A2X Newsletter | Tariffs: What your US ecommerce clients need to know
Here’s an unfortunate truth: Ecommerce sellers are on the front lines of these tariffs.
The U.S. has the world’s largest consumer market, and China finds itself in most ecommerce supply chains.
If your accounting practice supports ecommerce businesses, you’re probably asking the same questions they are: “What will these tariffs do to our margins, and what should we change right now?” Tough to answer in volatile markets.
Your clients do have two clear advantages:
A) They have you.
B) They have accurate, up-to-date numbers to base real decisions on.
Even so, there’s still so much uncertainty. That’s why we teamed up with Lahari Neelapareddy, Founder and CEO of TaxHero and LN Accounting – ecommerce accounting experts – to answer some frequently asked questions from U.S.-based sellers.
If your clients are asking something we’ve missed, hit reply and let me know. I’ll track down an answer and share it with the community.
Let’s dive into the FAQ.
Geoff
Tariffs & Margins: FAQs (and answers) for U.S.-based sellers
Disclaimer: The information provided here is intended to be general. Every business will be impacted by tariffs differently and we strongly recommend you consult with an expert to understand your business’s specific obligations.
“How can I quickly determine which tariffs and duties apply to my product category?”
Here are a few helpful tools:
- USITC HTS Search/DataWeb for the authoritative tariff rates (especially for detailed verification or unusual products).
- At least one third-party duty calculator (such as SimplyDuty or Freightos) for quick checks by product name, and for the convenience of getting a duty percentage and estimated cost in one go.
- Section 301 specific lookup tools (such as C.H. Robinson or GHY) if importing from China, to ensure you’re aware of the additional tariff and any exclusions.
- Logistics provider tools (FedEx/DHL/UPS) when you are preparing shipments, so you can double-check duties and also generate any needed paperwork in the same process. These tend to be very up-to-date and can handle complex scenarios (multiple items, differing origins, etc.), which is great as your business grows.
“How do I keep up with evolving U.S. tariff regulations and ensure compliance?”
There are several ways you can stay up-to-date – here are few ideas:
- Join industry groups or follow ecommerce leaders – learn what other sellers are doing. This is the easiest and quickest way to get news. Most groups will have someone who does the research for you and presents it in an easily digestible format.
- Subscribe to updates from CBP, USTR, and trade news sources.
- Subscribe to newsletters from your freight forwarder or customs broker.
- Perform regular audits of your classifications and documentation.
- Lean on a trusted broker or trade advisor to stay in compliance.
“How do the recent tariffs on imported goods impact the profitability and profit margins of my ecommerce business?”
- Tariffs directly increase your cost per unit, reducing your gross margin.
- Example: 25% tariff on a $10 product = $2.50 extra cost = margin squeeze.
- Tariff jumps (some over 100%) can make products unprofitable overnight.
- Retailers like Walmart are pausing POs to manage uncertainty.
- Cash flow is also affected – duties are due immediately upon import.
“What’s the best way to account for tariff costs in my bookkeeping – should I treat these import duties as part of Cost of Goods Sold (COGS) or record them separately to better gauge their impact on margins?”
Include tariffs in COGS (Cost of Goods Sold) – they’re part of your landed cost. Track them separately in sub-accounts if needed for visibility.
Don’t expense tariffs separately – it distorts gross margin and product profitability.
“How do I calculate my new landed costs so I don’t underprice (or overprice) products?”
Landed Cost = Product Cost + Freight + Duties + Insurance + Fees.
Tariff % applies to product cost (sometimes including freight, depending on incoterms).
Some other tips for calculating your costs:
- Use spreadsheets, landed cost calculators from freight providers, or tools like Settle to help determine your new landed cost.
- Recalculate regularly, especially when tariffs or shipping rates change so you can be proactive about your margin (vs. reactive).
“Should I raise my product prices to offset tariff costs, and how do I decide how much of the cost to pass on to customers without hurting sales?”
If your margin drops too much, yes – raise prices at least partially. But first try to offset any tariff costs by reducing costs elsewhere for your product so you are not increasing proportionally to the tariff increase.
When considering price increases, you should also:
- Benchmark competitors – if everyone is affected, customers may accept it.
- Consider smaller, incremental increases rather than big jumps.
- Communicate clearly with customers – transparency builds loyalty.
“If I decide not to raise prices, what other steps can I take to protect my margins despite higher tariff-related costs?”
Here are a few ideas to keep costs down:
- Negotiate cost reductions with suppliers.
- Reevaluate and prioritize higher-margin SKUs.
- Switch to cheaper shipping methods or renegotiate fulfillment costs.
- Explore lower-cost packaging or materials that don’t compromise quality.
- Trim operational inefficiencies – every dollar matters.
- For example, perhaps you’re air shipping goods in small batches; switching to ocean freight and better inventory planning could save transport costs to offset duties.
- Or maybe your customer acquisition cost is high – doubling down on organic channels could improve net margin.
- Conduct a quick audit of expenses and ask, “If we run a leaner ship, how much can we save?” It might not equal the tariff costs, but even partially offsetting them helps.
- Have employees or trusted contractors based in each country where your supply chain operates – for example, on-the-ground staff in China – to keep direct oversight.
- Brands without local representation face serious blind spots: without someone present to track market conditions and negotiate, they’re at the mercy of suppliers who have little incentive to pass along savings.
“Should I consider switching suppliers or sourcing from a different country to reduce tariff costs, and what factors should I weigh before making that change?”
Many brands are currently pursuing a “China +1” strategy (or China +2, +3) – meaning they keep some production in China, but also source from other countries with lower or no tariffs.
Some steps to take when considering this strategy include:
- Compare tariffs across supplier countries – Vietnam, Mexico, or India may be cheaper. For example, some apparel companies have shifted sourcing to Bangladesh, Cambodia, or Latin America to sidestep U.S. tariffs aimed at China.
- Assess supplier quality, reliability, and lead times before switching. A new supplier must meet your quality standards, production capacity needs, and reliability. If China currently provides top-notch manufacturing that your customers love, moving to a less experienced factory could introduce quality issues – which carry their own costs (returns, brand damage). So, weigh the savings vs. potential quality risk. It may be worth trialing a smaller batch from a new country first.
- “Boots-on-the-ground” visibility: I have often warned about the dangers of operating without boots-on-the-ground visibility in your manufacturing country, especially China. If you’ve been sourcing from China purely remotely, you might have less insight into your supply chain’s real conditions or flexibility. Switching to a country where you (or someone you trust) can more easily visit and oversee production might be beneficial. For instance, if you move some production to Mexico or within the U.S., it’s easier to audit and ensure things run smoothly. Lack of on-site oversight can lead to quality fade or surprise problems. So if a new sourcing location allows better oversight, that’s a plus for consistency and risk management.
- Be wary of “false origin” claims – CBP is cracking down on transshipping.
My take: If tariffs are materially hurting your margins, start investigating alternative sourcing now.
The savings could be substantial. Just go in with eyes open: evaluate all the factors above. It’s a strategic move that could yield cost advantages and resilience (by not having all your eggs in one country basket).
Be sure to choose partners and locations that align with your quality and brand, and plan the switch carefully to avoid stockouts or quality dips. In the end, being nimble with supplier geography is a key way to turn this trade chaos into a competitive advantage.
“What supply chain adjustments can I make to mitigate tariff impacts (for example, changing import schedules, using bonded warehouses or foreign trade zones, or stocking up inventory before a tariff hike)?”
A few ideas to consider include:
- Import early before tariff hikes.
- Use Foreign Trade Zones (FTZs) or bonded warehouses to defer or reduce duties.
- Modify shipment frequency or consolidate shipments.
- Explore duty drawback if re-exporting goods.
- Consider domestic assembly or final processing if it changes duty exposure.
“If I sell on Amazon (FBA) or use dropshipping, do tariffs affect me differently than a direct-to-consumer seller, and what should I know about handling tariff costs in these business models?”
If you sell via Amazon FBA: You’re the importer of record; tariffs apply when goods arrive at Amazon’s warehouse.
If you use a dropshipping model: Tariffs used to be avoidable via de minimis, but that’s ending . Effective May 2 2025, the $800 de minimis exemption no longer applies to any shipment from China (including Hong Kong). Dropshippers must consider DDP shipping, include tariffs in pricing, or shift to bulk import.
“What tariff-related compliance issues should I be aware of, and how can I ensure my products are correctly classified so I pay the right duties and avoid penalties?”
- Use the correct HTS code – misclassification = fines.
- Declare the true customs value (no under-invoicing).
- Ensure country-of-origin labeling is accurate.
- Keep records for 5 years – CBP audits happen.
- If unsure, get a Binding Ruling or consult a trade compliance pro.
“How are other sellers navigating tariff changes?”
Some ideas I’ve seen in practice among ecommerce sellers include:
- Diversifying sourcing (China +1), nearshoring to Mexico or U.S.
- Raising prices strategically while emphasizing product value.
- Cutting unnecessary expenses and optimizing SKUs.
- Using the tariff hikes as a marketing opportunity: “We’re stable despite the chaos.”
- Joining trade groups and lobbying for tariff relief.
