Reciprocal Tariff Update #12

Tariffs, Trade, and Turmoil: Navigating the New Economic Reality in Late 2025

*Updates from Rafe Morrissey, Morrissey Strategic Partners, LLC & Craig Brightup, The Brightup Group, LLC

As 2025 draws to a close, the global trade landscape remains in a state of suspended animation. Businesses, consumers, and policymakers are all locked in a waiting game for the Supreme Court’s decision on the legality of tariffs imposed under the International Emergency Economic Powers Act (IEEPA). However, while the high court deliberates, the machinery of government and the maneuvering of private industry have not paused. The past few weeks have provided a flurry of activity from contingency planning in the Treasury Department to record-breaking consumer spending creating an economic environment that serves as a Rorschach test for observers on both sides of the tariff debate.

The Administration’s "Plan B"

While the fate of the IEEPA tariffs hangs in the balance, the administration is actively signaling that it has no intention of letting the current tariff regime evaporate. Speaking recently at the DealBook Summit in New York, Treasury Secretary Scott Bessent outlined a robust strategy to preserve the tariffs regardless of the Court's ruling.

Bessent made it clear that the administration is preparing to utilize alternative authorities, specifically Section 232 of the Trade Expansion Act of 1962 (national security), Section 301 of the Trade Act of 1974 (unfair trade practices), and potentially Section 122 as a bridge mechanism. "We can re-create the exact tariff structure with [sections] 301, with 232, with 122," Bessent stated, indicating a deeply entrenched commitment to protectionist trade policies.

In response, the corporate world is fighting back to protect its bottom line. Major players including Costco, Revlon, Toyota, and Bumble Bee Foods recently filed lawsuits challenging Customs and Border Protection’s refusal to extend liquidation deadlines. These companies are positioning themselves to ensure they can secure refunds should the current tariffs be deemed illegal, a move that highlights the high stakes involving billions of dollars in duties.

International realignment: Brazil, Korea, and the USMCA

On the diplomatic front, the results of the tariff strategy are mixed. There are positive developments in South America and Asia. Following a productive call between President Trump and Brazilian President Lula, there is optimism for reduced tariffs on Brazilian imports, specifically agricultural staples like coffee. Similarly, a confirmed agreement with South Korea has stabilized tariffs at 15%.

However, closer to home, the waters are choppier. Reports indicate that President Trump is considering allowing the United States-Mexico-Canada Agreement (USMCA) to lapse, potentially replacing the trilateral bloc with separate bilateral agreements. While this may be a negotiation tactic ahead of renewal talks, the uncertainty could prove disruptive to North American supply chains.

Meanwhile, the U.S.- China relationship appears steady, with high-level summits planned for April. Yet, the Alliance for American Manufacturers insists that China has failed to comply with previous Phase 1 agreements, keeping the pressure on the ongoing Section 301 investigation.

The Economic Paradox

Domestically, the data presents a confusing picture. The labor market is sending conflicting signals; while ADP reported an unexpected drop in private payrolls, the Labor Department simultaneously reported that unemployment claims have hit their lowest levels since 2022.

Inflation data is equally nuanced. The Bureau of Economic Analysis reported that the core personal consumption expenditures (PCE) index rose 0.2% for the month with an annual rate of 2.8%. While these numbers met expectations, they do not reflect the higher operational costs businesses are currently absorbing.

Despite polling that suggests Americans are pessimistic about the economy, their wallets tell a different story. Adobe Analytics reported a record-breaking Black Friday with $11.8 billion in online spend, a 9.1% increase over 2024. Cyber Monday followed suit with $14.2 billion. In total, shoppers spent a massive $44 billion over the holiday weekend, defying recessionary fears.

The Burden on Small Business

While macro-level spending hits records, the micro-level reality is harsh. The aggregate data often masks the pain felt by specific sectors. Pet products, for instance, have borne the brunt of trade wars, facing a staggering 29% increase in tariff liabilities this year.

This disproportionately affects small businesses. Unlike retail giants that can absorb lower margins or negotiate better terms, small importers and retailers are vulnerable. As we look toward 2026, the resilience of these smaller enterprises caught between record consumer demand and rising tariff costs will likely be the true indicator of the economy's health.

 Morrissey Strategic Partners, LLC & The Brightup Group, LLC provides guidance on how transportation, customs, or other government regulations may affect the Client’s business.

PTC is not a law firm, does not practice law, and does not provide legal advice. The Client should consult legal counsel for any legal matters, including trade compliance.

The Importer of Record (IOR) is responsible for complying with customs regulations and managing the import process. This includes obtaining required licenses and permits, classifying and valuing goods correctly, declaring goods accurately, paying duties and taxes, following import rules, and maintaining proper records.