Are Tariffs the New Normal?

In this episode, Founder and Chief Trade Strategist of TradeMoves LLC, Shawn Jarosz, pulls back the curtain on the new IEEPA tariffs—why they’ve become the “new normal,” and what a looming Supreme Court ruling could mean for importers, including the possibility of major refunds. You’ll also hear what’s coming next in 2026, from surprise tariff “backup plans” to robotics and USMCA shakeups that could reshape the packaging and processing industry fast.

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Transcript

Sean Riley: So with all the fancy introductions out of the way, welcome to the podcast, Shawn.

Shawn Jarosz: Thank you. It's a pleasure to be here.

Sean Riley: Oh, the pleasure is all ours. So by now, most of our industry is aware that when he began his second term, the President introduced a new type of tariffs under the International Emergency Economic Powers Act (IEEPA). I want to make sure I get that right. Two questions to kick that off. Where are we right now with the IEEPA tariffs? And then wasn't the Supreme Court supposed to come in and rule on the legality of these tariffs?

Shawn Jarosz: Yes. So, where we currently are with IEEPA Tariffs is that we have tariffs that range anywhere from 10% to 41% on goods coming into the United States, with some exceptions. Canada and Mexico have some carve-outs, but pretty much we see tariffs now on average into the United States at about 15% because of these IEEPA tariffs. Where in the past pre-IEEPA, tariffs on average were about 2%. So we have seen the new normal is a tariff at 15% or higher.

To your second question, yes, we saw the Supreme Court wanted to accelerate a decision on whether or not these IEEPA tariffs are legal. Are they a valid tool and policy mechanism by the President? They had their oral arguments in November, and we had anticipated that, since they had accelerated the oral arguments, we would have a decision possibly before the end of the year. Unfortunately, we did not get a decision. The next time we could see something come out of the Supreme Court would likely be mid-February. And we're hoping that it is a decision that provides clear and unequivocal decision, meaning are the tariffs legal? Are they not legal? And will we get some reprieve in terms of some refunds that may come to importers?

Sean Riley: Interesting. Okay, yeah, because if they are found to be illegal, we've heard that refunds may be possible. I can't even wrap my head around that. Will there be a refund process? How will importers activate requests for refunds? How could that possibly work?

Shawn Jarosz: Yeah, so we see several scenarios. So the Supreme Court could direct the administration to refund all importers—

Sean Riley: Okay.

Shawn Jarosz: …and anybody who had imported under IEEPA had paid a tariff, they could potentially get a refund. The Supreme Court could also direct the administration to limit the scope of those refunds to only the plaintiffs in the case. If that happens, you would probably see a lot of importers wanting to file cases at what's called the U.S. Court of International Trade to push back on that determination.

We could also see the Supreme Court say, "The Court of International Trade, you decide the scope and the process for refunds." But I should mention that, within the regulations for Customs and Border Protection, there is a process for submitting requests for refunds. They're called Post Summary Corrections. You would work with your customs broker to make that amendment, and that would happen if you had imported prior to what's called liquidation. So, about 314 days after you've imported a product, you have this period where you could make an amendment to that entry and get a refund. If that period is after the tariffs have been liquidated, you could file a protest with the CBP. So there are these two processes that are in place that importers could use, but we don't know yet what the Supreme Court will direct the administration to do.

And if every importer is going to file a Post Summary Correction or file protests, it could be lengthy. That means any cash infusions and refunds we were hoping for could be delayed. It could take a long time. So we're trying to manage expectations that once that Supreme Court decision comes out, we still have to wait to see what the process will be and how we can make this as simple for importers as possible.

I will say the one thing you did ask was about how importers activate these requests. What we've been telling importers, including PMMI members, is to have this information at your fingertips. The important information you'll need in order to file Post Summary Corrections or file protests is that you'll need to know your entry number, your date of entry, and your date of liquidation. What is the product description? What are the tariff codes, including the IEEPA-related tariff codes? What was the value of the goods? What was the value of IEEPA tariffs? So you have this information at your fingertips to make it easy for your process to potentially get refunds. There's no easy button that we anticipate, and we're just trying to manage expectations that there is some homework and some due diligence that importers have to do to prepare, but that we can anticipate it's not going to be an immediate cash infusion.

Sean Riley: Okay, and that's fair, and that I would assume most people would think that, but who knows? So let's say it's determined that we can't use the IEEPA for tariffs. Do the tariffs just automatically go back to the way they were?

Shawn Jarosz: I wish that were the case. Unfortunately not. Although the President has said… If IEEPA tariffs go away, the President has already said, "I have a backup plan."

Sean Riley: Oh, good.

Shawn Jarosz: And they've already said that tariffs are always going to be part of the President's trade policy going forward.

Sean Riley: Okay.

Shawn Jarosz: So, there are other legal authorities that the President could use to impose tariffs that would replace the IEEPA tariffs. We have what's called Section 122, which is to address large and serious deficits. We have Section 338 to counteract discrimination against U.S. goods, so the President could pull from these other legal authorities and impose tariffs to replace those IEEPA tariffs. The only difference we see is that the possibility of refunds could provide some cash infusion back to importers, but prospectively, we'll still see tariffs very much part of the trade landscape.

Sean Riley: Okay, and I guess in that vein, I know the President expanded the use of Section 232 tariffs to protect national security. Why are these tariffs particularly relevant to packaging and processing manufacturers?

Shawn Jarosz: Yeah, so in addition to IEEP, which has been the President's go-to for hitting all countries in all products, Section 232 is meant to be sectoral. They're meant to be focused on those particular sectors that, again, as you said, to protect national security, steel, aluminum, copper, pharmaceuticals, and the President has… Section 232 tariffs on steel and aluminum started in his first term. So the President had imposed Section 232. In his second term, he expanded the scope in terms of the products subject to Section 232.

He expanded it to a higher level of tariffs, so no longer 15 or 25%, but up to 50%. And so we're seeing PMMI members, some of their machinery being hit with these Section 232 tariffs, so ovens, belt-type conveyors are in scope with this expanded list. The good news is that Section 232 tariffs on steel and aluminum have not hit the primary tariff codes where we see PMMI members' products.

Sean Riley: Okay, and correct me if I'm wrong, this could also have an impact on robotics?

Shawn Jarosz: Yes. So in September of 2025, the President initiated an investigation into robotics, indicating that we need to protect national security in the robotics sector. And in order to do that, we have to undergo an investigation. The scope is robots and programmable, computer-controlled mechanical systems, as well as application-specific specialty metalworking equipment. And for PMMI, these robotics are the machines that help us build our machinery and our processing lines—

Sean Riley: Sure.

Shawn Jarosz: …so quite important to our sector. We don't yet know what the scope will be in terms of what tariff codes, how the President would apply this, but the investigation is underway. PMMI did submit comments opposing any new tariffs on robotics that would not be in the interest of our sector, as we need these robotics. We don't have access to what we need here in the United States domestically. So we do rely on global supply chains, and we see robotics as a part of our way to bolster our manufacturing sector and to enhance our U.S. competitiveness. So this is one we'll be watching, and if tariffs are applied, they could be applied in 2026. So we'll be watching this space.

Sean Riley: Okay. The President did this during his first term: he replaced NAFTA with the U.S.-Mexico-Canada Agreement, the USMCA. How important is the USMCA to our industry, where PMMI members are in Canada, Mexico, or the U.S.? So it obviously touches on all of us. So I guess, yeah, in general, how important is this to our industry?

Shawn Jarosz: You do mention the fact that we have manufacturers and customers in all three markets, and last year we saw over $1.5 billion in processing and packaging machinery move between the markets. The one… Prior to 2025, USMCA was important, but wasn't critical necessarily because we move a lot of products. A lot of industrial goods move what's called MFN duty-free. No matter if you're importing from Canada, Mexico, or any other country, products could come into the United States MFN duty-free for most of the packaging and processing equipment. But because of the IEEPA tariffs, USMCA has become extremely important because if a product, if a piece of machinery, a piece of equipment is compliant with USMCA, you're not going to pay those IEEPA tariffs on goods from Canada or Mexico.

Sean Riley: Oh, okay.

Shawn Jarosz: So, USMCA has become a way; it's become a carve-out for goods coming from Canada and Mexico and into the United States. And USMCA has been important for our exports, Canada and Mexico, because not everything is MFN duty-free there. So we've had to rely on duty-free access through the agreement. So it is an important agreement and one that we'll be watching this trilateral review because it's really about whether or not USMCA is working for all parties. And most notably from the administration's perspective, is it working for U.S. companies?

Sean Riley: Okay. And I know from what I understand, there's a meeting in July, the three parties meet for a six-year sort of sunset review. I think you just explained why it's important. Does this mean that the USMCA is in jeopardy of going away? Or was the meeting just going to happen regardless? What is your take on that?

Shawn Jarosz: So this is a mandatory review.

Sean Riley: Okay.

Shawn Jarosz: This is something new. When President Trump renegotiated NAFTA and brought in USMCA, he wanted to make sure that the agreement is dynamic and flexible. Whereas NAFTA felt somewhat static. While the term "sunset review" sounds a little bit ominous, it does not mean that USMCA is going to go away in 2026. The President is using USMCA review as a way to put more pressure on Canada and Mexico. I think it brings them to the table, threatening tariffs against Canada. Just this past week, before some of its comments, was meant to put pressure on these countries as part of this review.

The one thing that we are also watching is that the President has indicated that maybe USMCA doesn't need to be a trilateral agreement. Maybe it's meant to be something that evolves into two bilaterals. So a bilateral with Canada and a bilateral with Mexico. That may change the dynamics of, I think, what are some highly integrated supply chains. But again, that wouldn't happen in 2026. It starts the process for either renegotiation or modification. Again, I think this has been an agreement that's worked well for our sector, and we want to see it continue without big changes.

The other change that has been something that has been of concern to us is whether there will be greater restrictions on where you can get your components and your parts that are put into machinery? There's been a lot of pressure on Mexico to stem the flow of Chinese goods into the United States via value-added processing and limiting Chinese goods. So we may see some changes that could impact how USMC evolves, but I don't think that will mean anything in 2026; it could mean things in the future as negotiations proceed.

Sean Riley: Okay. Fair enough. So then, I guess, what do you foresee for 2026? Are we going to expect more of the same with this volatile trade policy and tariffs, with all this uncertainty? Or are you projecting it cleans up a little bit? What do you see for 2026?

Shawn Jarosz: I think we're seeing more of the same. I think tariffs are not going away. They'll just potentially take different forms. There was a lot of volatility in 2025 that was very much companies having to quickly react to, and they couldn't be proactive.

Sean Riley: Right.

Shawn Jarosz: I think tariff fatigue will continue, but the volatility, and we've seen, at least in the past three months, tariffs have somewhat stabilized. So yes, they're at this higher level of average, 15%, but we haven't seen the highs and lows that we saw in the first part from like March through April, May, and June that really didn't allow companies to have any foresight on how they could do their pricing considerations or how they could plan for the future.

I think it's going to be more of the same in terms of tariffs. 15% is the new normal. It's the new average—

Sean Riley: Right.

Shawn Jarosz: …and if we do see tariffs go away, they're just going to be replaced, and it's going to make it a little bit harder for brokers and so on and so forth. But I think companies can have some sort of semblance of not a lot of fluctuations. There are going to be exceptions to that rule, but I think for right now, we can anticipate some stability.

I think the one area we'll want to watch, as I mentioned, is Section 232 to see if that expands for steel and aluminum, copper, and so forth, as well as robotics. That will be where we're starting to hit other parts of our supply chain. That could change that rule. That would be where you're seeing that those fluctuations continue.

And I'll just say I think in terms of the outlook for 2026, the one thing we anticipate is that a lot of companies have been absorbing these tariff costs. They have not been fully passing them on to downstream users or passing them on to consumers.

I think that if we have this cash infusion is what we're calling it, if there's a refund process, we may be able to see companies, again, not passing on as many costs to consumers. But I think that we'll start to see the Consumer Price Index go up a little bit, and maybe the Producer Price Index come down a little bit as we start to see companies just can't continue to absorb these tariffs for in 2026, 2027, 2028 because the President has said tariffs aren't going away.

Sean Riley: Right. Okay, so I've been following a lot of your reports since this tariff stuff started happening last year, and we've been fortunate to have you come on a bunch of PMMI webinars and town halls and things like that and speak at our meetings. So I really appreciate you coming on the podcast to clean this up a little bit, give us kind of an idea of what's happening. Hopefully, it clears up a little bit more for our listeners. But thank you again, Shawn, for taking the time to come on here and explain this for us.

Shawn Jarosz: My pleasure. I appreciate the opportunity.