Navigating US Tariff Hikes: A Comprehensive Guide for Online Retailers

The trade tension between the US and China has kept us on edge. And as the US dropped a 145% tariff on Chinese imports this May, we know the effect might worsen.

Platforms like Temu and Shein have already taken the blow. Temu’s daily active users in the US went down by over 50%, while Shein’s fell by 25%. Both marketplaces also have to slash their ad budgets and change up their logistics models to cope. 

Now, smaller online retailers are feeling the damage. Some have to pull out of the US market. While others? They are barely holding on. 

The good news is that there are still ways to adapt and keep your business going. Take DIY Watch Club (a Hong Kong-based business). Its owner decided to double their efforts in Europe after realizing that 20-30% of its US revenue was at risk. They’ve managed to grow their sales there from 6% to nearly 30%. 

We’ll help you do the same. 

In this guide, you’ll understand the important details about US tariffs and learn smart strategies to manage their financial impact.

Understanding How US Tariffs Directly Increase Your Costs

As a business owner and the importer of goods, you’re the one who’ll pay these high tariffs. It adds to the cost of every item you bring from other countries (in the form of tax). 

Here’s how that works. If your main product is men’s boots and you get them for $80 a pair, a 145% tariff means you’ll pay an extra $116. That pushes your total cost to $196. Order 20 pairs, and you’re looking at nearly $4,000 just to bring them in! 

There are different types of tariffs: ad valorem, specific, and compound. Let me help you understand each: 

• Ad Valorem Tariffs: Customs calculates these based on a percentage of your product’s value. If you import women’s tops for your retail brand and each one costs $10, a 10% tariff means you’ll pay $1 more per piece.
• Specific Tariffs: These are charged as flat fees, often tied to quantity or weight. So, if you’re shipping 3D printers and there’s a $50 tariff per unit, you’ll pay $50 for each, regardless of the price. 
• Compound Tariffs: This is a hybrid (or a child of the first two). The tariff could be $5 per unit plus 145% of the product’s value if you’re sourcing from China. So, if you’re selling a headset for $60, that’s $5 plus $87. You’re paying $92 in tariffs for a $60 item. Ouch.

If you want to check the current state and the full list of US tariffs by country, BBC provides this chart, containing the originally threatened tariff versus the updated rate:

(Image from BBC)

But here’s a positive update: the US and China agreed to take a temporary step back from their trade war. The Trump administration announced a major cut in tariffs on May 12, 2025. 

So, for 90 days (until July 8), the tariff rate will decrease from 145% to 30%. In turn, China also reduced its rate from 125% to 10%.

We should celebrate, right? But 30% is still a lot. And it can affect other parts of your business. 

The Ripple Effect: Indirect Cost Impacts Beyond the Initial Tariff Fee.

The high-tariff effect doesn’t end at customs. You’ll also see changes in your shipping and logistics, raw materials, and admin work. I’ll tell you more about what to expect from each. 

Increased Raw Material Costs 

The new policy will increase the tariff fee for foreign metals, such as steel and aluminum, from 25% to 50%.

How does that affect you if you’re not selling raw materials? Good question. 

Many US manufacturers (around 80% in one study) outsource their components somewhere in their supply chain. So, even if you’re buying local, your supplier’s imported parts might still carry hidden tariff costs.

When that happens, they pay more for the parts. And pass it along to you instead of absorbing the cost. 

Changes in Shipping and Logistics 

Shipping and logistics are other areas you have to watch closely. Due to the instability and unpredictability of tariff fees, many companies are reevaluating their methods for shipping parts. 

Some businesses have even had to pause or cancel shipments because the costs no longer make sense.

One of our clients, a small apparel brand selling minimalistic clothes, ran into this exact issue. They had already set the launch date for their new hood collection and got an OK sign from their supplier in China. But now they have to pause and wait because of the unreasonable tax they must pay. 

Administrative Overheads

New tax policy equals new rules to follow. That also means more paperwork and added operational costs (yikes!)  

You have to comply with updated customs requirements, reclassify your product, and make sure every shipment has the right tariff codes. If you don’t, it can affect your shipment and cause a delay in delivery. 

You may need to work overtime or pay your freight forwarder to assist with the compliance work.

I briefly mentioned earlier that there is a pause in the U.S.-China tariff hike. They lowered it from 145% to 30% for the next 90 days. 

Good news? Well, not really. Especially for smaller businesses. CNN’s new piece sheds light on the struggle of some business owners. 

(Image from CNN)

One founder shared how the “reduced” tariff still left her with a $48,000 import tax bill. And the other one had to wait and think of backup plans before moving forward.

While she said the 30% rate felt a little more “survivable,” she’s still dealing with the ripple effects (administrative tasks and extra shipping fees). 

But we don’t want you to lose hope. There are still smart ways to adjust the impact of this new policy on your business. We’ll talk about them next. 

6 Effective Strategies for Mitigating Tariff-Induced Costs 

Luckily, there are six actions you can take to lessen the pressure (and stress) brought by tariffs. Some of them include talking to your supplier, adjusting your pricing, and improving your supply chain. 

Let me break them down to you: 

1. Supplier Engagement and Sourcing Adjustments

Your suppliers are your #1 collaborators. They know who you are, understand your product, and are surely aware of what’s happening. 

Now is the right time to reach out (and see if things can work out) or reevaluate where you’re sourcing. 

Here’s what you can do to engage with your suppliers and adjust your sources:

• Renegotiate Supplier Terms: Ask for some leniency. Can they give you a bulk discount? Or is it possible to extend payment terms for a big order? For example, one of our retail clients selling home decor asked their supplier for 60-day terms instead of the usual 30. They agreed right away. 
• Diversify Your Sourcing Locations: You have to research a bit on this since other great options (Vietnam, Malaysia, and India) also saw tariff increases. Their rates are at 10% until July 8. And while their regular tariffs are quite high, they’re more doable compared to China’s. 
• Assess Domestic Sourcing: The final option is to determine if you can source some of your materials or products locally. It might not be cheaper upfront. But it can help you cut down on shipping delays, surprise fees, and long lead times.

2. Pricing Strategy Adjustments

Your costs will go up. But you don’t have to shoulder everything. “The winner takes it all” doesn’t apply to this one.

Pricing adjustments (when done in the right way) can save you from drowning in fees. 

One smart approach is to start with small increases. Numerator learned that around 89% of US shoppers are aware of the recent tariff changes. That’s a great sign that they’re paying attention. But a $20 sudden increase can still turn them off. 

What you can do instead is apply a $5 bump this month, then another in two months, and so on. Small and steady is the way to go. 

Another option is to add temporary surcharges. If you’re importing something with a steep tariff, add a short-term fee to that product. Just be upfront about it. You can say, “Because of new tariffs, we’ve added a small temporary fee to this item. We really appreciate your understanding.”

Now, if you feel like it’s impossible to raise prices without losing sales, hone your perceived value. 

What makes you a better option, even with a price bump? That’s what your customers need to see. Just like how Rolex sells its craftsmanship, you might be selling comfort, convenience, or quality. Keep your focus there.

3. Tariff Engineering: Reducing Duty Rates

Tariff engineering means making small, intentional changes to your product’s design or how it’s made so it qualifies for a lower tariff rate. A few smart tweaks can save you a surprising amount.

Let’s say you sell kitchen gadgets online. Adding a recipe booklet to your blender might reclassify it from “electric appliances” to “kitchen sets with printed materials” (which often comes with lower rates).

Another example is for online retailers selling fitness equipment. They can include resistance bands with yoga mats and switch from “sporting goods” to “exercise kits.” This simple addition often results in lower duty rates.

But here’s what you need to remember: these changes have to be real. You can’t just slap on a component and remove it later. 

PRO TIP: Hire a customs expert who understands how these classifications work. They can help you figure out which changes are legit (and which ones could put you in trouble).

4. Supply Chain Optimization

The indirect costs of tariffs can really mess up your supply chain. You might have mapped out your whole plan. But tariff hikes came and hit like a storm, forcing you to rethink everything from shipping routes to where you store your goods.

The good news? A few small tweaks are possible, and you can see some differences. So, check out these to-dos and optimize your supply chain: 

• Try Cheaper Shipping Options: This is the easiest option. We recommend trying low-hanging fruit, such as sea freight or slower couriers. This alone can save 20-35% on shipping costs. 
• Rethink Inventory Planning: Instead of bringing everything in at once, try breaking your imports into smaller batches. Some brands also store inventory in different locations, so they don’t incur all the duties at once.
• Use Bonded Warehouses (only if it makes sense): These allow you to store goods without paying duties right away. Sure, they cost more than regular storage. But if you’re dealing with high-tariff items, that extra two to five years is a great buffer.

5. Leveraging Technology and Data

You don’t have to wait for a surprise fee to fix your margins. There are tools that show you what’s coming and help you act before it hits.

AI-powered supply chain platforms are a great starting point. 

They help you spot disruptions early, test different order plans, and get smarter about timing. Some businesses using them have already seen a 15% drop in costs and faster decision-making when things get messy.

Then, there are simple tools like NerdWallet’s tariff calculator. They won’t fix your whole system, but they will give you real numbers before you commit to a shipment. 

All you have to do is plug in the item’s original cost, quantity, and expected tariff rate, and you’ll get a total amount of impact that’s more accurate than a guess.

If you’re not sure where you’re losing money, run a quick scenario analysis. You might find that one product category is dragging down your profit more than others.

6. Transparent Communication

When tariffs force you to raise prices or change how you operate, hiding from your customers won’t work. Being upfront about what’s happening builds more trust than trying to sneak changes past them.

Start with proactive customer communication. Send an email explaining why prices are increasing before customers see the change at checkout. 

Most people understand that tariffs aren’t your fault (and they’ve probably heard about them in the news anyway). They appreciate knowing the real reason, rather than wondering if you’re just being greedy.

Another thing to do is manage their expectations right away. If you’re switching suppliers or sourcing locations, delivery times might change. You have to inform your customers in advance.

A simple message, such as “Due to supply chain adjustments, orders may take an extra 3-5 days,” prevents angry emails later.

Your suppliers need the same transparency. Have honest conversations about how tariffs are affecting both of you. Maybe they can adjust payment terms while you figure out pricing. Or recommend alternative materials that cost less. 

Building Resilience in a Tariff-Affected Market

We know how hard it is to deal with tariffs. But unlike before, you now have practical strategies to work with. 

You can start by renegotiating with your suppliers, adjusting your pricing slowly, or exploring lower-tariff shipping routes and inventory setups. 

Trying tariff engineering or learning how to use technology to plan smarter are other great ways. And don’t forget the value of honest communication.

As an online retailer, it’s important to stay prepared. Things will continue to (most of the time without any warnings), and the more flexible your systems are, the easier it’ll be to stay in business.

Ready to grow your store’s revenue, whatever the trade climate? Channelwill helps you turn post-purchase stress into long-term customer loyalty by improving shipping, simplifying returns, and building a solid group of loyal customers with our solutions. Book a call with our experts for more details.