How the Trump Tariffs Could Increase Taxes for DMV Families and Businesses
The Trump-era trade tariffs have been a hot topic in policy circles, particularly as discussions continue about the potential economic impact if those tariffs stay in place—or return in full force in 2025 and beyond. While tariffs are often framed as tools for leveling the playing field internationally, they effectively operate as indirect taxes on American businesses and consumers. According to recent economic analyses, the average U.S. household could see a tax-equivalent burden of over $1,300 in 2025, rising to nearly $1,600 in 2026 if the Trump-era tariff policies are maintained or expanded.
For business owners, professionals, and high-net-worth individuals in Maryland, Virginia, and Washington, D.C., this is more than just a budget line item—it's a structural shift with real implications for cash flow, operating costs, and financial and tax planning. Let's look closely at what this means for your business or estate.
Key Takeaways:
Trump-era tariffs function like indirect taxes, amounting to over $1,300 per household in 2025 and $1,600 by 2026.
These tariffs raise the cost of imported goods and materials, directly affecting businesses that rely on global supply chains.
Small business owners in affected industries—retail, construction, manufacturing—could see reduced margins or pressure to raise prices.
For S-Corps, partnerships, and LLCs, the increased costs may result in lower pass-through income or increased tax planning complexity.
Estate and succession plans, especially those involving business interests, need to reflect the long-term impact of these policy changes.
What Are the Trump Tariffs—and Why Do They Matter Now?
Originally imposed during the Trump administration, these tariffs added significant duties on imported steel, aluminum, and a wide array of goods from China and other countries. While designed to protect U.S. industries and create leverage in trade negotiations, many of these duties functioned as a cost pass-through to consumers and businesses alike.
Recent economic projections show that if these tariffs continue or are reinstated in full under a second Trump administration, the effective cost per U.S. household could exceed $1,300 in 2025. That figure is expected to rise to nearly $1,600 by 2026 due to compounding effects throughout the economy.
For high-earning households and business owners in the DMV region, this additional tax burden may not always be obvious—but it's there, embedded in the rising cost of everything from consumer goods to industrial materials.
Implications for Small Business Owners in Maryland, Virginia, and D.C.
Tariffs are not abstract policies—they land squarely on the bottom lines of businesses. If your company imports products or relies on global suppliers, your cost of goods sold (COGS) will likely increase. That matters whether you're a construction firm buying imported steel, a retail business sourcing electronics, or a logistics operation handling international goods.
A few examples:
A Virginia-based contracting company may notice increased costs for materials sourced abroad, such as copper wiring or aluminum beams. These increases can't always be passed on to clients without losing bids.
A boutique retailer in Washington, D.C., that imports specialty leather goods could see shrinking margins if it cannot source alternate products or renegotiate terms.
Startups and smaller LLCs in Maryland operating on lean budgets may find their growth plans delayed as operational costs rise unpredictably.
Business owners in these situations must assess whether their pricing models, supplier relationships, and profit expectations are still viable under new tariff environments.
Effect on Pass-Through Entities: S-Corps, Partnerships, and LLCs
For many Thienel Law clients, pass-through entities such as S-corporations, partnerships, and limited liability companies play a central role in both business operations and wealth-building strategies. These structures allow income to flow directly to the owners' personal tax returns, avoiding corporate double taxation.
However, the tariff-induced cost increases can suppress net profits—and with them, owner distributions. This is particularly relevant when high operational costs cut into distributable income, impacting everything from estimated tax payments to retirement planning.
Example:
Imagine an LLC in Maryland that manufactures consumer home goods and sources materials from Asia. With tariffs increasing component costs, the business reduces distributions by 25% to retain cash. That's less income passed through to the members, and a possible trigger for revisiting tax elections, compensation strategies, or debt structures.
This kind of pressure on earnings can also influence decisions on whether (and when) to convert an LLC to an S-corp, take on partners, or restructure operations to minimize the downstream effects on personal tax liability.
Estate Planning and Business Succession: Stay Ahead of Structural Risks
A less obvious—but no less significant—implication of these tariff-linked cost increases is in estate and succession planning. Many high-net-worth families in the DMV area hold ownership interests in operating businesses or investment LLCs. If those entities face diminishing profits due to higher supply chain costs, the value of those business interests may decrease—or fluctuate more—complicating planning around gifts, succession, or buy-sell agreements.
For instance:
Let's say a Northern Virginia family trust owns a controlling interest in a manufacturing S-corp. If tariffs drive up material costs and depress margins, not only could annual distributions decline, but the value of shares for gifting or sale under a buy-sell agreement may need to be revised based on new forecasts.
For families using valuation discounts as part of a sophisticated estate planning strategy, these changing cost structures must be accounted for—especially if transfers are scheduled over multiple years in consultation with CPAs or tax attorneys.
Ways to Manage Risk and Plan Strategically
1. Review Pricing and Supplier Contracts
Business leaders should evaluate their key vendor contracts to see whether prices are fixed or adjustable based on tariffs and material costs. Where possible, renegotiate or diversify supply chains to mitigate exposure.
2. Cash Flow Forecasting
Update cash flow and profit-and-loss projections to reflect the impact of higher input costs. This can guide short-term decisions such as hiring, capital expenditures, and owner distributions.
3. Reassess Entity Structure
If you own a pass-through entity and are anticipating lower net margins in the coming years, it may be time to reassess whether your current entity structure continues to serve your goals efficiently from a tax perspective.
4. Estate Planning Check-In
Families with business interests or closely held entities should re-evaluate how new profit forecasts could affect gifting strategies, buy-sell agreements, and long-term succession plans.
5. Use Consultative Advisors
Rely on cross-disciplinary advisors—your attorney, CPA, and financial planner—to create a cohesive strategy responsive to wider economic conditions. One-time planning no longer suffices in a shifting policy landscape.
Looking Ahead: Unique Concerns in the DMV Region
Our region—comprising Maryland, Washington, D.C., and Virginia—is home to a high concentration of professionals, legal and consulting firms, government contractors, and dual-income households. Many of our clients operate in industries that will feel the ripple effects of tariff-related inflation more acutely, especially where global supply chains are involved.
Clients also face federal, state, and local compliance standards that may shift as tax revenues, inflation, and political positions evolve in response to changing trade policy. Staying ahead of these shifts is not just about staying compliant—it's about protecting and growing your income and assets.
Final Thoughts: Plan Proactively, Not Reactively
Tariffs may sound like a trade policy issue, but they are ultimately a tax issue—woven into the cost of doing business, running a household, and passing wealth to the next generation. Households in Maryland, Virginia, and D.C. that maintain higher income levels or own business interests stand to feel the largest financial pinch, even if indirectly. It's not just about products getting more expensive—it's about how those changes ripple through financial structures, tax obligations, and planning strategies.
If you're a business owner, high-net-worth individual, or executor of a complex estate, you don't want to leave this new economic landscape unexamined. Tariffs are here now—and possibly expanding. Knowing where you stand will let you respond from a place of control and confidence, not confusion or crisis.
Let's Talk About Your Plan
If you're unsure how the proposed tariffs and their economic impact apply to your business or personal financial planning, you're not alone. Schedule a consultation with Steve Thienel to get advice tailored to your specific goals and concerns.
At Thienel Law, we focus on smart, forward-thinking solutions in business law, tax strategy, and estate planning for professionals and entrepreneurs throughout Maryland, Virginia, and D.C. Let's create a strategy that works—no matter which way the winds in Washington blow.