Recent executive orders on immigration enforcement, tariffs, and international trade have significant implications for businesses. This article delves into the impact on the private sector and the steps companies need to take to prepare for these changes.
Watch: Navigating Executive Orders on Immigration, Tariffs, Trade
Impact on the Private Sector
Immigration Enforcement
The executive orders on immigration enforcement directly affect businesses especially those with a large non-citizen workforce. Employers should anticipate:
- Increased I-9 Audits: Employers should anticipate a rise in Form I-9 audits by US Immigration and Customs Enforcement (ICE). These audits ensure that employees are legally authorized to work in the US. Non-compliance can result in hefty fines and legal repercussions.
- Worksite Enforcement Actions: There is an expected increase in unannounced worksite enforcement actions. Businesses must ensure that their employment practices are compliant with federal immigration laws to avoid disruptions.
- Impact on Workforce: Industries with a significant number of non-citizen employees, such as agriculture, construction, and hospitality, may face workforce shortages due to increased deportations and stricter immigration policies.
Legal Challenges
Several immigration-related executive orders are likely to face legal challenges, which could create uncertainty for businesses and individuals navigating the law, and for those relying on federal contracts or funding. Some challenges include:
- Birthright Citizenship: The executive order challenging birthright citizenship for children born to undocumented parents is already facing multiple lawsuits. The outcome of these legal battles could have far-reaching implications for businesses employing individuals from mixed-status families.
- Expedited Removal: Also being challenged in court is the expansion of Expedited Removal. The executive order expands the use of expedited removal, which allows for the swift removal of undocumented individuals without a court hearing. Traditionally, this process is only utilized within 100 miles of a US border, but the expansion triggers a federal rule change allowing officers to use expedited removal in the interior of the United States for all undocumented individuals who have been present in the United States for less than two years.
- Sanctuary Jurisdictions: Multiple challenges and enforcement actions have been filed to address whether the federal government can withhold grants and funding in order to encourage local jurisdictions to cooperate with federal immigration enforcement. Multiple venues saw similar litigation under President Trump’s first term in office, but was never ultimately resolved by the Supreme Court because the Biden administration ended the practice. Funding for federal grants is in jeopardy for many cities and states within these jurisdictions, and we anticipate seeing further litigation.
Tariffs and Trade Executive Orders
Overview of Tariffs
Tariffs are taxes imposed on imported goods, and recent executive orders have introduced new tariffs on imports from Canada, Mexico, and China.
- 25% Tariff on Canada and Mexico: The executive orders impose a 25% tariff on imports from Canada and Mexico, with a 10% tariff on energy products from Canada. The president has temporarily paused the tariffs related to Canada and Mexico until March 4, 2025.
- 10% Tariff on China: An additional 10% tariff has been imposed on imports from China, on top of existing tariffs.
The president also issued executive orders re-instituting 25% tariffs on steel articles and increasing the tariffs on aluminum articles to 25%.
Implications for Businesses
These tariffs have significant implications for businesses.
- Increased Costs: Businesses importing goods from Canada, Mexico, and China will face higher costs due to the new tariffs. This could lead to increased prices for consumers and reduced profit margins for businesses.
- Supply Chain Disruptions: The tariffs may disrupt supply chains, especially for businesses that rely on imported raw materials and components. Companies may need to find alternative suppliers or adjust their supply chain strategies.
- Retaliatory Measures: Canada and China have already announced retaliatory tariffs on US goods. This could further escalate trade tensions and impact businesses that export to these countries.
Risk Management Strategies
To effectively navigate the challenges posed by recent executive orders on tariffs and international trade, businesses need to adopt strategic risk management practices. Following are some key strategies that might help mitigate the impact of these changes. Whether these strategies can assist will depend on the particular business model at issue and the latest details of the applicable executive orders and associated regulations.
- Stocking Up on Goods: Businesses can stock up on goods they import before new tariffs take effect to avoid increased costs.
- Foreign Trade Zones: Utilizing foreign trade zones allows businesses to bring imports into a designated area without paying duties or tariffs until the goods enter US commerce. This can help manage cash flow and, in some circumstances, may reduce tariff costs.
- Tariff Engineering: Modifying goods to classify them under different tariff codes with lower rates can help reduce tariff expenses.
- Changing Country of Origin: Manufacturing goods in countries with lower tariff rates can help businesses avoid higher tariffs imposed on certain countries.
Why This Is Important for Businesses
Understanding these executive orders is crucial for businesses to navigate the changing regulatory landscape. Non-compliance with immigration laws can result in severe penalties, while tariffs can significantly impact costs and supply chains. Staying informed and proactive can help businesses mitigate risks and adapt to new challenges.
Steps Businesses Need to Take to Prepare
- Legal Consultation: Consult with legal counsel to understand the implications of the executive orders on your business and to develop strategies for compliance and risk mitigation.
- Enhance I-9 Compliance: Ensure that all Form I-9s are accurately completed and maintained. Regularly audit your I-9 records to identify and correct any discrepancies.
- Employee Training: Train staff on worksite compliance and ensure employees, especially managers, understand the business’ approach to immigration enforcement actions.
- Internal Audits: Conduct internal audits to ensure compliance with immigration laws and identify any potential issues before they become problems.
- Communication with Employees: Be prepared to have conversations with employees and provide clear information on the company’s policies and procedures.
- Diversify Supply Chains: Explore alternative suppliers and diversify your supply chains to reduce reliance on imports from countries affected by the new tariffs.
- Cost Analysis: Conduct a thorough cost analysis to understand the financial impact of tariffs on your business. Adjust pricing strategies and explore cost-saving measures to maintain profitability.
- Stay Informed: Keep abreast of legal developments and changes in immigration and trade policies. Subscribe to industry newsletters and participate in relevant forums to stay updated on the latest information.
Conclusion
The executive orders on immigration and tariffs present significant challenges for businesses. By understanding the impact of these orders, preparing for legal challenges, and taking proactive steps, businesses can navigate this complex landscape and continue to thrive.
Nixon Peabody is actively monitoring and analyzing developments related to executive orders. Visit our New Administration Hubto stay updated on government actions and how they will affect business operations. Reach out to your Nixon Peabody attorney with any questions.