2025 Tariff Tax Reform: How Businesses Prepare for Consumer Impact

Tariffs and Tax Talk: What Businesses and Consumers Should Really Be Watching

As tax season wraps up and the headlines shift to proposed revenue strategies—like expanded tariffs and tax code tweaks—it’s important for both consumers and business owners to understand the real bottom line: policies that sound good on paper often come with hidden costs and ripple effects that hit closer to home than you might think.

Tariffs Are a Tax—Just One You Don’t See Until It Shows Up on Your Invoice

Tariffs may be positioned as a patriotic move or a tool to “level the playing field,” but the reality is more complicated. Tariffs are essentially a hidden tax on American consumers and businesses. Though they’re charged at the border, the cost of those tariffs is almost always passed along—showing up as higher prices for goods, materials, and supplies.

This matters especially for small and medium-sized businesses that depend on global supply chains. Whether you’re importing retail products from Asia or buying steel and equipment, tariffs translate to tighter margins, slower growth, and tough decisions around pricing, wages, and hiring.

The 2025 Tariff Hikes: What’s New

Earlier this year, the U.S. administration implemented sweeping tariff increases, some as high as 145% on goods from China. These sudden hikes have disrupted supply chains and made financial planning harder for businesses across industries.

According to Erica York from the Tax Foundation, even under optimistic projections, these tariffs might generate $150–170 billion in revenue this year—but that’s not enough to meaningfully reduce the federal deficit, especially when balanced against calls for new tax cuts on tips, overtime, or Social Security benefits. From an accounting perspective, that’s like trying to cover your payroll by collecting occasional late fees: helpful in the short term, but hardly sustainable.

Erica York, vice president of federal tax policy at the Tax Foundation, says any drop off in tax filings as a result of layoffs at the IRS likely won't be felt until after this year.

Tariffs vs. Structural Reform

If policymakers want to raise meaningful revenue, experts suggest a better path would be closing the so-called “tax gap”—the estimated 15% difference between what’s owed and what’s actually collected. Enforcing current tax law and simplifying the tax code could yield far more predictable, equitable results than relying on politically motivated tariff spikes.

Unfortunately, enforcement is also under pressure. Proposals to cut IRS staffing would further reduce the agency’s capacity to audit or support taxpayers, making the system even harder to navigate and trust.

What This Means for Your Business

Tariffs may feel like a distant policy decision, but their effects are local and immediate. Higher import costs lead to real changes in how businesses operate. If you're a service provider, you could see slower customer spending or rising overhead costs due to supply chain pressures.

As your accounting partner, here’s what I recommend:

• Review Your Supply Chain: Know where your costs are coming from and whether tariffs apply.

• Adjust Pricing Models: Prepare flexible pricing strategies in case costs continue to rise.

• Diversify Vendors: Explore local or domestic sourcing where possible.

• Monitor Policy Shifts: Tariff and tax changes can come quickly—stay updated.

• Budget for Uncertainty: Inflation, global dynamics, and tax policies are shifting—build that into your forecasts.

  
  

The Bottom Line

Tariffs may generate revenue in the short term, but they’re no substitute for thoughtful, long-term tax policy. For business owners, the priority should be on planning, diversification, and adaptability. And for policymakers, the real opportunity lies in creating a tax system that’s predictable, transparent, and fair—not reactionary.

Need help understanding how these policy changes could impact your bottom line? Let’s connect and walk through it together.

 Sources:

- York, E. (2025). Interview on Bloomberg TV. [Tax Foundation Analysis](https://taxfoundation.org)

- Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The Impact of the 2018 Trade War on U.S. Prices and Welfare. National Bureau of Economic Research.

- Internal Revenue Service (2023). Tax Gap Estimates for Tax Years 2014–2016. [IRS.gov](https://www.irs.gov/newsroom/the-tax-gap)

Key words: Tariff, tax reform, business, prepare consumers