt industries like agriculture, manufacturing, and energy. From a transfer pricing perspective, this measure will significantly impact intercompany pricing between U.S. subsidiaries and their parent companies. Increased costs due to tariffs may require adjustments in pricing models, particularly for related-party transactions involving imported goods. Companies must revisit their transfer pricing policies to ensure compliance with arm’s length principles while managing the financial burden of higher import costs. At PKF, we have a dedicated team of transfer pricing experts ready to help businesses navigate these challenges, ensuring compliance and optimizing intercompany pricing strategies in response to evolving trade policies. For any questions or support, feel free to contact us: Jimy Cruz ✉️ [email protected]