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D EPTH

Impact of US-China Tariffs

on Transfer Pricing --

Considerations for MNCs

By Arendse Huld， China Brie昀椀ng

brings potential tax implications for
On April 2, 2025, Trump announced sweeping reciprocal tariffs the importing companies, as well
on around 90 trade partners and a 10 percent minimum baseline as the risk of noncompliance with
tariff on obal imports, spar ng turmoil in obal markets. While the arm’s length principle. To ensure
the reciprocal tariffs on the majority of most partner’s have been that the tax bene昀椀ts of reducing the
ven a 90-day pause, the 10 percent universal base tariff and transfer price are not outweighed
the tariff on China remain in place. In addition to the immediate by the risks of violating transfer
serious implications for the obal economy, the tariff escalation also pricing regulations, multinational
corporations (MNCs) must conduct
has important consequences for transfer pricing, particularly for thorough analyses and maintain
multinational corporations involved in intercompany transactions. We robust documentation to withstand
look at how tariffs impact transfer pricing and discuss strate es scrutiny from both customs and tax
companies can adopt to mitigate the risks. authorities in both jurisdictions.

In this article, we look at the possible
n April 2, 2025, Trump companies can adopt to mitigate implications of the rising tariffs on transfer
Oannounced sweeping reciprocal the risks. pricing and discuss steps MNCs can take
tariffs on around 90 trade partners to overcome these complications.
and a 10 percent minimum baseline At the time of writing, tariffs on
tariff on global imports, sparking imports from China to the US Impact of tarIffs on transfer
turmoil in global markets. While are at 145 percent, while imports
the reciprocal tariffs on the from the US to China face an 125 prIcIng between chInese and
majority of most partner’s have percent tariff. US imports from all amerIcan subsIdIarIes
been given a 90-day pause, the other jurisdictions are subject to
10 percent universal base tariff a 10 percent baseline minimum Under both US and Chinese import
and the tariff on China remain in tariff. Certain products, including regulations, tariffs are usually
place. In addition to the immediate smartphones, computers, and imposed on the value of the
serious implications for the global semiconductors, are exempt from transaction at the time of import.
economy, the tariff escalation also the US import tariffs. This means that the 145 percent tariff
has important consequences for In response to the rising tariffs, currently imposed on Chinese goods
transfer pricing, particularly for companies may look to adjust their entering the US and the 125 percent
multinational corporations involved transfer prices or prepare transfer tariff on US goods entering China
in intercompany transactions. We pricing (TP) risk mitigation plans will be applied to the transfer price
look at how tariffs impact transfer to offset the increased costs of agreed upon between the af昀椀liated
pricing and discuss strategies imports. However, this strategy entities. In both cases, customs

3 AMCHAM SOUTH CHINA