Let’s face it.
Tariffs are about to gut ecommerce businesses.
10%.
25%.
10% on top of the old 10%…
It’s incredibly hard to keep up with all this insanity, and as of today, they just announced that all new tariffs are on hold for most countries for 90 days.
Except for China basically.
Who is now hitting back hard with their own tariffs.
For many sellers, this is an existential threat.
If these tariffs hold, some businesses won’t make it.
Let’s get to work on figuring out where you land in all this.
Cash Flow Killer
Here’s the brutal part about tariffs some might miss:
You pay them BEFORE you sell a single unit. Right at the port of entry.
Before your products even reach your warehouse.
No “Net 30” terms here.
This creates a massive cash flow crunch that compounds with each new inventory order.
If you’re already stretching your working capital, this can be fatal.
Do You Know Your Numbers?
I’ve audited so many ecommerce accounts, and I can tell you that a lot of business owners have a very difficult time answering these five questions:
- 1. What’s your true landed cost per unit (including tariffs, freight, and customs fees)?
- 2. What are your all-in variable costs per order?
- 3. What are your fixed costs allocated per order?
- 4. What’s your average customer lifetime value?
- 5. What’s your maximum allowable CPA for profitability?
Without these numbers, you’re flying blind.
Making random guesses about pricing and marketing spend.
Hoping things work out.
Hope isn’t a strategy.
Let’s Start Doing Math
Tariffs aren’t applied equally.
Electronics from China? Ummm 125%? (honestly who knows as of this writing).
Textiles from Vietnam? 10%(for now).
Raw materials for your manufacturing? That varies wildly by category.
But let’s use a common example:
A product that used to cost you $20 now costs $25 with a 25% tariff.
That extra $5 might not seem catastrophic…
…until you realize it comes straight out of your bottom line.
And if you’re ordering 10,000 units?
That’s $50,000 in additional costs.
Money that’s gone before your products even hit your warehouse.
Alright, Let’s Really Jump in Now
Here’s a more detailed example:
- Average order value: $50
- Product cost (with 25% tariff): $25
- Variable costs: $12.60 (shipping, packaging, payment fees, etc.)
- Fixed costs per order: $15
- Target profit: $7.50 (15%)
Do the math: $50 – $25 – $12.60 – $15 – $7.50 = -$10.10
That’s -$10.10 available for marketing.
Per order.
And that’s BEFORE spending a dime on Google ads.
This business is underwater before they even start marketing.
“So What The Hell Do I Do?!”
You generally have three options when the math doesn’t work:
- Raise your prices
- Cut your expenses
- Focus on customer lifetime value
Let’s dig into each one.
Raising Prices
“My competitors will eat me alive if I raise prices!”
I hear this often and I get it.
But your options are limited and honestly your competitors are facing the exact same tariffs.
They’re struggling too.
The question isn’t whether to raise prices but how to do it strategically.
Some approaches to test:
- Raise prices incrementally (3-5% at a time) and watch conversion rate
- Premium product bundles
- Add value through better support, warranty and delivery (can you work out any special rates with shippers?)
- Focus your price increases on your most unique products first
Whatever you do, test it methodically.
Measure conversion rates before and after.
Don’t just guess.
Other Marketplaces
If you sell on Amazon, Walmart, or other marketplaces, drastic price increases can tank your rankings there.
Consider testing the price increases on your direct website first.
Once you know which increases still convert well, then roll them out to marketplaces.
And regardless of tariff talk or not: marketplace-specific bundles or skus that can’t be directly price-compared!
Cutting Costs
Here’s where you need to get creative.
Some immediate places to look:
- Tariff classifications: Are your products classified correctly? Some HTS codes carry lower duty rates
- Duty drawback: If you re-export products, you might qualify for tariff refunds
- Free Trade Zones: Storing inventory in FTZs can defer duty payments until products ship (but as with everything right now, these are sure to be scrutinized more than ever before.)
- De minimis thresholds: Shipments under $800 to individual consumers may be duty-free but the rules around this are about to change as well
- Alternative sourcing: This is likely less of an opportunity now but worth the research
- Tariff engineering: Minor product modifications can sometimes change tariff classifications.
- Packaging optimization: Lighter, smaller packaging can mean lower shipping costs.
- Fulfillment consolidation: More efficient warehouse operations can offset tariff increases.
- Marketing: Drop down to your most efficient channels and tactics.
- Software: Can any of your software be cut without harm to the business?
Even a 2% savings on multiple cost categories adds up quickly.
Customer Lifetime Value
This is the big one.
If your business model is built around one-time purchases, you’re going to struggle.
But if you can generate repeat business, everything changes.
Let’s revise our earlier example:
- First order: -$10.10 profit (losing money)
- Average orders per customer: 2.6
- Profit on repeat orders: $10-15 (little to no marketing costs)
Now, you can afford to lose money on the first sale.
Because you’ll make it back on orders 2, 3, and so on.
But this only works if you KNOW your customer retention rates.
Not what you hope they are.
Not what they were last year.
What they actually are RIGHT NOW.
And you need systems to drive those repeat purchases:
- Post-purchase emails
- Loyalty programs
- Subscribe & save
- Retargeting
- Product upsell and recommendations
The businesses that survive tariffs are the ones who can maximize customer lifetime value.
Inventory Management
You could potentially rush inventory now (90 day pause on most countries outside of China – as of this writing) with higher carrying costs but some temporary protection against future tariff increases.
Order just-in-time for lower carrying costs but exposure to potential tariff hikes.
It’s hard to know at this point.
It depends on your cash position, storage costs, sales predictability and supplier flexibility.
You could consider splitting the difference – stocking up on bestsellers while keeping slower-moving items leaner.
Tariff Era Checklist
Begin investigating and working on these TODAY:
- Current tariff rates on your specific HTS codes
- Variable costs including freight changes
- Inventory pipeline and potential risk exposure
- Product margin analysis by SKU
- Marketing efficiency by channel
- Price elasticity testing results
- Customer retention metrics
- Calculate your operating expenses
It’s intense.
But businesses that survive will be the ones on top of these numbers.
The ones making data-driven decisions.
The ones adjusting course quickly as conditions change.
Tariffs aren’t going away anytime soon.
The question is whether you’ll be one of the businesses that adapts and thrives.
“How Else Can You Help Me?”
From here, I can offer three more things.
1) Google Ads Optimization – If you’ve done the math and have a marketing budget left, don’t cut out your most efficient channel! If it’s not your most efficient channel, why not? Get an expert Audit of your account now.
2) Business Automation – Streamline processes and cut your current software costs by building custom tools that can do it all for lower costs.
3) Know What You Can Pay To Acquire a New Customer – here’s a calculator that’ll help you figure this out.