Understanding Stacked Tariffs: A Hidden Cost to Global Manufacturers
- Chad Harbola, Kirti Vardhan
- Jul 15
- 4 min read
Updated: Jul 17
In the global trade environment of 2025, the United States has introduced a new, far-reaching tariff framework, one that’s already disrupting how global manufacturers calculate cost and manage margin. These aren’t just tariffs on finished goods. The new model applies layered duties based on the origin of each raw material and component. This is the era of stacked tariffs and they’re hitting importers harder than many realize.
At DuCanTan, in partnership with OpsVeda, we’re helping companies decode this complexity through TariffSight, a real-time trade intelligence platform built for the modern global supply chain.
U.S. Tariff Landscape – What’s Driving Complexity?
Today’s U.S. tariff regime is built on multiple overlapping rules and authorities, each targeting different aspects of imports:
Section 232 – National security-based tariffs on steel, aluminium, and semiconductors, currently as high as 50%.
Section 301 – Trade remedy tariffs, mostly targeting China, with duties up to 25% on goods like electronics, machinery, and chemicals.
IEEPA (International Emergency Economic Powers Act) – Allows emergency-based tariffs, such as 20% additional duties on Chinese goods tied to fentanyl-related enforcement.
Auto & Auto Parts Tariffs – Broad-based tariffs of 25% on finished vehicles and parts, especially those involving foreign content.
Universal + Reciprocal Tariffs (April 2025 policy) – A 10% base tariff across most imports, plus 11–50% country-specific reciprocal rates based on trade imbalances.
De minimis rule removal – Low-value goods from China no longer enjoy the <$800 exemption, impacting e-commerce and small-parcel shipments.
The real challenge lies in how these rules interact — creating stacked effects that apply differently based on a product’s content, origin, and transformation process.
Understanding Stacked Tariffs in Auto Parts
Auto parts imported into the U.S. especially those with steel, aluminium, or electronic components are now subject to a layered tariff regime shaped by origin, material content, and supply chain complexity.
For example:
Chinese-origin parts may face:
25% tariff under Section 301
+20% via IEEPA (e.g., fentanyl-linked enforcement)
+25–50% under Section 232 if the part contains steel or aluminium
Indian electronics may face:
10% base tariff
+27% reciprocal tariff, depending on current trade relations
Even if these parts are assembled into a higher-level product like a car door or ECU module in a third country (e.g., Italy), U.S. Customs and Border Protection (CBP) will assess whether the product meets:
Substantial Transformation: Has the part changed enough to qualify as Italian?
RVC (Regional Value Content) Thresholds: Does the final value added in Italy meet trade agreement requirements?
If the answer is no, the original country of origin (e.g., China, India) still applies, meaning the hidden tariffs follow the parts, even when the final product says, “Made in Italy.”
But if the answer is yes, the U.S. applies tariffs based on Italy and not China or India.
Means:
Reciprocal tariff on Italy (e.g., 15–20%)
No Section 301 (which targets China)
No IEEPA tariff (if that only applies to China)
A Real-World Example: ABC Manufacturing
Let’s consider ABC Manufacturing, a company in Italy that exports car doors to the U.S.
It imports raw steel from China
Uses electronic window modules from India
Assembles the product in Italy
Ships the car door to the United States
Here’s how the stacked tariff might look {subject to changes}
Component | Origin | Tariff Rate |
Steel | China | 80% (50% sectoral tariff on raw material + 20% Fentanyl + 10% reciprocal) |
Electronics | India | 37% (10% base tariff on components + 27% reciprocal) |
Final Assembly | Italy | 25% (10% base tariff on finished goods + 15% reciprocal) |
For a $1,000 car door:
Tariff on steel: $280
Tariff on electronics: $111
Overall assembly duties: $250
Total tariff cost = $641
That’s over 60% in hidden trade costs — often passed through or absorbed without full visibility.
What Is RVC and Why It Matters
RVC (Regional Value Content) is a trade rule used in agreements like USMCA and EU FTAs to determine whether a product qualifies for reduced or zero-duty treatment.
RVC measures how much of a product’s value was created in a specific region.
How It’s Calculated:
Transaction Value Method
= (Final selling price – cost of foreign materials) / Final selling price
Build-Up / Build-Down Method
· Build-Up: Add up all local inputs
· Build-Down: Subtract all foreign inputs
For example:
If a car door is assembled in Italy, but 70% of its value comes from Chinese steel and Indian electronics, it may fail to meet RVC thresholds (often 50–60%). In that case, no preferential treatment applies, and full tariffs are charged based on the input origins not the final assembly.
RVC is particularly critical for companies using globally sourced components but hoping to qualify under FTA exemptions.
How TariffSight Automates RVC & Origin Evaluation
TariffSight simplifies this complexity by automating component-level RVC analysis and origin tracking across your entire supply network.
What TariffSight Does:
Analyses multi-tier BOMs and supplier declarations
Applies rules from FTA frameworks (like USMCA, EU-Mexico)
Calculates RVC in real-time
Flags products that fail thresholds
Traces origin attribution at each tier of the supply chain
Provides alerts and simulations for better sourcing and compliance
With TariffSight, your teams can:
Avoid false claims
Prevent missed duty savings
Align sourcing with tariff strategies
Make trade-informed decisions before production begins
Insight-Driven, Not Guesswork-Driven
In this world of layered tariffs, RVC thresholds, and shifting exemptions, spreadsheets simply don’t cut it anymore. With TariffSight, companies get clarity before the cost hits the P&L and the ability to adjust procurement, pricing, and compliance strategies in real time.
At DuCanTan, we’re proud to work with OpsVeda to deliver this intelligence to manufacturers, distributors, and global brands seeking greater cost control and competitive agility.
Ready to See What’s Hidden in Your Tariffs?
If you're unsure whether your suppliers are charging you accurately or whether your products qualify for trade exemptions, it’s time for a deeper look.
Let’s schedule a walkthrough of TariffSight and explore how your company can move from tariff uncertainty to tariff intelligence.
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