Businesses from Wall Street to main street are struggling to comply with President Donald Trump’s byzantine tariff regime, driving up costs and counteracting, for some, the benefits of the corporate tax cuts Republicans passed earlier this year. Trump has ripped up the U.S. tariff code over the past year, replacing a decades-old system that imposed the same tariffs on imports from all but a few countries with a vastly more complicated system of many different tariff rates depending on the origin of imported goods. To give an example, an industrial product that faced a mostly uniform 5 percent tariff rate in the past could now be taxed at 15 percent if it comes from the EU or Japan, 20 percent from Norway and many African countries, 24 to 25 percent from countries in Southeast Asia and upwards of 50 percent from India, Brazil or China. “This has been an exhausting year, I’d say, for most CEOs in the country,” said Gary Shapiro, CEO and vice chair of the Consumer Technology Association, an industry group whose 1,300 member companies include major brands like Amazon, Walmart and AMD, as well as many small businesses and startups. “The level of executive time that’s been put in this has been enormous. So instead of focusing on innovation, they’re focusing on how they deal with the tariffs.” Upping the pressure, the Justice Department has announced that it intends to make the prosecution of customs fraud one of its top priorities. The proliferation of trade regulations and threat of intensified enforcement has driven many companies to beef up their staff and spend what could add up to tens of millions of dollars to ensure they are not running afoul of Trump’s requirements. The time and expense involved, combined with the tens of billions of dollars in higher tariffs that companies are paying each month to import goods, amount to a massive burden that is weighing down industries traditionally reliant on imported products. And it’s denting, for some, the impact of the hundreds of billions of dollars of tax cuts that companies will receive over the next decade via the One Big Beautiful Bill Act championed by the White House. “Every CEO survey says this is their biggest issue,” said Shapiro. A recent survey by KPMG, a professional services firm, found 89 percent of CEOs said they expect tariffs to significantly impact their business’ performance and operations over the next three years, with 86 percent saying they expect to respond by increasing prices for their goods and services as needed. Maytee Pereira, managing director for customs and international trade at PriceWaterhouseCoopers, another professional services firm, has seen a similar trend. “Many of our clients have been spending easily 30 to 60 percent of their time having tariff conversations across the organization,” Pereira said. That’s forced CEOs to get involved in import-sourcing decisions to an unprecedented degree and intensified competition for personnel trained in customs matters. “There’s a real dearth of trade professionals,” Pereira said. “There isn’t a day that I don’t speak to a client who has lost people from their trade teams, because there is this renewed need for individuals with those resources, with those skill sets.” But the impact goes far beyond a strain on personnel into reducing the amount of money that companies are willing to spend on purchasing new capital equipment or making other investments to boost their long-term growth. “People are saying they can’t put money into R&D,” said one industry official, who was granted anonymity because of the risk of antagonizing the Trump administration. “They can’t put money into siting new factories in the United States. They don’t have the certainty they need to make decisions.” A White House spokesperson did not respond to a request for comment. However, the administration has previously defended tariffs as key to boosting domestic manufacturing, along with their overall economic agenda of tax cuts and reduced regulation. They’ve also touted commitments from companies and other countries for massive new investments in the U.S. in order to avoid tariffs, although they’ve acknowledged it will take time for the benefits to reach workers and consumers. “Look, I would have loved to be able to snap my fingers, have these facilities going. It takes time,” Treasury Secretary Scott Bessent said in an interview this week on Fox News. “I think 2026 is going to be a blockbuster year.” For some companies, however, any benefit they’ve received from Trump’s push to lower taxes and reduce regulations has been substantially eroded by the new burden of complying with his complicated tariff system, said a second industry official, who was also granted anonymity for the same reason. “It is incredibly complex,” that second industry official said. “And it keeps changing, too.” Matthew Aleshire, director of the Milken Institute’s Geo-Economics Initiative, said he did not know of any studies yet that estimate the overall cost, both in time and money, for American businesses to comply with Trump’s new trade regulations. But it appears substantial. “I think for some firms and investors, it may be on par with the challenges experienced in the early days of Covid. For others, maybe a little less so. And for others, it may be even more complex. But it’s absolutely eating up or taking a lot of time and bandwidth,” Aleshire said. The nonpartisan think tank’s new report, “Unintended Consequences: Trade and Supply Chain Leaders Respond to Recent Turmoil,” is the first in a new series exploring how companies are navigating the evolving trade landscape, he said. One of the main findings is that it has become very difficult for companies to make decisions, “given the high degree of uncertainty” around tariff policy, Aleshire said. Trump’s “reciprocal” tariffs — imposed on most countries under a 1977 emergency powers act that is now being challenged in court — start at a baseline level of 10 percent that applies to roughly 100 trading partners. He’s set higher rates, ranging from 15 to 41 percent, on nearly 100 others, including the 27-member European Union. Those duties stack on top of the longstanding U.S. “most-favored nation” tariffs. Two notable exceptions are the EU and Japan, which received special treatment in their deals with Trump. Companies also could get hit with a 40 percent penalty tariff if the Trump administration determines an item from a high-tariffed country has been illegally shipped through a third country — or assembled there — to obtain a lower tariff rate. However, businesses are still waiting for more details on how that so-called transshipment provision, which the Trump administration outlined in a summer executive order, will work. The president also has hit China, Canada and Mexico with a separate set of tariffs under the 1977 emergency law to pressure those countries to do more to stop shipments of fentanyl and precursor chemicals from entering the United States. Imports from Canada and Mexico are exempt from the fentanyl duties, however, if they comply with the terms of the U.S.-Mexico-Canada Agreement, a trade pact Trump brokered in his first term. That has spared most goods the U.S. imports from its North American neighbors, but also has forced many more companies to spend time filling out paperwork to document their compliance. Trump’s increasingly baroque tariff regime also includes the “national security” duties he has imposed on steel, aluminum, autos, auto parts, copper, lumber, furniture and heavy trucks under a separate trade law. But the administration has provided a partial exemption for the 25 percent tariffs he has imposed on autos and auto parts, and has struck deals with the EU, Japan and South Korea reducing the tariff on their autos to 15 percent. In contrast, Trump has taken a hard line against exemptions from his 50 percent tariffs on steel and aluminum, and recently expanded the duties to cover more than 400 “derivative” products, such as chemicals, plastics and furniture, that contain some amount of steel and aluminum or are shipped in steel and aluminum containers. And the administration is not stopping there, putting out a request in September for further items it can add to the steel and aluminum tariffs. “This is requiring companies that do not even produce steel and aluminum products to keep track of and report what might be in the products that they’re importing, and it’s just gotten incredibly complicated,” one of the industry officials granted anonymity said. That’s because companies need to precisely document the amount of steel or aluminum used in a product to qualify for a tariff rate below 50 percent. “Any wrong step, like any incorrect information, or even delay in providing the information, risks the 50 percent tariff value on the entire product, not just on the metal. So the consequence is really high if you don’t get it right,” the industry official said. The administration has also signaled plans to similarly expand tariffs for other products, such as copper. And the still unknown outcomes of ongoing trade investigations that could lead to additional tariffs on pharmaceuticals, semiconductors, critical minerals, commercial aircraft, polysilicon, unmanned aircraft systems, wind turbines, medical products and robotics and industrial machinery continue to make it difficult for many companies to plan for the future. Small business owners say they feel particularly overwhelmed trying to keep up with all the various tariff rules and rates. “We are no longer investing into product innovation, we’re not investing into new hires, we’re not investing into growth. We’re just spending our money trying to stay afloat through this,” said Cassie Abel, founder and CEO of Wild Rye, an Idaho company which sells outdoor clothing for women, during a virtual press conference with a coalition of other small business owners critical of the tariffs. Company employees have also “spent hundreds and hundreds and hundreds of hours counter-sourcing product, pausing production, restarting production, rushing production, running price analysis, cost analysis, shipping analysis,” Abel said. “I spent zero minutes on tariffs before this administration.” In one sign of the duress small businesses are facing, they have led the charge in the Supreme Court case challenging Trump’s use of the 1977 International Emergency Economic Powers Act to impose both the reciprocal and the fentanyl-related tariffs. Crutchfield Corp., a family-owned electronics retailer based in Charlottesville, Virginia, filed a “friend of the court” brief supporting the litigants in the case, in which the owners detailed its difficulties in coping with Trump’s erratic tariff actions. “If tariffs can be imposed, increased, decreased, suspended or altered … through the changing whim of a single person, then Crutchfield cannot plan for the short term, let alone the long run,” the company wrote in its brief, asking “the Court to quell the chaos.”

BRUSSELS — The European Union has invited U.S. Commerce Secretary Howard Lutnick to Brussels on Nov. 24 for talks with the bloc’s trade ministers, a Danish official familiar with the situation told POLITICO. The Danish presidency of the Council of the EU, as well as the European Commission, have invited the commerce secretary to attend a lunch with ministers dedicated to trade relations between the United States and the EU. The invitation comes as rifts with China over its latest export controls on rare earths redefine relations between Washington, Beijing and Brussels. Lutnick hasn’t yet formally confirmed his attendance at the ministerial meeting, the official added. The invitation, which has been in the works for months, comes as Brussels and Washington are still going through the implementation of commitments struck in Scotland in July between U.S. President Donald Trump and the European Commission President Ursula von der Leyen. European Commission spokesperson Olof Gill confirmed the invitation had been extended to Lutnick. Brussels is still pressing Washington for tariff exemptions on sensitive sectors such as spirits and chemicals, and has raised concerns about the U.S. expanding its list of derivative steel products subject to a 50 percent tariff. EU countries will be informed of the invitation on Friday, with ambassadors set to discuss it on Nov. 5. It builds upon recent contact between EU trade chief Maroš Šefčovič and Danish Foreign Minister Lars Løkke Rasmussen, whose country is currently chairing legislative work for the Council, the bloc’s intergovernmental arm. G7 allies are meanwhile seeking to coordinate their responses to China’s grip on the supply of the minerals that are crucial for tech such as wind turbines, electric vehicles and drones. The European Commission on Friday is hosting a delegation of Chinese officials to discuss the latest export controls. The U.S. Department of Commerce was contacted for comment. Daniel Desrochers contributed to this report.

Germany’s two banking supervisory agencies have drafted a plan to ease the burden of regulation on Europe’s smaller banks and are now seeing if it will fly. An informal discussion paper drafted by the Deutsche Bundesbank and Bafin — which share responsibility for supervising German banks — proposes freeing banks across the EU of the need to report capital ratios based on complex calculations of the riskiness of their assets, as well as liberating them from various other obligations. The proposals are the first concrete result of a drive to simplify regulation that began earlier this year and are the clearest sign yet that the EU is — belatedly — ready to undo some of the stifling financial regulation it introduced over a decade ago. Regulation is currently based on the global Basel III accords that were agreed by regulators in 2010, two years after reckless lending by U.S. and European banks caused the biggest financial crisis in nearly 80 years and a wrenching recession across most of the world. Basel III drastically increased the amount of capital and liquidity that banks have to hold to protect themselves against a possible repeat. But the accords were aimed primarily at big international institutions whose operations were capable of destabilizing the global financial system; as the impact of the 2008-2009 disaster has faded, regulators have grudgingly come to accept that their response went too far. The U.S., Switzerland and the U.K. have already implemented less intrusive regimes for smaller banks with simpler business models. “With the proposal for an EU small banks regime, we have provided important impetus to the discussions on simplifying the regulatory framework,” Michael Theurer, the Bundesbank’s head of banking supervision, said in emailed comments, stressing that the proposal “does not represent a departure from the Basel framework.” The framework would be open to banks with less than €10 billion in assets and with a mainly domestic focus (at least 75 per cent of their business should be in the European Economic Area). Banks using it would not be allowed to hold any cryptocurrency assets such as Bitcoin, and would be allowed to hold only minimal amounts of derivatives or assets for trading purposes. They would also have to prove that their vulnerability to changes in interest rates is acceptably low. ‘PARADIGM SHIFT’ Under the Capital Requirements Regulation, which applies Basel III in the EU, banks are generally required to report two capital ratios — one adjusted for risk, and one unadjusted. The latter, known as the leverage ratio, was originally intended as a backstop to prevent larger banks from gaming the system by understating the risks on their books under internal models allowed by the accords The German proposals suggest that smaller banks would merely have to report a leverage ratio, albeit a “significantly higher” one than the present 3 percent. By comparison, U.S. community banks must keep their leverage ratios above 9 percent, which means they must hold at least $9 of capital for every $100 in assets. Theurer said the Bundesbank had deliberately refrained from suggesting a specific ratio at this time. This idea “is more than a technical detail,” Daniel Quinten, a member of the board at Germany’s Federal Association of Cooperative Banks, said in a post on social media. “It would be a paradigm shift — and a chance for more proportionality, more efficiency and less bureaucracy in regulation.” The proposals — and the feedback they get — are to be incorporated in a report that a high-level European Central Bank task force will recommend to the European Commission at the end of the year. | Florian Wiegand/EPA The proposals also simplify demands on liquidity coverage. They would exempt banks from the Basel III Net Stable Funding Ratio — a complex formula for guaranteeing liquidity over a one-year timeframe — and would replace it with a new requirement that would limit their lending to only 90 percent of their deposit base. Banks would also have to keep at least 10 percent of their assets in highly liquid form, such as cash, central bank reserves or short-term government debt. This, the discussion paper said, “would achieve similar potential outcomes with dramatically reduced complexity.” The proposals — and the feedback they get — are to be incorporated in a report that a high-level European Central Bank task force will recommend to the European Commission at the end of the year. Additional reporting by Carlo Boffa.

BRUSSELS — Ursula von der Leyen played hardball on trade with China in Beijing last week. Within days, she was rewarded with a trade deal with U.S. President Donald Trump. After reaching a handshake deal at the U.S. president’s Turnberry gold resort in Scotland on Sunday, the European Commission President made clear — without name-checking China — that Washington and Brussels needed to team up to confront the competitive threat from the east. “On steel and aluminum, the European Union and the U.S. face the common external challenge of global overcapacity,” she said — referring to China’s excess production of subsidized products such as steel, as well as solar panels or batteries. When Washington and Brussels “work together as partners, the benefits are tangible on both sides,” she added.  The EU’s deal with the U.S., which fends off Trump’s threat to raise tariffs on most EU goods to 30 percent on Aug. 1, came days after von der Leyen met Chinese President Xi Jinping and Premier Li Qiang in Beijing for what should have been a celebration, yet ended up being anything but.  Speaking after a one-day EU-China summit — marking the 50th anniversary of diplomatic relations — von der Leyen said relations between the bloc and China had reached an “inflection point.”  “Trade must become more balanced,” she said, arguing that the EU will not be able to keep its markets open to Chinese exports unless Beijing takes decisive action on the trading relationship.  In her strategy to win over the White House, von der Leyen, a transatlanticist at heart, has over recent months gradually toughened her stance toward Beijing — which in return has warned it will retaliate against any country that seals a trade deal with the U.S. Ahead of the EU-China summit, expectations for any concrete deliverables on trade were low, with some EU officials pointing out it was an achievement the EU and China were meeting at all in the current climate. Right on cue before the summit, the EU listed two Chinese banks in its latest sanctions against Russia, leading Beijing to vent its “strong dissatisfaction and resolute opposition” at a step that it called “egregious.” In the end, the two sides agreed a mechanism to facilitate the fast-tracking of licenses for raw materials, something many European companies had complained about as China tightened its leash on export controls over its rare earth minerals. Big spats — such as over the EU’s anti-subsidy duties on Chinese electric vehicles and access to tenders for medical devices — were left unresolved, however.  EU officials have started referring to China’s negotiation tactics as “the stinking fish strategy” — in which Beijing manufactures new frictions (aka stinking fish) that the EU then has to remove through negotiation.  THE ENEMY OF MY ENEMY IS MY FRIEND The optics could hardly have been more different at the Scottish coast on Sunday.  Following a meeting that lasted about an hour, von der Leyen, a grin on her face, said she wanted to “thank President Trump personally for his personal commitment and leadership to achieve this breakthrough. He’s a tough negotiator, but he is also a deal maker.” The “breakthrough” amounted to Donald Trump lowering his originally threatened 30 percent to 15 percent tariffs on imports of EU goods, as well as agreeing to certain sectoral exemptions. | Andrew Harnik/Getty Images The “breakthrough” amounted to Trump lowering his originally threatened 30 percent to 15 percent tariffs on imports of EU goods, as well as agreeing to certain sectoral exemptions.  As part of their preliminary deal, von der Leyen and Trump also agreed to form an alliance on industrial metals — steel, aluminum, copper and their derivatives — to mitigate the impact of subsidized Chinese overproduction on global markets. This alliance would “effectively [create] a joint ring fence around our respective economies through tariff rate quotas at historic levels with preferential treatment,” Maroš Šefčovič, the EU’s trade chief, said on Monday.  While terms still need to be ironed out — along with most details of the transatlantic trade deal — the alliance is part of broader plans to “join forces in addressing sources of non-market overcapacity so that we work together to address global overcapacity,” according to one senior EU official, who was granted anonymity to discuss the closed-door talks.  LOOKING EAST? LOOKING WEST Initially, after Trump’s return to the White House, hopes were high for a diplomatic reset of the bloc’s relations with China, or at least a gradual détente. In a speech to EU ambassadors in February, von der Leyen said the EU needed to “engage constructively with China,” adding that “we can find agreements that could even expand our trade and investment ties.” The unusual openness was welcomed by Beijing, which seemed keen to build ties with the EU when Washington later hiked tariffs to 145 percent. But when China hit back by imposing strict controls on exports of rare earths, Europe was caught in the crossfire — and von der Leyen’s conciliatory tone didn’t last.  At a summit of G7 leaders in June, von der Leyen accused China of “weaponizing” its leading position in producing and refining critical raw materials. And, speaking to European lawmakers shortly before the EU-China summit, she took aim at China’s industrial overproduction, export restrictions and its support for Russia’s war against Ukraine. In the end, von der Leyen’s hawkish stance on Beijing may have helped her seal a deal with Trump. But it’s a strategy that risks backfiring and being less effective than the Commission hopes.  “The current U.S. leadership seems more interested in striking a bilateral deal with China than in collaborating with allies and partners to deal with the challenges posed to the U.S. and the world,” said Francesca Ghiretti, director of the China Europe Initiative at the RAND think tank. Ghiretti added that the EU’s alignment with the U.S. on China “does not give any immediate advantage or relief in the tensions between the U.S. and the EU.”  The EU, she said, should “carry on with an approach to China that is about the EU and China, rather than the role China may play in the EU’s relation with the U.S.”