Trump’s Tariffs Turned a Sleepy Industry Into the Front Lines of the Trade War
Cherie Pallotta had barely slept in the weeks since Donald Trump announced new worldwide tariffs on April 2. The news—framed as Liberation Day by the White House—put an under-the-radar group of customs brokers like Pallotta at the center of the trade war.
For years, these brokers have helped firms calculate tariffs and fees, expediting the process of bringing imports into the country. The trade war has turned the effort into a game of whack-a-mole.
“I mean, it’s nonstop. I feel like I’m working 24-7 at this point—all day, all night, which was not normal before,” Pallotta told Barron’s. “I feel bombarded.”
One customs broker reached by Barron’s ended an interview by expressing how grateful she was to have had a calm conversation for the first time in a week. “You’re not yelling at me,” she said. “So, thank you for listening.”
The first job for customs brokers is to help importers identify the proper ten-digit codes for their products out of almost 20,000 choices. Some goods require multiple codes, and compliance can be tricky in these cases, even before the trade war, says Karen Ferry of Karen Ferry Customs Brokers, whose customers primarily import jewelry and gems from India.
Gems don’t get a tariff, though precious metal jewelry, like chain necklaces, do. And then the rate depends on the type of chain. A continuous length of silver chain gets a 6.3% tariff, but if it’s gold the tax is 7.0%. A gold rope chain necklace gets a 5.0% tariff, but if it’s mixed-link, that’s 5.8%. Other types of gold necklaces are taxed at a 5.5% rate.
There are also 3,450 temporary levies, covered in the 690-page “Chapter 99” of the Harmonized Tariff Schedule, which includes tariffs from the Trump and Biden administrations going back to 2018.
Chapter 99 has already been revised 11 times this year, compared with once for all of 2017. Customs brokers must keep up with the changes and know which codes to add for each product and country of origin. Sometimes these rates get stacked on each other, and sometimes only one rate prevails. Those gem and jewelry imports from India are stacked, so they are now hit with an additional 10% tariff from Chapter 99, maybe rising later this year to 27%.
“I’ve been a customs broker, an economist and a therapist, because my clients are all coming to me,” says Ferry. “I have to have sympathy because they’re saying, ‘I’m going to have to close my business if this keeps up.’ ”
On the eve of the second Trump presidency, most cargo still came into the U.S. with zero or low rates. As of last year, the average U.S. levy rate was 2.4%. For many importers who paid no tariff, passing through customs was more of an annoyance than a hurdle.
But now the landscape has shifted rapidly for customs brokers and their customers. The first big round of new tariffs came in February on goods imported from the three largest U.S. trading partners: Mexico, Canada, and China. These were on-again, off-again through March.
Robert Krieger got his broker license in 1982, and is the president of Krieger Worldwide, a company founded by his father. With offices at several U.S. entry points, his customers were immediately impacted.
“That wasn’t very pleasant, particularly along the Mexican border,” he says of the February round of duties.
“I wake up in the morning to a bunch of emails and text messages,” Krieger said. “And it’s something like ‘Help! What am I going to do? The tariffs are going to put me out of business. What suggestions do you have?’ And that’s been for a number of months.”
Krieger helps those clients with the day to day, but the future is cloudy. “My crystal ball is broken,” he says.
The Mexico and Canada news was followed by a wave of global tariff announcements from the White House. On April 2, using a law meant for economic emergencies, the Trump administration announced an additional 34% tariff on imports from China, a baseline 10% for all other imports, with some countries getting an additional 1% to 40%.
On April 5, that baseline 10% for all imports took effect. On April 8, the additional tax on imports from China, to take effect the next day, was raised to 84%. By the end of April 9, the day the rest of the tariffs were implemented, the Chinese add-on was raised to 125%, while the rest of the world got a 90-day reprieve from all but the baseline 10%.
On April 11, many goods were exempted, though the White House said three days later that those categories, like semiconductors and pharmaceuticals, would be getting their own special rates later this year.
“It’s been chaotic,” says Pallotta of IBC Customs Brokerage. “Once you wrap your brain around one executive order and you understand it, it changes soon after.”
“It’s a major shock to the industry,” she said.
These rapid shifts in policy are compounded by White House communications that aren’t specific enough for their work. “First it’s a tweet, then it’s an executive order,” a Los Angeles area customs broker told Barron’s. “But that wording, it’s close. But it’s not technical enough for us in the industry to be able to move on it.”
The uncertainty means customs brokers—usually a source of institutional knowledge—are adapting on the fly, says Ferry.
She now provides caveats when quoting tariff rates to clients. “Just be careful, it could change,” she recently warned one customer. “It could change in two hours. It could change by tomorrow. It could change Monday.”
Instead, Ferry says, “it changed like 15 minutes after that.”