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Hypothetical examples demonstrating how different products are impacted by new tariff rates
Eric Hargraves, who works for Elliott Davis, a tax consulting firm that ShipBob works with regularly, has provided these examples of how different tariffs “stack” on one another. These three examples are based on the executive orders and federal register notices that mimic the following tariff stacking structure:
- Normal Tariff Rate: MFN/PNTR (most favored nation or permanent normal trade relations) based on the HTSUS code. This is your normal tariff rate for the article you’re importing under a specific HTSUS code. Column 1 Rates of Duty.
- Section 301 Tariff: between 7-25% (more in for some HTSUS codes).
- Section 232 Tariff: for steel, aluminum, and steel and aluminum derivatives listed in the Annex, copper, and certain automobiles and auto parts, generally applied at 25%
- IEEPA Border Tariffs: 20% for China related to fentanyl and immigration concerns. 25% for Canada & Mexico, but USMCA eligible goods are exempt.
- IEEPA Reciprocal Tariffs: 125% for China (for now…)
- All Tariffs are Cumulative: So, for example, let’s review 8481.80.30XX: *country of origin China.
- Normal: 3%
- Section 301: 25%
- Section 232: 25%
- IEEPA Border: 20%
- IEEPA Reciprocal: Does not apply because of Section 232 exemption, but otherwise would be 125%
- Total for 8481.80.30XX: 73%
Caveats:
- If Section 232 applies to your HTSUS codes, then the IEEPA Reciprocal Tariffs do NOT apply; furthermore, on April 29th a new executive order offered some relief for the auto industry from the stacking effect of certain Section 232 impositions.
- If your goods qualify for USMCA duty-free treatment, they remain duty-free.
- Canada and Mexico are exempt from the IEEPA Reciprocal Tariffs; however, the IEEPA Border Tariffs still apply at 25%. If the IEEPA border tariffs are terminated, then a reciprocal tariff baseline rate of 10% will be applied and could potentially move up to 12% on July 9th when the delay expires.
Tariff mitigation assessment
Tariff experts like Eric advise that Tariff mitigation is a 3-step process needed to retain market access, maintain business continuity, and contain cost.
Step 1. Map your supply chain
Take supply chain inputs and dependencies from bill of materials and production origins to destination selling markets.
- Customs valuations, classifications, and country of origin rules
- Key stakeholders
- Tariff exposure
Step 2. Identify technical and operational solutions
Mapping will unveil opportunities to contain cost through various technical strategies to minimize duties and operational solutions to reshore, x-shore, and adequately scenario plan
- Duty minimization
- Supply chain structure
- Sourcing scenario plans
Step 3. Create a transformation roadmap
Make a project roadmap with a clear cadence of accountability that will facilitate the realization and optimization of measures that will retain market access, maintain business continuity and contain cost.
Hypothetical examples demonstrating how different products are impacted by new tariff rates
As mentioned above, Step 1 is mapping your supply chain dependencies to discover tariff exposure and risk. Below is a quick example of tariff stacking for 3 different products from China origin:
Note: “FOB Cost” that’s included for the water bottle in the image above indicates that the supplier is charging the buyer/importer $4.00 for both the water bottle and to deliver the water bottle to the ship or aircraft that will transport the water bottle is what is called an “INCOTERMs” (which stands for International Commercial Terms) that are used as a “shorthand” to specify a seller’s and buyer’s rights and responsibilities in international sales transactions.
Product 1 – Finished article: Stainless steel water bottle
Product costs:
- Description: Dual wall insulated
- Raw material: Stainless steel
- Supplier: 12345
- HTSUS: 7323.93.0080
Product costs:
- FOB cost: $4.00
- New landed cost: $5.88
- This means the difference in cost now is an additional $1.88 (a 47% increase).
Product 2 – Finished article: Printed car sir freshener
Product info:
- Description: Custom Shape car fragrance
- Raw material: Printed paperboard
- Supplier: 678910
- HTSUS: 4821.90.4000
Product costs:
- Cost: $0.08
- New landed cost: $0.216
- This means the difference in cost now is an additional $0.134 (a 167.5% increase).
Product 3 – Finished article: Polyester polo shirt
Product info:
- Description: Men’s polyester wicking polo shirt
- Raw material: 180 GSM polyester
- Supplier: 111213
- HTSUS: 6105.20.2010
Product costs:
- Cost: $6.00
- New landed cost: $17.07
- This means the difference in cost now is an additional $11.07 (a 184.5% increase).
In this hypothetical example, while all products more than doubled in cost, the polyester polo shirt was most impacted (both in absolute price increase and in its percentage increase).
Hypothetical examples demonstrating how country of origin impacts tariff rates and the importer’s total tariff costs
The following mapping exercise leads to “best cost country” scenario planning for 3 example countries (China, Mexico, and Vietnam) to analyze the benefit of x-shoring or reshoring.
Note: For the following 3 countries of origin, we’re using these same variables and assuming the same product is being manufactured:
- Annual Quantity: 1,000,000
- Finished article “XYZ”
- BOM parts: 4, ABCD
- Item: SKU ABCD
- Description: Assembled threaded stud
- Raw material: Carbon steel, stainless steel
- Supplier: 12345
- HTSUS: 7318.15.50XX
Country of origin 1: China
- Cost: $0.38
- New landed cost: $0.646
- This means the difference in cost now is an additional $0.266 (a 70% increase).
Country of origin 2: Mexico (non-USMCA eligible)
- Cost: $0.46
- New landed cost: $0.69
- This means the difference in cost now is an additional $0.23 (a 50% increase).
Country of origin 3: Vietnam
- Cost: $0.41
- New Landed lost: $0.5125
- This means the difference in cost now is an additional $0.1025 (a 25% increase).
In this hypothetical example, Vietnam becomes the cheapest option for all countries of origin.
U.S. Customs laws and regulations are complex, and each importer’s obligations will depend on its unique circumstances. The information included in this post is for informational purposes only and is not intended to be tax or customs advice. ShipBob is not a licensed customs broker, and it recommends that you seek the advice of a tax advisor or licensed customs broker to obtain advice about your particular situation.
Chaos-proof your fulfillment with ShipBob
If you need to make changes to your fulfillment strategy or are in need of a new fulfillment partner, ShipBob offers:
- Global fulfillment centers across the US, Canada, Australia, UK, and EU
- ShipBob Capital (for US businesses that have an EIN), a financing program powered by J.P. Morgan-backed Slope, which offers a flexible line of credit (up to USD $250K instantly and millions within days) that you can draw on at any time, empowering your brand to grow with ease*
- Intelligent product distribution and replenishment through our Inventory Placement Program in the US
- DDP shipping for international orders
- Partnerships and introductions we can make to companies across the ecommerce and supply chain ecosystem
* Financing offered through Slope Tech, Inc. and underwritten by third-party lenders. ShipBob is not a lender, and it does not make lending decisions.
ShipBob will continue to monitor the ever-changing landscape closely and help you navigate these challenges as they unfold. We’ve already hosted a few webinars on tariffs and have more upcoming events you can register for here.
Tariff stacking FAQs
What is tariff stacking (and how will it affect your supply chain)?
Tariff stacking refers to the cumulative effect of multiple tariffs applied to a single imported product, from standard import duties, to emergency tariffs enacted under laws like the International Emergency Economic Powers Act (IEEPA), to retaliatory tariffs imposed during trade disputes. While each tariff may seem manageable on its own, their combined impact can be staggering and quickly add up, inflating the landed cost of goods and squeezing already thin margins.
What are the broader implications of tariff stacking?
The ripple effects of tariff stacking extend far beyond importers and manufacturers, touching nearly every part of the economy. As businesses absorb higher import costs, many pass those expenses on to consumers, leading to price increases on everything from electronics to apparel to food. This contributes to inflationary pressure, which can dampen consumer spending and slow economic growth.
Industries that rely heavily on global supply chains are particularly vulnerable. Tariff stacking can disrupt production schedules, delay shipments, and force companies to make difficult decisions about pricing, sourcing, and inventory levels. In some cases, businesses may even shift operations to new countries to avoid excessive duties, adding complexity and risk to their logistics networks. Other businesses aren’t so lucky and will have to shut down.
Which industries are most likely to be affected by tariff stacking?
Tariff stacking poses a significant threat to industries with complex, globally distributed supply chains (particularly those that rely heavily on imported components from countries subject to multiple layers of tariffs). Among the most vulnerable sectors are automotive, electronics, and fashion, which often include components manufactured in tariff-impacted regions such as China, Taiwan, and Southeast Asia.
What are some real-world examples of tariff stacking?
Tariff stacking is already reshaping how companies operate across industries, especially in sectors where global supply chains are deeply integrated and highly sensitive to cost fluctuations.
In the automotive industry, manufacturers are facing compounded tariffs on essential components such as steel, aluminum, and semiconductors. These materials often pass through multiple countries before final assembly, each layer potentially triggering a new tariff. As a result, companies are reevaluating their sourcing strategies, shifting production closer to end markets, or redesigning supply chains to minimize exposure.
Consumer electronics brands are also adapting. Devices like smartphones, laptops, and calculators often rely on components sourced from multiple countries. When tariffs are applied at each stage—on microchips, batteries, displays, and final assembly—the cumulative cost can be significant.
Example: Why a calculator might cost more
Let’s say a basic calculator includes:
- A microchip from Country A (25% tariff)
- A plastic casing from Country B (10% tariff)
- Final assembly in Country C (15% tariff)
If the base cost of the calculator is $10, the total tariff burden could look like this:
Total Cost= $10 + (25% * $10) + (10% * $10) + (15% * $10) = $10 + $2.50 + $1.00 + $1.50 = $15
That’s a 50% increase in cost due to stacked tariffs before shipping, warehousing, or retail markup.
How do you assess your supply chain’s tariff exposure (in light of recent events)?
With tariff stacking becoming a growing concern, businesses need a clear strategy to evaluate their exposure and respond effectively. The key is to gain visibility into every layer of your supply chain and understand how recent trade developments could impact your costs and operations. Here’s a more detailed checklist to guide your assessment:
- Map your supply chain: Create a visual or digital map of your entire supply network across suppliers. Focus on identifying suppliers in countries affected by recent tariff changes to uncover hidden risks and dependencies.
- Classify your products: Use Harmonized System (HS) codes to determine the tariff classification of each product and component. This is essential for identifying which goods are subject to base tariffs, emergency measures, or retaliatory duties.
- Track country of origin: Document where each component is sourced, processed, and assembled. Even if final assembly occurs in a low-tariff country, components from high-risk regions can trigger additional duties.
- Calculate cumulative tariff impact: Add up all applicable tariffs for each product. Use landed cost calculators or consult with a trade compliance expert to understand how stacked tariffs affect your bottom line.
- Model financial scenarios: Run “what-if” scenarios to see how different tariff rates would impact your costs, pricing, and margins. This helps you prepare for future policy shifts and make informed sourcing decisions.
- Stay updated on trade policy: Subscribe to trade bulletins, use automated tariff tracking tools, or partner with a 3PL that offers real-time compliance insights. Staying informed helps you act quickly when policies change.
How can you get ahead of and mitigate tariff stacking risks?
While tariff stacking can feel unpredictable, there are several strategic steps businesses can take to reduce their exposure and build a more resilient supply chain. The key is to be proactive and anticipate risks before they impact your bottom line. Here are some proven strategies to help mitigate tariff stacking:
- Diversify your supplier base: Avoid over-reliance on suppliers in high-tariff regions. Build relationships with vendors in multiple countries to spread risk and maintain flexibility when trade policies shift.
- Explore nearshoring or reshoring: Move production closer to your end markets (e.g., relocating from Asia to Mexico or the US) to reduce exposure to international tariffs and improve lead times.
- Leverage free trade agreements (FTAs): Take advantage of FTAs like USMCA, CPTPP, or EU trade deals to reduce or eliminate tariffs on qualifying goods, and ensure your products meet rules of origin requirements to benefit.
- Utilize Foreign Trade Zones (FTZs): FTZs allow businesses to defer, reduce, or eliminate duties on imported goods. This is especially useful for companies that re-export products or conduct manufacturing within the zone.
- Invest in trade compliance technology: Use digital tools to monitor tariff changes, automate classification, and model cost impacts. This enables faster decision-making and reduces the risk of non-compliance.
- Partner with a knowledgeable tech-enabled 3PL: A leading fulfillment partner like ShipBob can provide real-time insights, regulatory expertise, and flexible logistics solutions to help you stay ahead of trade disruptions.
