In a sweeping move that is having a profound and immediate impact on retail companies, President Donald Trump has reintroduced significant import tariffs under the banner of national economic protection. Nicknamed “Trumptariffs,” these new duties include a 10 percent baseline tariff on all imports, effective April 5, 2025, and a 104 percent total tariff on imports from China; Trump subsequently suspended tariffs for 90 days (except in China). The executive order also targets low-value shipments (those under $800) from China and Hong Kong with a 90 percent tariff or a $75 per-item minimum – a dramatic escalation in trade tension.
The Background in Brief: These tariffs are being imposed through the International Emergency Economic Powers Act (“IEEPA”), a 1977 law that allows the president to regulate international commerce during a declared national emergency. President Trump declared such an emergency on the basis of “economic aggression” from countries with persistent trade surpluses, singling out China. While previous uses of the IEEPA were largely confined to sanctions against rogue regimes or terrorist networks, this move marks an unprecedented expansion of presidential power in peacetime trade policy. Legal experts argue the law does not explicitly grant authority to impose tariffs, and that trade powers remain constitutionally vested in Congress.
A lawsuit filed by Emily Ley Paper Inc., represented by the New Civil Liberties Alliance, contends that these tariffs violate both statutory and constitutional constraints. It could become a landmark case on the boundaries of executive trade authority.
Retail: Caught in the Crossfire
While legal debates brew, the retail sector is confronting real-world consequences of the newly-implemented tariffs. U.S. companies sourcing from China – a dominant hub for consumer goods, electronics, textiles, and packaging – are now paying dramatically more to move goods across borders. Smaller retailers that rely on direct-to-consumer imports, including low-value e-commerce shipments, may be disproportionately affected. And despite years of supply chain diversification, many mid-sized and even large retailers remain deeply tied to Chinese manufacturing for reasons of cost, speed, and infrastructure.
Legal experts are urging retail clients to adopt multi-pronged strategies. Counsel at ArentFox Schiff stated in a recent note that companies need to implement “a multifaceted approach to mitigating the impact of significant tariff increases and be prepared to pivot quickly,” encouraging companies to “reassess their supply chains, make strategic global sourcing and manufacturing decisions, and review contractual obligations to protect from tariff risks.”
While some brands are already diversifying their supply chains by developing manufacturing relationships and sourcing capabilities in alternative countries like Cambodia, Vietnam, Mexico, Brazil, and with Free Trade Agreement partners, and while diversification is key, these measures “may only serve to mitigate – and likely will not enable retail entities to entirely avoid – increases in tariffs,” the firm notes. It states that companies may benefit from “several tariff reduction strategies, such as first sale, tariff engineering, origin reviews, and others, [and a] flexible supply chain may allow companies to adapt and respond to fast changes in market conditions and tariff rates.”
Next Steps for Retailers
While both Democratic and Republican lawmakers have expressed discomfort with the White House’s unilateral tariff authority, actual legislative pushback appears unlikely. Past efforts to constrain presidential use of the IEEPA for trade purposes have stalled, and with the 2025 political landscape still unfolding, Congress is not expected to act swiftly – if at all.
That leaves the courts as the only meaningful check on the president’s tariff power. But litigation can take months or years. Given that the stakes are “sky-high” for retail brands, retail-focused consultancy AlixPartners emphasizes the need for “decisive action now” in connection with the new tariffs.
As a critical matter, retailers should revisit supplier and fulfillment contracts to assess exposure. Some agreements may include force majeure or material adverse change clauses, but not all will apply to tariff increases, especially if they can be characterized as foreseeable risks. Companies may need to renegotiate commercial terms, seek mutual accommodations, or prepare for disputes if cost burdens shift. Retail companies should also consider proactive legal audits to assess their customs classification strategies, explore mitigation tools (like first sale doctrine or tariff engineering), and ensure documentation is in order for any future refund or exemption claims.
In particular, companies – from legacy department stores and big-name luxury brands to digitally native startups – should take concrete action, including efforts to …
> Conduct Exposure Mapping: Audit your SKUs, countries of origin, and product classifications. Know your exposure down to the unit;
> Review and Renegotiate Contracts: Revisit supplier agreements to assess how tariffs are handled. Consider renegotiations or restructuring to share the burden;
> Deploy Customs Strategy: Explore legitimate mitigation methods like first sale, tariff engineering, origin reviews, and duty deferral programs;
> Diversify, But Strategically: Shift sourcing to FTA-aligned countries where feasible – but evaluate production capacity, quality control, and logistics risks; and
> Forecast Aggressively: Use financial modeling to anticipate margin pressure, pricing options, and market reaction scenarios.
THE BOTTOM LINE: The Trump tariffs are more than just a policy shift – they are a test of legal boundaries, supply chain agility, and corporate adaptability. Retailers that take a passive approach risk falling behind. Those who invest in legal due diligence, contract agility, and strategic sourcing stand the best chance of surviving under a regime of unpredictable trade policy.
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