A client called me last week. They import about 40% of their product line from Southeast Asia and wanted to know what the new tariff rates meant for their business. Fair question. But when I asked what their landed cost per unit was today, they couldn’t tell me.
That’s the real problem. Tariffs are moving targets. Your cost structure shouldn’t be.
What a Stress Test Actually Looks Like
You don’t need a PhD in trade policy. You need three numbers for every product or input you source internationally: what you pay today, what you’d pay at 10% more, and what you’d pay at 25% more. Then you ask one question for each scenario: does this product still make money?
For that client, we pulled their top 20 SKUs by revenue, mapped landed costs including freight and duties, and ran the math at current rates, +10%, and +25%. Seven of those SKUs dropped below a 20% gross margin at the +25% scenario. Three of those seven were in their top 10 by volume.
That’s not a tariff problem. That’s a pricing problem they didn’t know they had.
The Three Things You Should Know Right Now
First, know your actual COGS by product line. Not the blended average across everything. The real number, per SKU or per category, including freight, duties, and warehousing. Most businesses I work with are running on averages that mask the losers.
Second, know your break-even margin. What’s the minimum gross margin where a product still justifies the working capital, warehouse space, and operational attention it demands? For most product businesses, that floor is somewhere between 25% and 35%. If you haven’t defined yours, you’re guessing.
Third, know your lead time exposure. If your primary supplier gets hit with a new duty rate tomorrow, how many weeks of inventory do you have before the higher cost hits your P&L? That buffer is worth knowing. It’s the difference between having time to renegotiate or reprice and getting squeezed overnight.
What Most Owners Get Wrong
The instinct is to wait and see. “We’ll adjust when the rates are final.” But rates keep changing, and your competitor who already did this math is repricing while you’re still watching the news.
I worked with a $2.5M e-commerce business last year that preemptively raised prices on their most tariff-exposed category by 8%. They lost about 3% of unit volume on those items. Revenue on that category still went up. Margins improved by 11 points. They made more money selling fewer units because they understood the math before they had to react.
The businesses that struggle with tariff volatility almost always have the same underlying issue: they don’t know their numbers at a granular enough level to make fast decisions. The tariff is just the thing that exposes it.
What To Do This Week
Pull your top products by revenue. Map the landed cost for each one. Run the numbers at current duty rates and at +15% and +25%. Flag anything that drops below your margin floor. That exercise takes a few hours with clean books and about two days without them.
If your books aren’t clean enough to do this, that’s the first thing to fix. Not because tariffs are scary, but because you’re making pricing, purchasing, and inventory decisions without real data every single day.