The tax reconciliation bill making its way through Congress is expected to add trillions of dollars to the national debt, but the Trump administration hopes to offset the cost through income from tariffs. Accountants are helping worried companies deal with the possible fallout.
"Obviously, tariffs create a lot of uncertainty," said Tom Alongi, a partner and U.S. national manufacturing practice leader at UHY, a Top 50 Firm based in Farmington Hills, Michigan. "But with uncertainty for U.S. manufacturers, it creates a lot of opportunity. And for those that are contract manufacturers that use a lot of offshoring, it creates a tremendous amount of angst, especially among the auto industry that really over the last three decades has turned into a global supply chain as we've been in a race to the bottom to reduce costs."
UHY has been helping CFOs deal with the changing tariff policies coming out of the White House. "A lot of companies don't even realize how deep some of their supply chains are and where some of their raw material and purchased components ultimately originate," said Alongi.
That involves quantifying the impact, understanding the origin of components and raw materials, and where that fits in the Harmonized System that's administered by the International Trade Administration, making sure everything is classified correctly.
The Trump administration hopes to convince more companies to relocate their manufacturing operations to the U.S. But companies are also looking at changing their sourcing to other countries if they've been relying too heavily on Chinese-made supplies amid the ever-changing tariff pronouncements.
"That uncertainty does create challenges within our clients of allocation of capital," said Alongi. "Do I make big bets to transition if I have a huge amount of risk that is isolated in a certain country? What do we potentially do to mitigate that risk?"
Auto manufacturers need to look at the proposed changes to tax credits in the tax bill, including reductions in electric vehicle tax credits and other tax incentives for renewable energy.
"I always knew that it is a great alternative source that fits certain consumers, but I never believed that it was going to take over the world," said Alongi, who has been driving an EV for over seven years. "The tax credits create a behavior, and they incentivize people to drive electric."
The shortcomings in the national infrastructure for charging EV batteries disincentivize broader takeup, and the disappearance of the tax credits would make the vehicles even less affordable.
Read the full article published by Accounting Today.
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