How Tariff Increases Affect US Importers

🥊 Our margins just got punched in the face. But we’re not taking it lying down. The new tariffs hit us with a 15% increase on all materials sourced from China. We’re all feeling the pain. Margins are under attack — and no one’s coming to save us. So I opened up Notes on my phone and started writing. Let me walk you through the Obvi Tariff Survival Plan: 1. Moving 25% of production to Mexico Zero tariffs. 3-week lead times. Lower currency risk. We’re shifting a quarter of our production within 90 days. 2. Front-loading Q2 inventory We’re placing bigger orders now to blend costs across Q2–Q3. Cash flow takes a hit short term, but it buys us time to optimize SKUs without a margin cliff. 3. Renegotiating every supplier Lower MOQs. Net-60 terms. Freight support. We’re offering longer-term commitments in exchange. 4. Testing SKUs with Supliful No upfront inventory. No cash tied up. Just fast tests on upsell SKUs to boost AOV with zero downside. 5. Cutting low-margin SKUs If a product doesn’t drive profit or repeat purchases, it’s gone. We’re being surgical — focus beats optionality when under pressure. 6. Redesigning packaging to cut DIM Slimmer scoops. Compact containers. Thinner seals. Targeting a 15% reduction in shipping costs with no drop in CX. 7. Simplifying bundles The bells and whistles (shakers, scoops, freebies) looked nice but killed margin. We’re trimming bundles down to what customers actually value. 8. Testing small price increases with smarter messaging +5–7% pricing paired with added perks (free shipping, loyalty points).  Perceived value > price. 9. Re-examining HTS codes We’re reviewing every import classification with our broker. Looking for reclassifications and filing exclusion applications. Don't just eat the tariff — challenge it. 10. Diversifying supply in Vietnam & Thailand We’ve got samples in motion for 2025 SKUs. China still plays a role, but single-source manufacturing is too risky now. 11. Exploring bonded warehouses Why pay duties before fulfillment?  Bonded warehouses let us delay those costs and manage cash flow more strategically. 12. Scaling international with OpenBorder Intl customers = higher AOVs and lower CACs. OpenBorder helps us scale globally without operational chaos. 13. Moving to domestic 3PLs  We’re in RFPs with two U.S.-based 3PLs. Avoiding double-duty, speeding up shipping, and reducing customer tickets. 14. Being radically transparent with customers We’re updating PDPs, emails, and SMS to explain changes. Customers stick with you if you give them the “why.” Trust > Transaction. 15. Get leaner The tariffs weren’t just a problem — they were a wake-up call. This was the push we needed to trim fat, tighten ops, and rebuild for what’s next. 💬 What’s your go-to play for defending margin in 2024? Drop it below — let’s build the DTC Tariff Survival Guide together. Know someone struggling with tariffs? Share this post. Hopefully it helps.

The onslaught of tariff related news is fatiguing, as is all the incremental work that businesses are grappling with as they figure out how to handle the ramifications for costs, end customer impact, and potential reduction in demand for their exports. Endries International, Inc. is in throes of navigating what is proving to be one of the trickiest situations that we've ever encountered in our +50 years of business and I wanted to share a few practical takeaways that have emerged. 1] The best (and maybe only) buffer is inventory that is already in the US. But this will be short lived as most industries have spent the last two years working down their inventories that accumulated (and tied up undue working capital) coming out of the supply chain chaos of 2021/2022. 2] Unlike when the tariff focus was mainly imports from China (section 301), the situation today is much more comprehensive and has immediate impact on the entire supply chain, including resident domestic sources. Given that steel is the dominant material in our core product, the changes to section 232 mean there isn't any way to side step the cost-input inflation these tariffs are creating. 3] The domestic manufacturing base is running close to capacity and the increase in demand that the tariffs are intended to drive (and are driving) will quickly swamp US suppliers. Building incremental capacity takes time, working capital, and people, all of which are already in short supply. 4] Tariff front-running inflated shipping costs and lead times for imports from Asia (where an outsized chunk of the manufacturing base for our industry resides) in 2024 and those cost increases are not likely to retreat anytime soon... the relationship between supply, demand, and price is a common thread throughout all of this. 5] The size and scope of the new tariffs mean that most importers are not going to be able to absorb them into their COGS, which means they are going to be passed along. There are two obvious ways to do this: A) as a separate, tariff-specific line item, or B) rolling them into the price charged to the end customer. 6] "A" has advantages in that it is transparent, doesn't muddy traditional purchasing KPIs like PPV, and can be easily modified or removed concurrent with any change or cancellation of a tariff. That said, it should be noted that while the tariff is in place accumulated inventories will have this adder which drives up the cost of that inventory and the cash that it ties up in advance of it being sold... a big deal for distributors. When the tariff is removed, the tariff'd inventory needs to be consumed before the lower cost, non tariff'd inventory takes over. 7] "B" has a disadvantage in that it disconnects the increase from the source so that if/when the tariff is removed, the increases tend to linger. But for many insurmountable reasons, that will be how many sellers handle the additional costs they incur on imported material. 8] There is no silver bullet.

To calculate #tariffs, the White House used a simple formula. In their calculations ( they referenced an interesting paper by Cavallo et al. (2021). Let's look at some nuggets from that paper. The tariff formula used two key parameters: 1) the elasticity of #imports relative to import prices, ε, and 2) the elasticity of import prices relative to tariffs, φ. Assuming their product equaled 1, the formula was simplified to: (trade deficit / imports). 𝟭. 𝗧𝗵𝗲 𝗨.𝗦. 𝗽𝗮𝘆𝘀 𝗳𝗼𝗿 𝘁𝗮𝗿𝗶𝗳𝗳𝘀 The elasticity of import prices with respect to tariffs was assumed to be 0.25, indicating that U.S. importers pay only a fraction of the price increase. However, Cavallo et al. show that this value is nearly 1.0: “A 20% tariff, for example, would be associated with a 1.5% decline in the ex-tariff price and an 18.5% increase in the total price paid by the U.S. importer”. The amount paid by the exporter was statistically indistinguishable from zero. 𝟮. 𝗧𝗵𝗲 𝟮𝟱% 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗲 𝗹𝗶𝗸𝗲𝗹𝘆 𝗿𝗲𝗳𝗲𝗿𝘀 𝘁𝗼 𝘁𝗵𝗲 𝗘𝗥𝗣𝗧, 𝗻𝗼𝘁 φ. Cavallo et al. estimate the exchange rate passthrough (ERPT) at 22%: “a 20% dollar depreciation would only raise the dollar price of imports by 4.4%”. This means that currency devaluation by trading partners is not enough to offset price increases paid by U.S. importers. 𝟯. 𝗨.𝗦. 𝗿𝗲𝘁𝗮𝗶𝗹𝗲𝗿𝘀 𝗮𝗯𝘀𝗼𝗿𝗯 𝗽𝗿𝗶𝗰𝗲 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝘀, 𝗯𝘂𝘁 𝗱𝗼 𝗻𝗼𝘁 𝗽𝗮𝘀𝘀 𝘁𝗵𝗲𝗺 𝘁𝗼 𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿𝘀. Tariffs do not automatically imply a proportional #inflation in #retail prices. “A 20% tariff is associated with a 0.9% increase in the retail prices of affected household goods… and a 1.4% increase in the retail prices of affected electronics products after one year.” 1% to 1.4% additional inflation is still high. 𝟰. 𝗡𝗼𝘄 𝗹𝗲𝘁’𝘀 𝗹𝗼𝗼𝗸 𝗮𝘁 𝘁𝗵𝗲 𝗲𝗹𝗮𝘀𝘁𝗶𝗰𝗶𝘁𝘆 𝗼𝗳 𝗶𝗺𝗽𝗼𝗿𝘁𝘀 𝘄𝗶𝘁𝗵 𝗿𝗲𝘀𝗽𝗲𝗰𝘁 𝘁𝗼 𝗶𝗺𝗽𝗼𝗿𝘁 𝗽𝗿𝗶𝗰𝗲𝘀. This measures the percentage drop in imports for every 1% increase in import prices. Research suggests these elasticities vary widely, from -0.76 to -10, depending on whether we're looking at short-term or long-term effects. Assuming φ is 1, if the elasticity is -0.76, a 22% average tariff rate would reduce imports by approximately 18% (applied individually to each country). With an elasticity of -2, imports would fall sharply by 46%. And if we use an elasticity of -4, as the White House did, we'd see a dramatic 77% decrease in imports. 𝗕𝗼𝘁𝘁𝗼𝗺 𝗹𝗶𝗻𝗲 U.S. retailers will absorb tariff costs, unable to raise prices for consumers. Consequently, they'll reduce import volumes. Due to the slow adjustment of short-term supply chains, I expect more empty shelves than price hikes. This will create significant challenges for U.S. #freight, particularly #intermodal, which heavily relies on imports.