If you’ve been keeping up with the news, you’ve likely heard that another round of tariffs imposed by the Trump Administration has taken effect. These new tariffs, which impose as much as a 25% duty on products imported from China, are reported to have caused distress to many business owners in various industries of the United States.
However, there is a more important question on the minds of e-commerce entrepreneurs. Namely, how will this new round of tariffs on Chinese goods affect my business? Due to the extremely complex nature of tariffs, this can be a difficult question to answer. In reality, the impact felt by e-commerce professionals will vary widely, depending on factors like the kind of products they import and sell in the US market.
Still, it is vital to provide our readers with a general understanding of how these tariffs will affect their e-commerce business. To do this, it is essential to understand precisely what a tariff increase entails for business owners.
What Are Tariffs? How Are They Paid?
Tariffs are taxes (sometimes also called duties) that the United States government places on products that are imported into the country. They are often charged as a percentage of the value of a product, such as a 25% tariff on steel, for example.
While many believe that tariffs are paid by foreign companies sending their products to the United States, this is rarely the case. Instead, the companies importing products into the United States are typically footed the bill, leading to increased costs that are passed on to consumers. Generally speaking, when tariffs on imported products increase, the prices paid for them by consumers will increase as well.
How Badly Will Tariffs Affect My E-Commerce Business?
This is a complicated question to answer accurately, as tariff levels vary for any number of products that are imported by e-commerce entrepreneurs. While it’s hard to provide a one-size-fits-all estimate for your business, it is easy enough to see that these new tariffs will negatively affect the bottom line of most e-commerce retailers.
Since most of the products sold by today’s leading e-commerce distributors are made in China, it is almost certain that e-commerce professionals will have to raise their prices. It may be tempting to keep prices the same, but keep in mind that such an approach will just cut into your profit margin.
Why Can’t I Just Refuse to Pay Tariffs?
Since this new round of tariffs was implemented, many business professionals have voiced their understandable frustration at the situation. It may be tempting to consider not paying tariffs, but due to the nature of these taxes, this simply isn’t possible. Under the current rules and regulations, it is nearly impossible (and likely illegal) to avoid paying taxes on products that are under tariff. Unfortunately, this means that even small e-commerce businesses that leverage direct-to-consumer business models will likely be negatively impacted by the current tariff requirements as well.
Troubled Products Include Electronics, Clothing, and Furniture
If your e-commerce company specializes in products like Chinese electronics, clothing, or furniture, be prepared to take a severe hit to your bottom line as the so-called trade war continues. Popular electronic devices like televisions and are already starting to increase in price due to the higher cost of raw materials.
To make things worse, assembled televisions and computer monitors find themselves on the list of tariffed products, which could make their wholesale prices rise even further. When it comes to clothes, tariffs on products containing leather, silk, wool, and man-made textiles like polyesters have the potential to send the prices paid by consumers through the roof. Furniture will likely not be any better off, as many of the materials that are used for clothing are also used to fabricate chairs, couches, and other furniture.
If your business is tied to products made in China, consider diversifying into product areas that are less affected by tariffs. Those who sell products from the above categories are especially encouraged to diversify their offerings, as the long-term business effects of these severe tariffs are still unknown.
Consider Swapping Your Suppliers
If you feel a bit concerned or stressed after reading up to this point, we understand. The widespread impact of these tariffs is concerning to us as well. While situations like these have the potential to make businesses large and small feel helpless, there are still steps that can be taken to protect your business interests.
Specifically, if your e-commerce business can do so, looking into suppliers in countries other than China could be a short-term solution to the problems posed by tariffs. Numerous other countries are capable of producing low-cost, high-quality products that are not currently facing steep tariffs. For example, Vietnam has a growing industry that is capable of producing many of the same low-cost Chinese goods that are facing steep tariffs.
However, if you do feel the need to switch supplies while tariffs are steep, do your best to maintain favorable business relationships with your long-time suppliers based in China. While the ongoing trade war is making it difficult to conduct business between the United States and Chine, chances are these tariffs won’t last forever. When they do eventually disappear, it can be useful to have a Chinese supplier who you’ve worked with in the past available. In other words, if you switch suppliers, try not to burn any bridges.
Surviving Steep Tariffs in the E-commerce Industry
Figuring out how to navigate uncertain economic times can be difficult for even the most experienced business professionals. While the tariffs currently imposed on Chinese products will make it difficult to turn a good profit on many products in the short term, chances are that these steep taxes will eventually disappear.
Until then, the key to maintaining a successful e-commerce business is flexibility. Whether it’s swapping the products you offer or changing suppliers, there are many ways for e-commerce entrepreneurs to keep some level of control despite the uncertain economic climate currently surrounding the United States and China.