How to Mitigate the Impact of Tariffs Imposed by the United States

The U.S. Government, in its first 100 days in office, imposed new tariffs on other countries as a reciprocal measure that, in its view, would encourage the purchase of more products made in the United States, increase tax revenue, balance the negative trade disparities with other countries, and boost investment levels. 

As a result of this stance by the U.S. Government, on April 2nd, a 10% base or reciprocal tariff on imports to the United States was announced, which was referred to as “Liberation Day.” Subsequently, a series of much higher tariffs were imposed on around 60 countries, designated as the “worst offenders” among the U.S. trade partners. 

While reciprocal tariffs are applied to imports to the United States, they do not apply to all products in the Harmonized System. There is a list of products exempted from the reciprocal tariff, which can be consulted in Executive Order No. 14257, Annex II, and its subsequent amendments. 

Currently, there is a 90-day pause on tariffs exceeding 10% over the base level. In the case of Costa Rica, the applied tariff rate is 10%, which remains active until a new executive order is issued that suspends or redefines this universal base tariff. 

Due to these tariff measures taken by the U.S. Government, companies under definitive and special regimes, such as free zones, must reconsider their strategies to mitigate the economic impact of exporting products to the United States. Some of the strategies to consider include the following: 

• Application of free trade agreements to obtain tariff preferences for the import of products to the United States. This can reduce the tax burden of general import tariffs; however, it does not reduce the 10% universal base tariff, which is considered additional. 

• Diversification of the export offer. 

• Transformation of the production process to benefit from the application of trade agreements. 

• Searching for new export markets with more favorable tariff conditions where they can be potentially competitive. 

• Renegotiation of international marketing terms (INCOTERMS) to redefine responsibilities, costs, risks, and obligations of the buyer and seller in the transaction. 

• Meeting at least 20% of the total value of the goods with U.S.-origin content to exempt this value from the reciprocal or additional tariff. 

Meanwhile, the Ministry of Foreign Trade is currently negotiating with the U.S. Government to discuss bilateral trade relations and the policy on reciprocal tariffs, in order to safeguard the interests of Costa Rica’s export sector and ensure better conditions for foreign direct investment. 

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