The New Tariffs: What E-Commerce Brands Need to Know About Trump’s Latest Trade Policy Changes
On February 1, 2025, President Trump made a landmark announcement, introducing a new set of tariffs aimed at reshaping the future of international trade. As of February 4, a 25% tariff on imports from Canada and Mexico, as well as a 10% tariff on imports from China, will go into effect. For e-commerce businesses, especially those heavily reliant on low-cost, efficient supply chains, this move represents a major disruption.
As a response, LVK, a prominent third-party logistics (3PL) provider based in the U.S. and Canada, is providing a detailed breakdown of the immediate effects these tariffs will have on e-commerce businesses and supply chains. The changes include a significant shift away from the long-standing “de minimis” exemption, which many businesses, particularly those selling on platforms like Shopify, have leveraged to minimize costs when importing goods from international markets.
Understanding the Policy Changes
According to Maggie Barnett, CEO of LVK, the intention behind the new tariffs is clear: “The Trump administration wants to boost American jobs and curb fentanyl imports via small parcels.” This signals a direct hit to the de minimis loophole, a policy that allowed for small parcels to enter the U.S. duty-free. For years, e-commerce businesses used this exemption to ship goods from countries like Canada, Mexico, and China without incurring heavy tariffs. However, with the elimination of this loophole, businesses that previously enjoyed reduced tariffs or no tariffs at all on imports from these countries now face steep financial implications.
What Does This Mean for E-Commerce Brands?
The immediate effects of these tariff changes are poised to reverberate across the e-commerce industry, particularly among smaller businesses and fast-fashion brands. A key piece of the puzzle lies in the de minimis exemption. According to Barnett, “Over 25% of Shopify Plus stores rely on de minimis,” underscoring how many e-commerce brands will be directly impacted. For these businesses, the new tariffs will raise costs and introduce cash flow constraints, forcing companies to reassess their pricing models, inventory strategies, and even the very structure of their supply chains.
Some businesses, especially those operating on slim profit margins, face a stark reality. “Brands reliant on low or no tariff margins face existential threats,” says Barnett. These companies are now faced with the dual challenge of covering higher upfront tariff costs while also maintaining competitive pricing. Smaller businesses, in particular, may find it difficult to absorb these additional expenses without passing them on to consumers. This could lead to an increase in product prices, which could have negative effects on demand and overall profitability.
The End of “Optimization” in Supply Chains
For years, businesses have strived for supply chain “optimization”—the practice of squeezing every last ounce of efficiency out of their logistics networks. This meant sourcing from low-cost countries, minimizing shipping expenses, and avoiding tariffs altogether. However, Barnett argues that those days are over: “Optionality is the new optimization.” In other words, businesses can no longer rely solely on hyper-optimized, cost-minimized supply chains. In the face of higher tariffs, companies need flexibility to adapt and mitigate the risk of significant financial disruption.
Rather than focusing exclusively on cost reductions, businesses must now prioritize having multiple viable options in place. This means diversifying suppliers, changing shipping routes, and considering alternative markets and distribution methods. Brands that were previously able to squeeze out every dollar of margin from their international trade strategies must now focus on resilience—ensuring they can pivot and adjust quickly when tariffs or other factors throw off their previous models.
What Should E-Commerce Brands Do Now?
For e-commerce businesses, adapting to the new tariff environment requires quick action and forward-thinking strategies. Barnett outlines several steps that businesses should take immediately to stay ahead of the curve:
- Diversify Your Supply Chain
One of the most immediate and effective actions that e-commerce brands can take is to diversify their supply chains. By importing directly into the U.S. and partnering with U.S.-based 3PLs (third-party logistics providers), companies can minimize their exposure to tariffs on goods coming from Canada, Mexico, and China. Additionally, working with 3PLs based in the U.S. can help streamline operations and reduce the complexities that come with international shipping. - Relocate Inventory
Companies that have relied on the de minimis exemption will need to relocate their inventory to avoid tariffs. This may mean moving goods from affected countries (Canada, Mexico, and China) to regions where tariffs are either lower or non-existent. This could involve switching suppliers or even reshaping distribution networks to account for the new costs associated with cross-border trade. - Reevaluate Sourcing Strategies
Businesses should also explore sourcing alternatives to mitigate risks. This may involve looking for new suppliers in countries that aren’t subject to these new tariffs or shifting to domestic production. By expanding sourcing strategies and reducing reliance on high-risk countries, companies can better manage their supply chain costs and maintain competitive prices. - Build Flexibility into Your Operations
In light of the new tariff regulations, businesses need to be able to pivot quickly if their supply chains are disrupted. Building flexibility into operations—from inventory management to shipping and logistics—will be key for surviving and thriving in this new landscape.
The Broader Economic Impact
The consequences of these tariffs will extend beyond the e-commerce sector and affect broader international trade relationships. Canada and Mexico have already signaled that they will impose retaliatory tariffs on U.S. goods. These retaliatory measures could hit a number of industries, including oil, automobiles, food products, and energy, raising costs for U.S. consumers and potentially damaging trade relations between the three countries. The ripple effect could also slow down the growth of Canadian and Mexican e-commerce economies as trade becomes more costly and cumbersome.
Moreover, the economic consequences of these tariffs may have longer-term effects on the U.S. economy as a whole. With higher costs for imported goods, American consumers will feel the pinch. Rising prices could reduce consumer spending power, which in turn could impact the broader economy. Additionally, the new tariffs could complicate ongoing trade negotiations under the U.S.-Mexico-Canada Agreement (USMCA), potentially slowing down cooperation between the three countries.
As Barnett points out, “This isn’t just an e-commerce issue. It’s about the future of cross-border trade in North America.” The success or failure of these new tariffs could have wide-ranging implications for how trade between the U.S., Canada, and Mexico evolves in the coming years. The global nature of e-commerce means that businesses of all sizes will feel the effects of these changes, making it crucial for e-commerce brands to adapt quickly and effectively.
Maggie Barnett: Available for Interviews
Maggie Barnett, CEO of LVK, is available for interviews and insights into how U.S. tariffs are reshaping global e-commerce supply chains. She can provide further details on what businesses can do to stay operationally resilient in the face of these new tariffs, as well as a broader perspective on the implications for U.S. consumers and the economy as a whole.
