Navigating Tariffs: Smart Solutions for Product-Based Businesses

Tariffs can wreak havoc on small businesses, especially those reliant on imported goods. The good news? With the right strategies, you can turn tariff troubles into manageable (and even profitable) challenges. Here are practical and advanced solutions to help small product-based businesses thrive despite rising costs.

DISCLAIMER (my lawyer insisted)

This blog is intended for informational and educational purposes only. It does not replace the advice of qualified professionals, including your CPA, attorney, or customs expert. Regulations and tariff rules change frequently, and the information presented here may become outdated. While every effort has been made to provide ethical suggestions and ensure accuracy, readers should always consult trusted advisors before making business or compliance decisions.

1. 📌 Play the Inventory and Profit Game

✅ Slow your shipping velocity to reduce customs entries and landed costs.
✅ Ship less frequently—for example, three times a year instead of four.
✅ Review and increase pricing where possible to protect your margins.

2. 📅 COGS Split Invoicing (Labor vs. Materials for Duty Calculation)

✅ Ask your supplier to split invoices into labor and materials.
✅ Duties often apply only to materials—lowering your dutiable value.
Example:

✅ Properly separating costs may reduce the amount subject to tariffs significantly.

Pro Tip: Until recently, I advised clients against asking for an invoice breakdown. Why? Because it risked signaling to suppliers that they were considering leaving. But that advice has evolved—especially in high-tariff regions like China where suppliers are hungry for business and more flexible than ever.  Simply asking can lead to meaningful savings and stronger partnerships.

3. 🔍 Optimize HTS Codes (aka Tariff Engineering)

✅ Small design adjustments can lower tariffs significantly.
✅ Example 1: Replacing metal components with plastic in rodent traps reduced tariffs from 25% to 0%.
✅ Example 2: Adding a 10-cent plastic cap to a steel water bottle reduces duties by 5–20%.
✅ Partner with a customs broker to ensure compliant and strategic classification.

4. 🛍️ Recognize Local Customs (Visit Your Suppliers)

✅ Build relationships by visiting suppliers and walking the floors.
✅ Gain negotiating power and ensure ethical, high-quality production.

Pro Tip: Respect and follow local customs and etiquette when visiting suppliers — it strengthens relationships and shows professionalism.

5. 📷 Put Your Founder Story Front and Center

✅ Customers want to buy from brands they connect with—your story makes the difference.
✅ Share how your business is navigating global challenges and staying committed to quality and care.
✅ Use every touchpoint—website, product descriptions, social media, packaging, and email marketing—to tell your story authentically.
✅ Showing your mission and resilience builds trust and earns loyal customers who support you—even when prices adjust.

Pro Tip: Humanizing your brand matters now more than ever. By sharing your founder story and highlighting your commitment to navigating global challenges, you deepen customer loyalty. People rally around brands they trust and connect with, especially during price increases.

Pro Tip: Have a sale on Tuesdays and call it "NO TARIFF TUESDAY!" Apply an applicant discount with FREE Shipping or offer to create buzz and soften the impact of tariff-related price increases.

6. 📢 Partner With Suppliers to Share Costs

✅ Negotiate shared responsibility for tariff-related costs.
✅ Suppliers want your ongoing business—ask for a partnership approach.

Pro Tip: When partnering with suppliers, don't assume the price is set in stone. In today’s market, suppliers are often open to discussions on sharing costs—especially when ongoing business is at stake. Two of my clients recently asked their overseas suppliers and saw significant results. One had tariff-related increases fully absorbed by their supplier, while the other had their costs cut in half. The takeaway?  Asking for shared responsibility in tariff-related increases can turn negotiations into win-win solutions. 

7. 🌟 Consider U.S. Manufacturing

✅ Reduced cash outlay and lead time
✅ Easier visits and quality control
✅ Simplified communication and faster adjustments
✅ "Made in USA" marketing power

PRO TIP:  U.S. manufacturing offers more than tariff relief. Local production means improved cash flow, faster design changes, and fewer supply chain disruptions—giving you more control and flexibility.

A great example: Steve Chou of My Wife Quit Her Job (made the switch from China to U.S. manufacturing and shared his success story on YouTube (She Makes Products is his US Manufacturer 💐). Watch the video.

Don't know Steve Chou?  Steve is a 7-figure ecommerce founder, Bumblebee Linens), digital course creator (Profitable Online Store and Profitable Audience with his business partner Toni Herrbach), WSJ bestselling author (Family First Entrepreneur), and co-producer of the premiere, in-person, e-commerce annual conference, Seller's Summit. 

8. 🌐 Use Delivered Duty Paid (DDP) When Possible

✅ Shift tariff and duty responsibility to the exporter.
✅ Enjoy predictable landed costs and reduced import headaches.

9. 📦 Leverage Bonded Warehouses

✅ Defer duty payments until goods enter domestic markets.
✅ Avoid tariffs on inventory that is exported later.

PRO TIP: Typically for larger, more sophisticated product businesses, bonded warehouses offer flexibility. By delaying duties, you preserve cash and can adjust inventory flow based on market demand.

10. Consider Foreign Trade Zones (FTZs) for Strategic Duty Management

✅ Import goods into FTZs without immediate duty payment
✅ Store, assemble, or re-export goods duty-free if they never enter U.S. commerce
✅ Pay reduced or no duties on goods that change classification within the zone

PRO TIP: FTZs are powerful tools for large, sophisticated manufacturers and importers. Work with a customs expert to determine if locating inventory or operations in an FTZ can dramatically reduce or eliminate your tariff costs.

11. 📆 Take Advantage of Duty Drawback Programs

✅ Reclaim duties on products that are later exported.
✅ Maintain meticulous records to maximize refunds.

12. 📃 First Sale Rule (Reduce Dutiable Value)

✅ Use the initial sale price between manufacturer and intermediary for duties.
✅ Must follow strict compliance for legality.

PRO TIP: Used extensively in the textile industry especially with licensed products

 13. 📈 Upsell and Cross-Sell to Boost Margins

✅ Bundle products or offer add-ons to increase average order value.
✅ Offset tariff-related margin compression with higher per-order revenue.

14. 📢 Diversify Supplier Countries

✅ Reduce dependence on high-tariff regions.
✅ Take advantage of trade agreements and spread risk.

15. Consider alternative sources to sell your products. For example, MSO (Managed Service Organizations) or Industry Specific Marketplaces 

✅ Examples: VGM for health related products, Chewy for pet products, Silver Star (catalog for seniors), etc... 
✅ Streamline dealer network sales and shipping to save costs

Final Thoughts

Challenges will always come—whether it's a global disruption, an unexpected natural disaster, or a dramatic shift in consumer demand. While we can't predict exactly what will happen in the next five years, we can prepare. The difference between businesses that thrive and those that merely survive lies in their readiness, smart strategies, and trusted support systems.

Many of my She Makes Products clients are navigating today's tariff uncertainty because they completed She Makes Profitable Products in 90 Days. They were ready when the pandemic hit 5 years ago, and they'll be ready for what comes in the next 5 years. Will you?

That future starts today. Find out how in my You Made a Product. Now Make A Profit workshop — where you’ll learn how to take control of your costs, protect your margins, and confidently grow your business through every market shift. Register here for the next You Made a Product. Now Make A Profit workshop. 

 Being a product-based business owner means leading through change. Equip yourself with the tools, strategies, support, and mindset to lead boldly—no matter what tomorrow brings. Want to know more?  Register here for the next You Made a Product. Now Make A Profit workshop. 

Do you have another tariff solution?  Please add your family-friendly suggestion, here!