Recent executive orders and court decisions have cast U.S. trade policy into new territory. Sweeping tariffs, updates to reciprocal trade agreements, and controversy over the extent of presidential power are all getting press. But what does it all mean if you’re a U.S. citizen abroad? Especially in the case of your U.S. tax return, import duties, trade income, or associated financial repercussions, knowing the changes is more necessary than ever.
Here’s what’s going on now, how it might impact you, and what you should do to ensure you file properly and remain compliant with the IRS.
Recent Highlights in News: Tariffs and Changes in Executive Power
In Executive Order 14257 (April 2025), President Trump issued a national emergency regarding the trade deficit of the U.S. and imposed “reciprocal tariffs” on numerous imports. These are tariffs designed to retaliate against foreign partners’ trade practices and to compel more “balanced trade.
A recent executive order (Sept 5, 2025) changed the scope of the tariffs (Annex II changes) by adding and removing some goods from tariff lists, namely goods such as bullion, medicines, and strategic minerals.
A court — the U.S. Court of Appeals for the Federal Circuit — has recently held that much of the blanket tariffs imposed under the International Emergency Economic Powers Act (IEEPA) are beyond presidential power. In simple words: the president’s power to unilaterally impose wide-ranging import duties is being questioned as overstepping constitutional boundaries.
The S.1272 proposed Trade Review Act of 2025 attempts to restore Congress to greater authority over any new or revised tariffs. In the event of a passage, it would necessitate notification, economic impact analysis, and Congressional approval for most new tariffs.
What These Changes Mean for U.S. Expats
If you’re an American expat, here’s how these trade-and-tariff changes may impact your taxes or financial reporting:
Cost of Imported Goods May Rise
If you are importing products (personal belongings, business stock, collectibles) from the U.S., or operate a business importing products into the U.S. from elsewhere or vice versa, increased tariff rates can boost expenses. These may be passed on as higher prices, and potentially influence deductions or costs of goods if you are involved in such imports.
Reciprocal Tariffs & Trade Taxes Might Impact Income Sources
If you collect royalties, licensing fees, or business payments from firms impacted by trade-tariff adjustments, the profitability and taxation of such payments could change. For example, if your company is based on imported parts now taxed more, it could tighten margins or initiate alternate tax treatments.
Executive Power Legal Challenges = Chances of Reversals
With the courts now resisting executive overreach under IEEPA, there’s a likelihood that some tariffs are reversed or reconsidered. That means your tax returns for 2025 and later years should reflect any potential changes, such as refunds or lower duties in the future.
IRS Reporting of Trade Glasses
The IRS is more and more interested in cross-border transactions. If you have trade or importing/exporting, you’ll want to have good records: invoices, customs forms, any duties paid. These may be important for deductions, figuring cost basis, or taking foreign tax credits in some situations.
How to File Your U.S. Tax Return Properly Under These Circumstances
Following are steps to take to file properly with these trade/ tariff considerations in mind:
Keep Detailed Records
Save all records pertaining to imports, tariffs paid, invoices, customs duties, shipping fees. If you’ve imported goods or materials for business or resale purposes, these may affect your cost basis.
Classify Income Correctly
If you’re being paid income that’s affected by trade policy (e.g., royalties on goods from foreign corporations, licensing, goods imported/exported), ensure you classify it correctly on your tax returns (Form 1040 and related schedules).
Check for Foreign Tax Credits / Duties Deductions
In case you paid tariffs in the course of conducting business overseas, some of the expenses might be deductible or even offset by credits. The IRS does not always permit tariff paid deduction, but importing goods for business might qualify to go into your cost of goods sold or deductions.
Watch Changes in Law and Regulations
Because courts are ruling on some of these tariffs (for example, portions under IEEPA were struck down as overreaching), stay updated. If a tariff is reversed after it’s been applied, there may be refunds or credits — but you’ll need proof and documentation.
Consider Legal / Tax Professional Advice
Trade law, executive authority, and constitutional restraint are intricate. If your circumstances include imports or business impacted by tariffs, hiring a pro who’s familiar with trade law and U.S. expat tax law can save you from expensive errors.
Steps You Need to Take Immediately
- Inventory Your Imports & Trade-Related Income: Go over previous import/export transactions for products or shipments you’ve owned, or will own, for personal or company use.
- Compute Duties Already Paid: If you’ve imported goods, check what duties/tariffs you’ve paid. These may or may not apply directly to lowering U.S. taxes, but they do count in cost accounting.
- Examine Tax Year 2025 Filing: Check that you’re applying proper rates, and account for known tariffs in your cost basis or income assumptions.
- Stay Current on Legal Rulings: Because most of these tariffs have been litigated in courts, some remain in limbo. Be prepared to modify if laws/orders are overturned.
- Document All Correspondence & Warnings: Executive orders and tariffs are usually preceded by public notices, Federal Register listings, USTR releases. Having copies assists in establishing your treatment/expectations.
FAQs
Yes—if you’re in the import/export business. Tariffs can impact your cost of goods sold or change revenue expectations, which can move your taxable income.
No, not yet. Changes might take a while (like new rates or court decisions). But you should plan on changes and factor in known changes when appropriate for 2025.
Perhaps. For companies, there could be relief through customs or legal action. Keep payment records and duty in the event modifications necessitate refunds or adjustments.
Utilize Schedule C or other business calendars based on your operation type. costs from tariffs or duties incurred (on business inputs) can impact cost basis or gross income.
Less so—but potentially can still impact you indirectly (increased costs of goods, U.S. tax revenue changes that can alter policy). The major tax implications are to those importing, exporting, or employing trade-affected income streams.
Conclusion
Tariffs, trade-taxes, and executive power realignments are more than just political slogans—they’re actual, binding policy that impact the way you plan and file your U.S. tax return if you’re living outside the United States. The sweeping “Liberation Day” tariffs, reciprocal tariff changes under Executive Order 14257, and recent court rulings on executive power all demonstrate that trade policy is no longer predictable.
If you’re a U.S. expat, act now: gather your import and trade records, remain vigilant about changes in law, and keep your U.S. tax return honest. Doing so will shield you from surprises, overpayments, or worse, noncompliance.
