How Trump’s New Tariffs Are Changing the Dropshipping Game

Dropshipping is a profitable business where sellers maintain and manage any inventory to operate.

However, the recent tariff hike by the Trump administration will impact the profitability of dropshippers operating in the US with products imported from China, Canada, and Mexico.

Want to know how Trump’s new tariffs affect dropshipping? Continue reading.

How US Tariffs Affect Dropshipping: Key Changes You Need to Know

To understand the effects of these new tariffs, you must dig deeper into it, starting with the fundamentals.

Typically, the new tariff seems to target goods imported from China, Mexico, and Canada. The point of concern is that the bulk of goods for dropshipping come from these countries. So, almost every product will witness a steep rise in price.

Furthermore, the “De Minimis Rule” was also eliminated in Trump’s new trade policy. This means you will no longer enjoy the tariff exemption on imports less than $800. Therefore, you will also have to pay the increased tariff on low-cost products as well, which will increase their prices invariably.

The most affected products due to the new tariff plan include:

• Apparel
• Electronics
• Beauty and cosmetics
• Household goods 

Mostly, these goods are imported from China and, therefore, will no longer be cheap in the US. This will affect the small businesses that rely heavily on eCommerce. In addition to the price hike, higher shipping costs and longer delivery times will also reduce their margins for profit.

But why these changes? 

This is mainly because of Trump’s favor of the “America First” policy.

But why is it imposed now all of a sudden and not from Day 1 in his office?

This is due to the delay caused by the trade review, according to the White House memorandum.

However, the good side of this delay is that businesses have enough time to prepare for the changes and alter their strategies to retain profitability.

The Direct Impacts of Trump’s New Tariffs on Dropshipping

Competitive product pricing will be a challenge now with the rise in prices due to higher tariff plans. Moreover, it will also cause significant disruptions in logistics and delays in the supply chain. This will eventually result in consumer disappointment.

The sellers must, therefore, alter their pricing and business strategies, and they might even have to change or make adjustments with the suppliers to offset price rises and maintain profitability.

Additionally, the entire process will become more complicated due to higher paperwork and documentation requirements, causing further delays. Also, compliance checks for new sellers will be more stringent and intensive. This will cause delays and even deter new sellers from setting foot in the US market.

Most importantly, uncertainties in the market are inevitable because eCommerce businesses cannot design predictable trade policies for the future.

Expect Big Changes

If your dropshipping business relies heavily on Chinese products and imports, you will experience huge differences in price on the higher side, supply chain disruptions, and potential shipping delays.

You will not enjoy any tax advantage anymore while ordering low-cost products from Temu, AliExpress, and Shein. You will have to pay additional fees now since these platforms will not be able to leverage the de minimis exemption anymore. As a result of the tariff hike, Temu might alter its shipping model or increase prices, and Shein may move production.

At this point you may wonder, is dropshipping dead? However, you can expect significant changes and impacts around the corner, and it is already showing.

For example, the US Postal Service (USPS) suspended accepting products sent from Hong Kong and China after the changes in tariff but resumed it recently.

However, this action has caused a significant impact and uncertainty among the dropshippers, making them look for alternative and effective solutions to it. The good news is that there surely are better ways to handle this crisis and ensure profitability and sustainability in the long-term and future-proof dropshipping business.

So, the answer to your question is, no, it is not yet.

Strategies to Overcome Trump’s Tariff Impact on Dropshipping

So, how do sellers mitigate the effects of the tariff hike? Here are some expert tips and strategies to ensure profitability in this dynamic and competitive landscape.

• The best, and perhaps the most feasible, way to mitigate the adverse effect of a new tariff plan is to change or diversify your supplier database. Importing from countries that are not included in or affected by the new trade policy, such as India and Vietnam, will help maintain profitability and lower prices of products.
• Discussions with suppliers for discounts or splitting the burden due to the rise in tariff plans will also help offset the effects considerably.
• Also, the golden rule of “Buy in Bulk” will help reduce the cost burden on individual product units. This will increase your profits significantly.
• Another proven technique to eliminate the burden of high tariffs on imports is to look for and tie up with domestic fulfillment centers based in the US. In addition, sellers should implement more dynamic and innovative product pricing strategies based on the price preferences of the consumers at large.
• Dropshippers should adopt new business styles to surpass the effects of new tariffs and ensure profits, such as using advanced tools and platforms for dropshipping that will help them with market trend analysis. This will help them move with the market shifts and changes in demand and adapt new products.
• Similarly, better price insights and effective sourcing solutions will help dropshippers to maintain profits without overpricing the products.

How Domestic Sourcing Can Help Beat Tariff Challenges?

Businesses may try a domestic sourcing approach to reduce the impact of new tariffs on dropshipping. In addition, it will also help support local economies.

Domestic product sourcing will also offer several other notable benefits, such as:

• It will help meet consumers’ preferences for locally produced products, which will extend the marketing prospects and angle.
• It will reduce shipping delays and, therefore, enhance consumer trust and satisfaction.
• It also raises the chances of receiving government support in the form of tax benefits and incentives.

However, from another perspective, businesses relying too much on “Made in USA” products may witness some additional challenges.

For example, the production cost of goods manufactured in the US is usually higher, which may leave sellers with no other option than raising the price of goods to a premium. Additionally, sellers will also need to have smaller inventory or stocks than on-demand dropshipping orders to offset the high cost of holding too many goods.

Benefits of Local Sourcing

Dropshippers sourcing their products from local wholesalers or domestic manufacturers rather than importing them from tariff-affected countries will enjoy notable benefits in terms of service and money. This makes this approach feasible in the given scenario.

Since there will be no shipping delays, unlike overseas supply, consumers will be satisfied with your service and delivery commitments, which are usually within 2 to 5 days instead of weeks.

Stability of product cost will ensure predictability and support your pricing strategies to keep the cost of goods low. 

The product quality will be high, which will lower return rates and enhance reliability and brand reputation among consumers.

An alliance with dropshippers and dependable suppliers in the US is a smart move because it will align with the rising preference among eco-conscious consumers.

Justifying Price Hike 

Making changes in business operations and product prices responsibly will build trust among the consumers and, at the same time, help avert the effects of the tariff hikes. However, it must be communicated to the consumers clearly and honestly, stating the reasons for such changes and emphasizing product quality, sustainability, and exclusivity.

A good way to justify a price hike is to offer products in packages. This will raise the perceived value, and consumers will find it acceptable and reasonable. To repeat customers, royalty and reward programs are recommended.

Shifting to diverse subscription models is also a smart move because sellers will not have to rely on single sales. 

Furthermore, focusing on marketing and sales of high-value products will also promote and stabilize business revenue.

Leveraging Tech-based Shopping

The use of specific technology will enhance consumer shopping experience and sales. It will help in:

• Predicting future market trends
• Understanding consumers demand
• Improving product tracking
• Refining logistics and data analytics
• Improving inventory management
• Enhancing the payment process
• Expediting shopping
• Reducing cart abandonment
• Promoting checkout experience
• Optimizing organic footfall
• Enhancing SEO traffic
• Reducing dependence on paid ads
• Exploiting virtual assistants and chatbots
• Offering instantaneous customer support
• Emphasizing print-on-demand and custom sales

Overall, the use of technologies like AI and focusing on non-tariffed products and countries will lower the cost of operation and overhead, thereby increasing profitability.

Conclusion

Trump’s new US tariffs affect dropshipping by increasing product prices, causing shipping delays and supply chain disruption. Dropshippers can avert the temporary effects of tariff hikes and maintain profitability with some tactical steps. They must be proactive and flexible to adapt by lowering costs with supplier switches and the use of advanced technology.

FAQs about Trumps Tariffs Dropshipping

1. Will the new hike in tariff affect all dropshipping products? 

A. No. It will mainly affect electronics, apparel, and accessories imported from China.

2. Can I offset the impact?

A. Yes, certainly! Switch to a new supplier and focus on non-tariffed products of high value.

3. Is this effect temporary?

A. No, not until new trade agreements are made.

6. Will AliExpress be affected? 

A. Yes, it will because most of their products are made in China.

7. Is my dropshipping business illegal in the US?

A. No, it is not as long as you comply with the tax, tariff, and consumer protection regulations.