In the latest update to the ongoing tariff debacle, a new deal has been announced between the United States and China.
Not so much of a deal as a 90-day almost-reprieve. The tariffs in place on Chinese goods imported to the United States will be dropping from 145% down to 30%, and the Chinese reciprocal tariffs of 125% on imported goods from the United States will drop to 10%.
A short term tariff solution
At first glance, this seems like much-needed relief in the US trade war. Undoubtably, 30% is far better than 145%. But let us reconsider that feeling of relief. This agreement came about as pressure on the current US administration was increasing – empty ports and the promise of empty shelves.
The only reason this feels like relief is due to the extreme nature of the previous tariffs and let’s be real here; a 30% tariff is still a terrible, unplanned price increase for enterprises in the United States particularly when buying technology. To make it worse, this is only a 90-day solution, leaving the acidic nature of uncertainty eating away at business confidence.
IT budgets blown – uncertainty will continue
Enterprise IT departments have mandates for efficiency, simplicity, and of course, AI. All to achieve the benefits of digital business and take advantage of AI. IT budget planning from last year is blown from the water for US based enterprises. This comes at a time when it is even more imperative for enterprises to update their business practices to take advantage AI and other digital business trends.
The uncertainty regarding tariffs will continue. The current US administration, as of Monday 12 May 2025, has said unless a deal is reached within 90 days, that tariffs will go over the previous 145% against China. While that is an alarming idea on the surface, the reality is that tariffs such as the 145% rate constitutes a functional embargo. A rate higher than that is unlikely to make any real difference 145% was already unaffordable for most businesses, especially small business, and low margin operations.
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By GlobalDataQuick change on tariffs
This latest on the tariffs is simply an example of how quickly things can change. CIOs need to work on flexible budgeting, based on business priorities. CIOs should take a new, flexible budget plan to the rest of the C-suite with clear recommendations on what project to move forward with and what can be delayed until next year.
Further, there should be more contingencies created and agreed upon, that encompass both another round of tariff changes including worse-case scenarios of a return to astronomical tariffs and beyond, or best-case scenarios of a return to pre-trade war tariffs. There needs to be both regularly scheduled budget reviews as well as ad-hoc reviews when tariff events warrant it.
Prioritise business requirements
The guiding light for IT budgeting is business priority and moving forward to advance the overall business. That can mean accepting solutions that are sub-optimal in their first iteration but still provides business benefit.
It also means possibly delaying long-desired projects for IT itself, cutting those projects back, or stopgap measures until the tariff crisis has passed. Keep the budget planner up and lines of communication with lines of business heads and the CEO open. The digital ink on this may not even be dry before the next change comes.
