Tariffs: A Taxing Issue for Ecommerce
Depending on whom you listen to, an impending onslaught of tariffs anticipated to accompany the incoming presential administration is either a mere formality or a crippling increase in consumer prices and/or hits to resellers. President-elect Donald Trump was not shy about campaigning on adding this burden on overseas commerce – although he oddly implied that exporting countries would pick up the tab. Economists and commerce experts overall view tariffs as a negative, useful only to protect industries and sectors producing competitive goods stateside. They are clear that tariffs on imports are imposed on the importer at the point of receipt, and not on the country shipping product.
Add tariffs to the list of things-you-must-pay-attention-to for 2025 and beyond, as goods are expected to zoom up in price. Especially goods from China, which seems to be a target of the incoming president. Couched as a way to force foreign countries into stemming the flow of illicit drugs, these additional tariffs strike many as an unwise and inefficient approach to a problem that might be solved in a less economically depressive manner.
For the average online seller, the hit could be monumental. If you know exactly where your inventory comes from, you may be keenly aware of a need to pay even more tariff-taxes, an impediment to profits. If you resell, the result will still be alarming, yet less clear. Prudent ecommerce merchants will immediately explore potential fiscal impacts, and perhaps search for domestic sources from which you can buy.
How it happened
On background, Trump took office in 2017 the first time and quickly imposed tariffs as a mechanism for shoring up domestic markets. They weren’t fun for anyone, but were manageable to the point that the Biden administration left them in place after his reign began in 2021.
Trump’s recent campaign was far more aggressive and broad, with a hostile tone toward offshore producers that translates into high tariffs. Goods from Mexico and Canada, in particular, are allegedly slated to incur substantial tariffs of up to 25 percent over current rates. China imports are predicted to be closer to increase by 10 percent, a far lower figure than Trump’s pre-election threats of up to 100 percent.
Business experts point out the inherent danger of further taxing importers and customers at a time when inflation has been a palpable topic, both during and before the official campaign kick-off. Their mindset is rooted in the continual increase of off-shore production, a phenomenon growing exponentially over the past few decades. Attempts to move commerce to US borders would, they say, require a substantial investment for infrastructure. Ironically, building US factories and other points of production will require an escalated dependency on the same foreign sellers these tariffs are supposed to combat.
No decision on tariffs is available as of now, but smart online sellers will reassess logistics, rethink strategies for pricing, and stay abreast of compliance issues. All of these will ease the pain of what could be a rocky few years.
Photo by Kelly Sikkema on Unsplash