Tariffs and Franchising: What the New U.S. Trade Landscape Means for Franchisors and Franchisees

The U.S. tariff landscape has shifted sharply throughout 2025. For franchised businesses, especially restaurants, retail chains, and service-oriented franchises that rely on imported equipment, smallwares, merchandise, and certain ingredients, the combination of new proclamations, sector-specific tariff rate increases, and active litigation produces a mix of immediate cost pressure and legal uncertainty. Recent legal and policy developments continue to affect the factors driving commercial decisions and the practical steps franchisors and franchisees should take now.

What changed most recently

In late November, the Office of the U.S. Trade Representative (USTR) extended 178 product exclusions from the Section 301 China tariffs until November 10, 2026, a one-year reprieve for particular industrial and medical goods that had been slated to expire on November 29, 2025. That extension is tied to a broader U.S. and China trade deal and delays, for now, the re-implementation of the Section 301 duties on the full range of imported goods subject to the tariffs.

At the same time, the Trump Administration has modified existing tariff measures, such as sectoral tariff rate increases and the inclusion of derivative products (notably on steel and aluminum), and so-called “reciprocal” tariffs implemented under executive authority.

Several of the “reciprocal” tariff measures implemented pursuant to the International Emergency Economic Powers Act (IEEPA) have been litigated in the lower courts and were the subject of expedited briefing and oral argument before the U.S. Supreme Court in November, where the Supreme Court questioned the Administration’s reliance on IEEPA to impose sweeping tariffs in the absence of explicit statutory language delegating Congress’s Article I power to impose tariffs to the President in an emergency situation of the type described in IEEPA.¹ Those judicial proceedings could materially change which IEEPA tariffs stand and whether importers can pursue refunds for duties already paid.

It's not clear when the Supreme Court will announce its decision in the IEEPA tariff litigation, but it’s possible a ruling will be issued before the end of the year. Notwithstanding, the Supreme Court’s anticipated opinion on the IEEPA tariffs, Treasury Secretary Scott Bessent has stated that the Trump administration has a backup strategy to maintain the imposition of broad tariffs if the U.S. Supreme Court strikes down the emergency-powers authority currently used to impose them.

The tariffs that matter to franchised businesses

1. Section 301 China tariffs (selected exclusions extended). Many Section 301, List 1–4A duties remain in force for China-origin products, but 178 narrow exclusions were extended through Nov. 10, 2026. Operators that depend on China-origin products should note that Section 301 exclusions are product-specific, not Harmonized Tariff Schedule (HTS)-based, and verify whether their particular imported goods classified under the specified HTS lines fall within the extended exclusions.
2. Sectoral steel & aluminum duties. President Trump expanded and increased existing steel and aluminum tariffs, imposed in 2018 under Section 232 of the Trade Expansion Act of 1962 (with some steel/aluminum duties raised to 50 percent in June 2025, an increase from 25 percent), which raises buildout and equipment costs. In addition, the Administration has added a number of steel and aluminum derivative products to the list of goods subject to the Section 232 tariffs, so companies should investigate whether any of the goods that they import are subject to the tariffs prior to importation. If so, importers need to work with their suppliers to determine the value of the imported good that is steel and/or aluminum and coordinate with their freight forwarders and customs brokers to declare that value separately on entry documents.
3. Reciprocal tariffs and other proclamations. A number of broad tariff regimes based on national emergencies and tariff rate “reciprocity” have been implemented under IEEPA. The current baseline “reciprocal” tariff rates range from 10 percent for some countries to as high as 41 percent (Syria). Still, other countries have reached deals with the Trump Administration for negotiated tariff rates. For example, the “reciprocal” tariff rate for many goods from the European Union is “at least” 15 percent, meaning that if the regular duty rate on a good is higher than 15 percent, no additional reciprocal tariffs are owed, but if the regular duty rate is lower than 15 percent, the reciprocal tariff rate is 15 percent minus the regular duty rate. Certain of the IEEPA tariff regimes are currently being challenged in the previously mentioned Supreme Court litigation; their future depends on the Supreme Court’s findings in the case and U.S. Customs and Border Protection’s (CBP) subsequent disposition of the entries that were subject to the tariffs.

Key legal fight to watch and action to take now

• Constitutional/statutory challenges to IEEPA-based tariffs. Lower courts have entertained claims that IEEPA does not authorize the President to impose sweeping tariff regimes. A ruling limiting executive tariff power could result in opportunities for certain tariff refunds and change bargaining positions for suppliers and franchisors.
• Administrative and procedural steps to preserve the right to duty refunds. Should the Supreme Court find that some or all of the challenged IEEPA tariffs are unlawful, refunds of tariffs paid may not be issued automatically. Franchised businesses need to take certain actions now to preserve their right to request refunds. First, by working with customs brokers to track and document all imports subject to the tariffs, and then by working with trade counsel to consider whether the importer should request that CBP extend liquidation for those entries for one year. If CBP denies the extension request, franchised businesses that paid IEEPA tariffs should consult with trade counsel to discuss filing a case in the U.S. Court of International Trade before the entries liquidate to prevent CBP from liquidating the entry and potentially impacting the ability to obtain a refund.

The outcome of the Supreme Court case will shape whether duties collected remain sunk costs for franchise systems or whether importers can later recover some or all of the duties paid. Even if the Supreme Court finds the imposition of certain of the IEEPA tariffs unlawful, franchised businesses should expect the Administration to explore the use of other legal authority, such as Section 301, Section 232, or Section 122, to reimplement at least some of the tariffs originally implemented under IEEPA.

The current tariff environment mixes targeted relief (narrow exclusions) with broad, high-impact duties and active litigation that may upend traditional franchised business burdens and responsibilities. For franchisors and franchisees, the safest posture is pragmatic: comb through contracts and import exposure now, model higher capex and input costs conservatively, take proactive steps now to preserve the right to duty refunds, and stay positioned to act, contractually and procedurally, when judicial or administrative developments change the legal landscape.

Joyce Mazero is co-chair of Polsinelli’s Global Franchise and Supply Network practice. Josh Goldberg is an associate in Polsinelli’s Global Franchise and Supply Network practice. Alissa Chase is an Associate in Polsinelli's International Trade practice group.

[1] The case Learning Resources, Inc., et. al. v. Trump (Docket No. 24-1287, Argued Nov. 5, 2025) (consolidated with Trump v. V.O.S. Selections) is awaiting the Supreme Court’s decision.