If you've been running an eCommerce business for more than a few years, you probably remember when international trade felt relatively predictable. You found a good manufacturer, negotiated a decent price, and built your profit margins around stable costs.

Those days are over.

The year 2025 has brought unprecedented tariff volatility, with over 20 rate changes throughout the year. The end of the $800 de minimis exemption hit small package importers particularly hard. And if you're like most eCommerce brands, your business model was built when trade was far more predictable.

Here's what catches most business owners off guard: tariffs take away from profit, not revenue. A "small" 10% tariff increase doesn't mean you lose 10% of your profit. Depending on your margins, you could lose 40%, 50%, or more of what you're keeping. That is, unless you raise prices, which is itself a fraught decision that you have to be careful about making.

To help you do your best in this new tariff-heavy world, we’ve written this guide. It will show you how to audit your current tariff exposure, implement cost-saving strategies, and build resilience into your supply chain—without dismantling your entire operation.

Note: tariff rates change often. Any specific rates you see from this point forward are hypotheticals to illustrate our point. To calculate tariffs for your business, SimplyDuty is an excellent online calculator, available at no cost, and the devs do a great job of keeping it up-to-date.

Understanding Your Current Tariff Exposure

How Tariffs Affect eCommerce Margins

Suppose that your product costs $10 to manufacture and ship and you sell it for $13.33. That leaves you with a solid $3.33 in gross profit per unit.

A 15% tariff increase adds $1.50 per unit ($10 × 15% = $1.50).

Your profit drops from $3.33 to $1.83. That's a 45% reduction in profit from what looks like a "15% tariff increase."

This is why tariffs have harmed eCommerce brands to a greater extent than traditional importers. Big importers have sophisticated customs operations and can pivot faster. Small to mid-sized eCommerce brands often have less infrastructure to adapt.

Auditing Tariff Exposure: A Simple Framework

Before you can fix the problem of high tariff rates, you need to know where you stand. Here's a three-step audit:

Step 1: Pull 12 months of import data from your customs broker or freight forwarder.

Step 2: Calculate tariff cost per SKU:

Import value × Tariff rate × Annual volume = Annual tariff expense

Example: $15 declared value × 0.12 tariff × 5,000 units = $9,000 annual tariff cost

Step 3: Identify your "80/20" products—likely 20% of SKUs generate 80% of tariff costs.

When you identify which products are leading to the greatest tariff expenses, you then know where to focus first.

Verifying HS Codes

Tariff rates are determined by country origin and HS code. And HS codes are assigned by the type of product you’re selling, which is a surprisingly nuanced subject.

Your prototype might classify differently than your final product. Small changes—adding batteries, changing materials, including software—can push your product into an entirely different tariff category.

For example, if you have a basic plastic toy, you might have a 0% tariff. Add a battery and LED lights, and it could suddenly classify as an electronic toy with a 6.8% rate. You need to know this before you manufacture so you can set price accordingly and make sure gross margins are acceptable.

The CBP CROSS database (Customs Rulings Online Search System) is free and searchable. Look up how similar products have been classified and find precedent for lower-rate classifications. If you find a favorable ruling, your customs broker can file for a binding ruling.

Smart Sourcing Strategies for Lowering Tariff Costs

You need to redefine "cheapest" to mean total landed cost, not just unit price plus shipping.

Landed cost = manufacturing + freight + tariffs/duties + VAT + brokerage + shipping to customer

Here’s how you can calculate that:

Please note: tariff rates vary by country and by product. This is for illustrative purposes.

The "more expensive" manufacturer costs you $1.50 less per unit. Scale that across thousands of units and you're talking about real money.

Diversifying Suppliers by Country

Near-shoring has become a legitimate financial strategy now that tariffs play a much larger role in the economy.

Manufacturing in Mexico is sometimes even tariff-free thanks to the USMCA for qualifying products. It’s faster too, since you could see 2-3 week lead times versus 8-12 weeks from Asia, and lower freight costs as well. Eastern Europe provides similar advantages for EU markets.

What matters most here is taking the time to build dual-source capabilities.

Don't flip your entire supply chain overnight. Start with new product launches to test alternative suppliers. Maintain primary supplier relationships while developing backup options. That way, if you manufacture in China and the rates jump dramatically and suddenly, you have a Plan B somewhere else like Vietnam or Mexico.

Designing Products for Tariff Reduction

Sometimes the best tariff strategy is about what you manufacture, not where.

Material substitution can make a significant difference in overall tariff cost. Metal components with high tariffs might be redesigned with plastic or composite materials that classify differently.

Shipping components separately is another tactic. A product combining electronics (high tariff) with textiles (lower rate) might save money if imported separately and assembled at your fulfillment center. This doesn't always work—assembly labor costs money—but for the right products, it's smart.

Final assembly location can affect origin benefits. Under USMCA, substantial transformation in Mexico can qualify your product as Mexican-origin, even if components come from elsewhere.

Fulfillment Strategies To Minimize Cross-Border Costs

Here's where fulfillment strategy and tariff strategy intersect powerfully.

To minimize tariff costs, you can import bulk shipments to regional fulfillment centers. This means you pay tariffs once on the bulk import, then distribute locally within that market. That means no per-order tariffs or surprise customs fees for customers.

Regional fulfillment isn't right for everyone. It makes sense when you're shipping 500+ units annually to a region. Below that volume, warehouse and inventory carrying costs often outweigh tariff savings.

But when it works, it’s a huge cost saver. One example of strategic inventory allocation could be:

• 50% US inventory for American customers
• 35% EU inventory for European customers
• 15% other regions based on demand patterns

Distributing inventory in this way reduces tariffs and cuts shipping times. An added benefit is that US customers get orders in 2-3 days instead of 2-3 weeks, which is a massive competitive advantage that also reduces support inquiries.

Choosing a 3PL Partner for Tariff Management

Not all 3PLs are equipped to help with tariff management. If you're planning to roll out regional fulfillment, you need each 3PL in your network to have specific capabilities, including:

• Customs documentation automation
• VAT compliance in relevant markets
• Free trade zone operations experience
• eCommerce-specific expertise

If you’re evaluating possible partners, here are a few questions you can ask to see if they’re able to help.

1. How do you handle customs clearance—in-house or through a third party?
2. Can you manage VAT registration and remittance?
3. Do you have free trade zone operations experience?
4. How do you handle international returns?

The most useful 3PLs these days will help you handle customs and tariffs in addition to warehousing and shipping.

DDP vs. DDU Shipping

One other important decision you’ll make is whether to ship to customers DDP or DDU. Because that’s going to determine who pays for customs/tariffs if there are any.

With DDP (delivered duty paid), you pay all duties and taxes upfront. It costs 15-25% more per shipment, but customers get smooth delivery with no surprise fees.

With DDU (delivered duty unpaid), customers pay duties and taxes upon delivery. It's cheaper for you, but customers often get hit with unexpected fees, leading to refused deliveries and angry support tickets.

As a rule of thumb, for orders under $200, DDP shipping often makes financial sense when factoring in customer experience and support costs. For orders over $200, the economics vary based on your margins and customer base.

The worst move is being unclear about who pays what. If shipping DDU, make it crystal clear during checkout that customers may face additional fees. The last thing you want to do is leave your customers with surprise customs bills!.

Risk Management and Future-Proofing

Tariff volatility is likely to continue for a while, and you need to have plans for multiple scenarios.

• Optimistic: Current rates hold steady. Build in 5-10% buffer for normal cost fluctuations.
• Realistic: Moderate increases of 25% over 12-24 months. Manageable through operational efficiency, slight price increases, and sourcing strategies.
• Pessimistic: Major spikes requiring supply chain pivots. Leads to you activating alternative suppliers and further investing in regional inventory distribution.

The point isn't predicting the future perfectly, because that’s not doable. What you can do is have a plan for each possible scenario and know when and how to act in advance. That way, if something changes with tariffs, you can take calm, measured actions.

Communication Strategy for Changes

Eventually, you might need to raise prices due to tariff costs. How you tell your customers about this will make a big difference in how they perceive your company.

Don't spring price increases on customers without explanation. Frame tariff increases as external factors beyond your control while maintaining trust. That means you can say something like:

"You may have heard about recent changes in international trade policy. These changes affect businesses like ours that import products. As a result, we're making a small adjustment to our pricing starting [date]. We've worked hard to minimize this increase. We appreciate your understanding and continued support."

Implementation Timeline and Next Steps

If you’re committed to reducing tariff costs for your company, here’s a simple plan you can use to know what to do and how soon.

30-Day Quick Wins

1. Complete tariff exposure audit for your top 20% of SKUs
2. Verify HS codes with your customs broker
3. Research alternative suppliers for highest-impact products

90-Day Strategic Moves

1. Test new suppliers with low-risk product launches or small orders
2. Roll out regional fulfillment for highest-volume markets (if numbers make sense)
3. Set up monitoring systems for tariff rate changes

6-Month Structural Changes

1. Establish dual-source capabilities for key products
2. Optimize inventory allocation across regions based on demand data
3. Evaluate product design changes to reduce tariff exposure

Ongoing Management

Build these into regular operations:

• Monthly review of tariff rates and margin impact
• Quarterly assessment of supplier performance and total landed costs
• Annual strategic review of sourcing and fulfillment strategy

Final Thoughts

Tariff volatility is the new normal. That's not going to change anytime soon. But eCommerce brands that act strategically can turn this challenge into a competitive advantage.

The businesses that will thrive over the next few years aren't necessarily the ones with the best products or the biggest marketing budgets. They'll be the ones with resilient, adaptable supply chains that can weather uncertainty.

Taking no action is a mistake, and a costly one. Every month you wait to address tariff exposure is another month of eroding margins. But the good news is that most of these strategies can be implemented gradually. You don't need to overhaul everything at once. Start small, test what works, and build from there.

And if you're looking for fulfillment partners who understand what’s going on with tariffs and can help you improve your regional distribution strategies, that's exactly what we do.

But whether you work with us or someone else, don't wait.

Need help shipping? Fulfillrite has helped ship for thousands of eCommerce stores just like yours since 2010. If you need help with U.S. order fulfillment, including tariff assistance, contact us today for a free quote.

Brandon Rollins, MBA, is the Director of Marketing at Fulfillrite. He typically writes about how eCommerce and crowdfunding brands can manufacture, freight ship, and fulfill products, as well as scale their businesses. You can find his work featured on Kickstarter.com, CrowdCrux, Retailbound, and Launchboom. He has been quoted in CMSWire, Quartz, Whatagraph, and Atlassian.