The New Tariff Reality: Higher Costs, Less Certainty
A series of court rulings, new tariff authorities, and shifting trade agreements have created a constantly changing tariff landscape for distributors and manufacturers.
By Tim O'Connor
Editor and Communications Manager
Distributors and their customers are footing the bill for tariffs. Nearly 90% of tariff fees paid by importers in 2025 were passed straight through to companies down the supply chain, according to a report from the Federal Reserve Bank of New York. That cost-shifting shows no sign of slowing as the federal government continues to seek new mechanisms to carry out President Donald Trump’s tariff policies. Equally concerning, the same report found that 44% of manufacturers who paid tariffs directly say more price increases are still on the way.
For foodservice equipment and supplies distributors, the new tariff environment presents two increasingly familiar but still difficult options. Should distributors absorb the higher costs, or pass them on to customers, some of whom have already locked in budgets for equipment installations and other projects?
The stakes extend well beyond any single company’s bottom line. The Tax Foundation, a nonpartisan tax policy organization, estimates that tariffs imposed in 2025, combined with partial retaliation from some U.S. trading partners, will offset more than two-thirds of the economic benefit of the tax cuts included in the One Big Beautiful Bill Act. The organization projects the average U.S. household will pay $840 more in taxes in 2026 as a result, and that, in the long run, the tariffs will shrink gross domestic product by 0.4% and eliminate the equivalent of 345,000 full-time jobs.
The projected economic impact is underscored by how significant the administration’s approach to tariffs has been. The country’s weighted average applied tariff rate stood at just 1.5% in 2022. By comparison, the Tax Foundation estimates that under the current tariff structure, the applied rate will climb to 11.7% in 2026.
Distributors and manufacturers trying to plan around those rising import taxes face a moving target. Tariff policy has changed more than 50 times since January 2025, as various tariffs have been blocked by the courts only to be resurrected under different legal authorities.
The strongest rebuke came in February 2026 when the Supreme Court struck down the sweeping global “Liberation Day” tariffs the administration had put into effect under the International Emergency Economic Powers Act (IEEPA). The court ruled that the 1977 law did not give the president authority to impose tariffs; however, it did not address what the government should do with the $166 billion in duties it had already collected through the IEEPA. A few weeks later, the U.S. Court of International Trade ordered that all the associated taxes must be repaid to the businesses that paid them.
Returning all that money is going to take some time. U.S. Customs and Border Protection (CBP) implemented an automated refund system in late April to help manage the process, but as of the end of July it had only issued $100 billion in refunds, about 60% of the total. The first wave of refunds covers only unliquidated entries and entries within 80 days of liquidation; refunds for older, finalized tariff payments will be handled in a future phase.
Although money is now being returned to businesses, the administration remains committed to its tariff strategy. Immediately after the Supreme Court ruling, it invoked Section 122 of the Trade Act of 1974 to impose a temporary 10% tariff on most imports, a measure set to expire after 150 days, on July 24. The Court of International Trade ruled against those tariffs as well in May, though the government’s appeal allowed the tariffs to remain in effect until the statutory deadline arrived.
Section 301 Tariffs Take Over
With the Section 122 tariffs set to lapse, the administration turned to Section 301 of the Trade Act of 1974. The law authorizes the president to investigate and retaliate against foreign trade practices deemed “unjustifiable,” “unreasonable,” or “discriminatory.” The first wave of Section 301 investigations concluded in late July, resulting in new tariffs on 60 countries that account for an estimated $964 billion in goods.
U.S. Trade Representative Jamieson Greer said the investigations found that the affected trading partners were inadequately enforcing bans on goods made with forced labor. “President Trump recognizes that decades of moral suasion have not eradicated forced labor from global supply chains,” Greer said. “The United States has had a forced labor import ban for nearly a century and rigorously enforces it; it’s well past time for our trading partners to do the same.”
The new duties, ranging from 10% to 12.5% depending on the country, are structured differently than their predecessors. Where the IEEPA and Section 122 tariffs applied broadly and were vulnerable to court challenge, Section 301 tariffs are expected to provide a more durable legal framework because they are backed by a formal statutory process that requires structured investigations and findings. Additional Section 301 actions are expected in the coming months as the U.S. Trade Representative is also reviewing whether 16 countries have overproduced goods in ways that depressed prices and disadvantaged U.S. companies.
Steel, Aluminum, and Copper Tariffs Persist
Separate from the IEEPA-Section 122-Section 301 progression, tariffs on steel, aluminum, copper, and their derivative products remain in place under Section 232 of the Trade Expansion Act of 1962. Under this law, the president can adjust duties on imports found to threaten national security following a Commerce Department investigation.
Trump initially imposed Section 232 tariffs of 25% on steel and 10% on aluminum in 2018 during his first term. He moved quickly to reinstate and expand those duties after returning to office, setting 25% tariffs on both metals in February 2025, then doubling the rate to 50% four months later. In August 2025, the administration broadened the tariffs’ scope again, extending them to the steel and aluminum content of finished goods.
Products that are substantially composed of steel or aluminum, known as derivatives, are also covered by the Section 232 tariffs. These include many kinds of equipment found in commercial kitchens. As of August 2026, the tariff rate for refrigerators, freezers, table knives, and dishwashing machines from most countries was 25%, while the rate for cooking stoves, ranges, and ovens was 15%.
Even equipment made in the United States is still affected by these higher tariff rates. According to the Council on Foreign Relations, the country imports 25% of its steel and relies on imports for around half of its aluminum. That equates to higher costs for any manufacturer relying on foreign sources to supply those materials.
USMCA Under Strain
Alongside the tariff actions, the administration has pursued a series of trade agreements with individual countries over the past year. Among the most consequential developments has been the renegotiation of the United States-Mexico-Canada Agreement (USMCA), which underpins the cross-border supply chain that many foodservice equipment and supplies distributors and manufacturers rely on. The first Trump administration negotiated the trade deal as a replacement for the North American Free Trade Agreement and it went into effect in July 2020.
The USMCA requires its member countries to conduct a mandatory joint review every six years, and 2026 marked the first such review. Representatives from the three countries met virtually on July 1 to fulfill that obligation. While Canada and Mexico confirmed they wanted to extend the agreement for another 16 years, the United States announced it would not renew the agreement in its current form.
The USMCA remains in place for now, but the U.S. decision triggered a new process through which reviews will now be held annually to give the three countries an opportunity to resolve outstanding trade issues or to negotiate a replacement agreement. If a deal is not reached by 2036, the USMCA will expire.
Tensions between the neighboring countries have already surfaced. On Aug. 22, the U.S. imposed new 50% tariffs on $20 billion worth of Canadian goods, including dairy products, alcoholic beverages, and motor vehicles. The duties apply even to products that previously qualified for preferential treatment under the USMCA. Canadian Prime Minister Mark Carney responded by saying that Canada would retaliate “dollar for dollar.”
Congress Weighs a Check on Tariff Authority
The rapid pace of tariff changes has prompted a legislative response. Sen. Ron Wyden (D-OR), the ranking member of the Senate Finance Committee, introduced the Congressional Trade Powers Reform Act of 2026 (S.B. 5801) on July 22. The bill would limit the president’s ability to impose tariffs by requiring congressional approval and would establish a bicameral committee on tariffs and trade. This group would be staffed on a nonpartisan basis with economists, lawyers, and other international trade experts, who would review and make recommendations on proposed tariff actions. The legislation would also increase oversight of the Office of the U.S. Trade Representative by installing an inspector general and moving it outside the executive branch.
“Congress must reassert its authority over trade and tariffs to stop any president from being able to unilaterally change the worldwide economy at the click of a button,” Wyden said. The bill has been referred to the Senate Finance Committee for consideration.
FEDA and many of its advocacy partners are supporting efforts to stabilize the tariff situation. Higher costs threaten not only serious supply chain disruption but may also reduce the capital available for distributors to hire, increase wages, or invest in expansion.
The past two years of tariff whiplash underscore the importance of a predictable trade policy, which matters as much as the tariff rates themselves. A sensible approach to trade that allows distributors and manufacturers to secure the products and resources they need from the most competitive sources remains essential to keeping the supply chain functioning and costs manageable for end customers.