Q1. According to your estimate, will Nordic and EU companies start establishing legal entities in the U.S. in order to ease the burden of tariffs and otherwise simplify trade? What hurdles could that strategy entail, apart from the administrative workload?

A1. Many Nordic and EU companies are actively evaluating the establishment of legal entities in the US as a strategic response to rising tariffs and trade complexities. Our observations suggest that most companies pursuing this path had already planned to enter the US market prior to the imposition of tariffs—though the tariff environment has accelerated their timelines. Establishing a US entity offers several advantages, including improved access to local markets, simplified customs procedures, and alignment with federal and state incentives that favor domestic manufacturing. However, the strategy also presents notable challenges. Beyond the administrative effort required to set up and maintain a US presence, companies must contend with complex tax regulations, significantly higher labor and operational costs, and potential exposure to US legal and compliance risks. Moreover, the unpredictability of US trade policy and enforcement practices adds a layer of strategic uncertainty, making long-term planning particularly difficult for small and medium-sized enterprises.

Q2. How does §899 align with the administration’s often-stated “invest your factories in the USA and there will be no tariffs [for your country]”? How can companies make investment decisions if returns are subject to such punitive tax burdens, imposed seemingly without consideration of wider consequences?

A2. It’s true that some of these punitive measures appear to be at odds with the stated goals of attracting investment to the US, and I can’t quite explain that away with a specific policy response. I do think the ‘consideration of wider consequences’ played a part in the ultimate removal of sec. 899, along with the G7 discussions. That said, the tax bill does include a number of provisions to incentivize US investment, and even buys down the costs for some of these investments, like temporary manufacturing facility expensing and full expensing of R&E expenditures. These incentives should be considered in the broader investment context when making next-step decisions on supply chain relocation.

Q3. How are other Nordic countries addressing the U.S. tariffs in general? Our company is in Finland, and it would be useful to know how peers are mitigating the tariff issue.

A3. Nordic companies are responding to the tariffs not only through supply chain adjustments and physical relocation of production, but also by actively pursuing duty mitigation strategies. A key focus has been on reducing the customs value of imported goods, which directly lowers the amount of duty owed. One of the most widely used approaches is the “first sale for export” rule, which allows companies to base the customs value on the initial sale in a multi-tiered transaction. In addition, some companies are unbundling intellectual property and service components from the transaction value, as these elements are typically non-dutiable under US customs rules. Others are restructuring their transactions entirely and opting for models where there is no sale for export, and the exporter acts as a non-resident importer into the US.

Q4. How can companies use Chapter 98 exemptions for certain U.S. Government customers? What does this look like when shipping directly to Government entities, or when supplying as a vendor/subcontractor under government contracts?

A4. Chapter 98 of the Harmonized Tariff Schedule provides exemptions for certain goods imported under US Government contracts, allowing duty-free entry for qualifying items. These exemptions are particularly relevant for companies supplying agencies such as the Department of Defense, NASA, and the Department of Energy. To utilize these exemptions, companies must obtain certification from the contracting agency and ensure proper documentation is submitted to US Customs. The exemptions can apply to both direct shipments to government entities and deliveries made as subcontractors under federal contracts. This mechanism is especially valuable for high-value or specialized goods, where tariff costs could otherwise be prohibitive.

Q5. What does “onshoring” production look like in practice? U.S. officials state there is no tariff if you build or manufacture in the U.S. How do exemptions apply for materials imported from Europe to be used in U.S. production?

A5. In practice, onshoring can include various practices such as building new facilities, partnering with local manufacturers, or expanding existing US operations. While the strategy aligns with government messaging that encourages domestic production, it comes with significant cost considerations, including higher labor expenses and infrastructure investment. Imported materials used in US production are still subject to tariffs unless specific exemptions apply. Companies pursuing onshoring must carefully evaluate the total cost of production and the availability of local inputs to ensure the move is economically viable.

Q6. What is the status of exceptions negotiations (e.g., telecom, medical)?

A6. The current landscape of tariff exceptions is shaped largely by Section 232 investigations, which focus on national security implications of imports in key sectors such as timber/lumber, semiconductors, pharmaceuticals, trucks, critical minerals, and aircraft. While products subject to Section 232 measures are currently exempt from reciprocal tariffs, these exemptions are not guaranteed long-term. Although the typical timeline for these investigations is 270 days, the administration has expressed that they are aiming to expedite the conclusion of these investigations. Note that the US-EU framework states that potential tariffs imposed on pharmaceuticals, semiconductors, and lumber pursuant to Section 232 will not exceed 15% for EU origin products.

Q7. Could you also elaborate on the “zero-to-zero” tariff exceptions?

A7. Zero-for-zero refers to agreements where trading partners eliminate or significantly reduce tariffs on certain categories of goods or services traded between them. The US-EU framework contains several areas that may qualify as zero-for-zero tariff exceptions. Notably, both parties have agreed to apply only MFN tariffs to aircraft and aircraft parts, generic pharmaceuticals and their chemical precursors, and certain natural resources such as cork. The renewal and expansion of the 2020 lobster tariff agreement, now including processed lobster, also suggests a bilateral zero-for-zero intent. Additionally, while semiconductors and pharmaceuticals are still subject to Section 232 investigations, the US has committed to capping tariffs at 15%. While automobiles are not yet fully exempt, mutual recognition of standards and capped tariffs suggest a pathway toward future zero-for-zero treatment.