The near-constant shift in tariff policies, and Section 301 tariffs in particular, is creating a difficult terrain for small businesses to operate in. What makes the situation especially challenging is how these tariffs stack on each other. Original Section 301 duties combine with newer measures such as fentanyl tariffs and reciprocal tariffs on Chinese imports, putting a major strain on small business profit margins and making it difficult to plan and price products.
In this article, we’ll explore exclusion opportunities, compliance requirements, and practical strategies that tax advisors can use to help their small business clients minimize the impact.
Key takeaways
- Layered tariff systems can push effective rates above 55% for certain products, requiring in-depth impact assessments.
- Current exclusions for 178 products remain active through November 29, 2025. This provides temporary relief for specific products, including some manufacturing machinery, but doesn’t open a new window for businesses to apply for additional exclusions.
- Supply chain diversification offers proven pathways to mitigate tariff impacts, while maintaining operational efficiency.
Table of Contents
- Historical context of Section 301 tariffs
- Section 301 tariffs 2025
- Recent extensions and modifications
- Available product exclusions for small businesses
- Applying for Section 301 tariff exclusions
- Strategic considerations for small businesses
- Supply chain adjustments to minimize tariff impact
- Frequently asked questions
- How Harness can help
Historical context of Section 301 tariffs
The Section 301 tariffs we’re dealing with today began in 2018—a key moment when the first Trump administration implemented these trade measures in response to concerns about China’s approach to technology transfer, intellectual property rights, and innovation practices.
What started as a targeted action quickly expanded into something much broader. Implemented across four distinct tranches (Lists 1-4A), these tariffs grew to cover Chinese imports valued at over $360 billion. With duties ranging from 7.5% to 25%, they fundamentally changed the cost structure for businesses relying on Chinese supply chains.
List 1: The first round, implemented in July 2018, imposed a 25% tariff on approximately $34 billion worth of Chinese imports. This list primarily focused on industrial machinery and technology goods.
List 2: Implemented in August 2018, this list added a 25% tariff on another $16 billion of Chinese imports, again focusing on industrial and technology products.
List 3: This was a significant escalation, imposing an initial 10% tariff (later increased to 25%) on about $200 billion worth of Chinese goods in September 2018. This list was much broader, covering a wide range of consumer and industrial products.
List 4A: The final major round, List 4A, was implemented in September 2019. It covered about $120 billion worth of goods with a 15% tariff, which was later reduced to 7.5% as part of the Phase One trade deal. This list included many consumer goods. List 4B, which would have covered the remaining goods, was suspended.
The Biden administration’s statutory four-year reviews largely maintained this framework, but they didn’t simply preserve the status quo. Instead, they implemented increases that targeted specific sectors—particularly semiconductors, electric vehicles, and critical minerals—areas considered key components of American economic security.
Section 301 tariffs 2025
Today’s Section 301 framework maintains its foundation, with Lists 1-3 holding steady at 25% and List 4A remaining at 7.5%. These baseline rates affect thousands of products across Harmonized Tariff Schedule classifications, having a widespread impact on munerous industries.
In strategic sectors, the picture gets even more complicated. Electric vehicles, for example, now face a 100% Section 301 duty, reflecting shifting priorities in trade policy, domestic manufacturing initiatives, and international relations.
Manufacturing inputs tell a similar story. Battery components, semiconductors, and solar cells now face elevated Section 301 rates ranging from 25% to 50%, with specific rates tied to detailed product classifications.
The real challenge for businesses, however, is how these various duties are layered on top of each other. A product might be subject to a 25% Section 301 tariff, a separate 20% “fentanyl tariff,” and a 10% “reciprocal tariff” all at once. This stacking effect can push the total effective duty rate well above 50% for certain imports. Small businesses also face additional layers of duty exposure from Section 232 tariffs on materials like steel and aluminum, which can apply simultaneously to goods already subject to other tariff categories.
Recent extensions and modifications
In late August 2025, the Office of the U.S. Trade Representative (USTR) extended 178 product exclusions from the Section 301 tariffs on Chinese goods. This decision provided a temporary reprieve for businesses that import specific industrial equipment and components by keeping those products exempt from additional duties until November 29, 2025.
It’s important to note, however, that this extension doesn’t apply to all products that have received new or increased tariffs. In particular, it doesn’t include the new, elevated duties on strategic goods like electric vehicles, semiconductors, or batteries, which are part of a separate and ongoing policy initiative.
For businesses, this means that while a narrow list of products continues to enjoy duty-free status, the broader tariff landscape remains complex. To benefit from these exclusions, importers to make sure their products are properly classified under the updated Harmonized Tariff Schedule of the United States (HTSUS) codes.
Available product exclusions for small businesses
The Office of the U.S. Trade Representative (USTR) extended a specific set of 178 product exclusions from the Section 301 tariffs on Chinese goods, with a new expiration date of November 29, 2025. This offers a temporary reprieve for businesses that import a narrow range of industrial equipment and components, allowing them to manage costs on these specific goods.
However, it’s important to understand the limitations of this relief. The extended exclusions don’t cover the new, elevated tariffs on strategic sectors like electric vehicles, batteries, and semiconductors, which are subject to separate and much higher duties as part of a distinct policy initiative.
For companies seeking to claim an exclusion, attention to detail during the application process is vital. The applicable products are tied to precise Harmonized Tariff Schedule of the United States (HTSUS) classifications, primarily found under headings 9903.88.69 and 9903.88.70.
Tax advisors and small businesses should be aware that a major opportunity has now passed regarding the machinery exclusion process (the deadline for new applications for manufacturing equipment under HTS Chapters 84 and 85 was March 31, 2025).
In some cases, however, these exclusions have a retroactive feature, allowing businesses to seek refunds on duties paid for qualifying goods during the specified period. This can be a valuable way to recover costs, particularly for small manufacturers, as many of the exclusions are designed to support U.S. domestic manufacturing rather than finished consumer products.
Applying for Section 301 tariff exclusions
To pursue exclusion requests, small businesses can use USTR’s electronic portal. Each application requires comprehensive product specifications, precise HTSUS classifications, and a compelling business justification.
The path to approval typically hinges on two key arguments: either demonstrating the impossibility of sourcing from non-Chinese suppliers or proving that tariffs would cause severe economic harm. Both requirements need to come with clear evidence and documentation.
Building a successful application means assembling an extensive dossier. Beyond basic product details, a business needs to document import history, demonstrate failed attempts at alternative sourcing, and provide a detailed analysis of financial impacts.
Given that approval rates are below 10% for many product categories, tax advisors should consult with trade attorneys or customs brokers to put together a solidly backed argument for clients seeking tariff exclusions.
Strategic considerations for small businesses
Tax advisors are strongly recommended to suggest comprehensive supply chain reviews for their small business clients. These reviews should identify both exposure to Section 301 duties and potential alternative sourcing options that could mitigate tariff impacts.
It’s important to evaluate whether shifting production to alternative countries, restructuring assembly operations, or compromising product quality could reduce tariff exposure without disrupting established processes.
In addition to this, tax advisors need to carefully monitor USTR announcements and trade negotiations to stay ahead of any policy changes. In the current environment, rapid shifts between the United States and China can dramatically alter tariff liability within weeks or even days, requiring highly agile response strategies.
Supply chain adjustments to minimize tariff impact
A growing number of businesses are building resilience into their supply chains through these three key strategies:
- Geographic diversification: To reduce reliance on a single country, many companies are shifting their manufacturing and assembly operations to alternative regions, particularly in Southeast Asia. This “China Plus One” strategy helps to reduce the risk of Section 301 tariffs while maintaining production efficiency.
- Substantial transformation: Analyzing customs rules, a business can determine whether a product’s country of origin can be changed through specific manufacturing or assembly processes performed in a third country, potentially reducing or eliminating tariff exposure.
- Smart Inventory Management: Businesses can use strategic inventory tactics to better weather periods of policy uncertainty. This includes practices like advance purchasing during temporary tariff exclusion periods and the use of bonded warehouses, which allow goods to be stored for an extended time without paying duties until they are released for sale in the domestic market.
Frequently asked questions
Common questions regarding Section 301 tariffs include:
When will the current Section 301 tariff exclusions expire?
The current round of exclusions, covering 178 products, remains active through November 29, 2025, unless USTR announces further extensions.
How do Section 301 tariffs interact with other duties?
These tariffs generally stack with most other duties including MFN rates, fentanyl tariffs, and reciprocal tariffs. However, certain exceptions exist, particularly regarding Section 232 tariffs.
How can businesses verify if their products qualify for existing exclusions?
Companies should cross-reference their HTSUS classifications against current exclusion lists, and consult with customs brokers to confirm eligibility.
Are duty drawbacks available for Section 301 tariffs paid on goods later exported?
Yes, businesses can claim drawbacks on eligible goods that are incorporated into products subsequently exported from the United States.
What documentation should businesses maintain for Section 301 compliance?
Companies need to put together comprehensive records, including classification determinations, country of origin documentation, and evidence supporting exclusion qualification.
How Harness can help
The complex and constantly shifting nature of global trade policy can place huge demands on a tax advisor, whether it be staying up-to-date with current tariffs or developing effective strategies to go with them. At Harness, our professional community delivers the insights and answers that tax advisors need to deliver the highest value service to their clients.
Beyond our community, Harness’s concierge support, client portal, and TaxAssist software free up a tax advisor’s time by handling administrative tasks and routine client inquiries. This combination of peer-to-peer expertise and operational efficiency gives tax advisors the breathing room they need to stay ahead in the tariff arena. Get started with Harness and gain the support you need to heighten the performance of your tax practice.
Disclaimer:
Tax related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC.
Content was prepared by a third-party provider and not the adviser. Content should not be regarded as a complete analysis of the subjects discussed. Although we believe the content is reliable, it is not guaranteed as to accuracy and does not purport to be complete nor is it intended to be the primary basis for financial or tax decisions.