How Trump's Proposed Tariffs Impact Ecommerce Pricing Strategies and Landed Costs

Key Takeaways for Ecommerce Brands:

1. The proposed Trump administration tariffs - including a 10% levy on Chinese imports and 25% tariffs on Canadian and Mexican products - could potentially increase costs for American consumers by up to $810 annually, directly affecting ecommerce brands' pricing strategies.
2. Tariffs are a crucial part of brands’ landed cost per unit, which includes the direct and indirect costs per SKU. These costs become COGS in the profit and loss statement (P&L), one of the main ecommerce accounting documents of every business.
3. An ecommerce-dedicated bookkeeping software can automatically calculate your landed cost per unit, track COGS in real-time, provide insight into what's in a profit and loss statement, and support DTC brands when market dynamics change.

Any change in the political landscape of the United States is likely to have far-reaching consequences for businesses. Donald Trump's 2024 election win is no different. The second Trump administration is set to adopt tariff changes that have the ecommerce industry bracing for different market dynamics, especially when it comes to consumer spending and financial health. 

In Trump's first term, the U.S. imposed 25% tariffs on Chinese goods, affecting over 800 products worth $34bn in annual trade. The Biden Administration continued this policy, even increasing rates on certain Chinese-made products. Now, Trump plans to levy an additional 10% tariff on Chinese imports, plus 25% tariffs on all products from Mexico and Canada

In the short term, Trump’s tariff plan is causing many brands to front-load shipments into the U.S. before any tariff hikes take effect, leading to increased freight rates. In the long term, noted Mike Pugliese, Senior Economist at Wells Fargo, “I feel pretty confident saying tariffs are a price-raising policy. The question is just the magnitude.”

The Economic Anatomy of Import Taxes

Tariffs are taxes levied on imported goods. In the U.S., they have been a feature of trade policy since the nation’s founding, either as a source of government revenue or to protect domestic industries. While the significance of tariffs as a means of generating income has decreased over the years, they have resurfaced for protectionist purposes.

The flip side, of course, is that some brand operators might struggle to cover the additional cost of the tariffs. Those who do will be forced to make a tough decision: taking on the extra expenses or passing them on to consumers. And if there is any lesson to be learned from the previous wave of tariffs, it's that consumers will be the ones who pay the price.

According to several analysts, the price will be steep:

• Deutsche Bank analysts estimated the proposed tariffs on Mexico and Canada would increase U.S. inflation temporarily - and raised their 2025 core personal consumption expenditure price index inflation forecast from 2.6% to 3.7%.

• According to James Knightley, chief international economist at European bank ING, imposing 25% tariffs on Canada and Mexico could cost every American consumer as much as $680 yearly.

• Adding a 10% tariff on all Chinese products, besdies the tariffs against Canada and Mexico could bring that new cost to as much as $810, said Knightley.

‍How Tariffs Reshape Your Landed Costs 

In the competitive ecommerce space, where consumers are highly sensitive to price, the proposed tariff changes can have a significant impact on brands. But it goes deeper than higher prices. Tariffs are a crucial part of brands’ landed cost per unit, which includes the direct and indirect costs per SKU. These costs become COGS in the profit and loss statement (P&L), one of the main ecommerce accounting documents of every business.   

To maintain an accurate P&L, you need to know how to calculate your landed cost per unit. These costs include:

• Direct net unit cost of ecommerce inventory purchases (purchases of ready-for-sale items or raw materials)

• Estimated manufacturing/assembly costs (direct and indirect labor, contract manufacturers, manufacturing overhead)

• Product-related packaging per unit (a bulk cost divided by the unit quantity per product)

• Indirect costs to get items to your warehouse

Among the indirect costs of getting items to your warehouse are:

• Vendor fees

• Insurance

• Shipping surcharge

• Customs fees and services

• Taxes and tariffs

If the second Trump administration follows through on his tariffs promise, brands will have to adapt their landed cost calculations to ensure a precise ecommerce P&L statement. Unfortunately, many operators don’t even know what's in a profit and loss statement and struggle – whether due to manual practices or an antiquated bookkeeping software  – to reconcile their books and gain visibility into the business’s financial health.

Gaining this visibility requires placing an emphasis on ecommerce accounting. This can be done by adopting an advanced ecommerce bookkeeping software that can automatically calculate your landed cost per unit, track your ecommerce COGS in real-time, provide insight into what's in a profit and loss statement, and support DTC brands when market dynamics change.