Starting a Business After Trump's Tariffs: How the New Trade Rules Impact Costs & Profits

If you’ve ever considered starting a business that relies on importing goods from China, recent trade changes could dramatically shift your costs and profit margins. With Trump’s newly imposed tariffs and restrictions on parcels from China, businesses that once relied on affordable manufacturing and shipping now face new financial and logistical challenges. Whether you’re launching a fashion brand, a tech startup, or an e-commerce store, here’s how these tariffs might affect your plans - and what you need to prepare for.

 

Before the Tariffs: The Golden Era of Affordable Imports

For years, China has been the go-to destination for manufacturing due to its combination of low production costs, high efficiency, and vast supplier networks. Entrepreneurs looking to start small could easily:

  • Order low Minimum Order Quantity (MOQ) samples from manufacturers.
  • Take advantage of duty-free exemptions for small parcels.
  • Import goods with minimal shipping costs via ePacket and other cost-effective logistics options.
  • Scale production gradually without huge upfront investments.

These factors allowed countless brands to launch with relatively low risk, test products in small batches, and reinvest profits into scaling up.

 

 

After the Tariffs: Higher Costs, Lower Margins, and Logistical Challenges

With the new trade policies in place, businesses importing from China face new hurdles:

  • Higher Import Costs: Increased tariffs mean that even small sample orders are no longer exempt, forcing brands to pay duties on test products before committing to full production.
    - Restricted Shipping: Trump’s recent hold on parcels from China adds uncertainty and delays, making it harder for small businesses to receive goods efficiently.
    - Loss of Profit Margins: A business that once enjoyed competitive pricing will now have to increase retail prices or absorb higher costs, both of which can make it harder to compete.
    - Increased Risk for Startups: Since ordering small test batches is now more expensive, businesses must commit to larger orders upfront, raising the barrier to entry for new entrepreneurs.

Case Study: John’s Streetwear Brand – Starting a Brand Before vs. After the Tariffs

Let’s say John wants to launch a streetwear brand and plans to source hoodies and caps from China. Here’s how his costs and strategy would differ before and after the tariffs. These figures are used for demonstrative purposes and not entierly reflective of costs.

Before the Tariffs
- John could order 5 sample hoodies from a manufacturer for $20 each , with no import duties.
- Shipping via ePacket would cost lets say $10-$15, arriving within two weeks.
- If the quality was good, he could place a small MOQ order of 50 hoodies at $15 per hoodie, paying around $750.
- His total startup cost? Under $800, allowing him to test his brand with minimal risk.

After the Tariffs
- John still orders 5 sample hoodies for $20 each, but now he must pay a 25% tariff + import duties, bringing the cost to around $27 per hoodie.
- Shipping is now delayed or more expensive, costing $30+.
- Since tariffs apply to all orders, his MOQ of 50 hoodies at $15 per hoodie now costs around $18.75 per hoodie due to added tariffs, totaling $937.50 instead of $750.
- His total startup cost? Over $1,000, and if shipping is restricted, he may have to find a new manufacturer in a different country, which could raise costs even more.

What This Means for New Brands

For entrepreneurs in the U.S., launching a brand post-tariffs means higher upfront investment, lower profit margins, and longer waiting times for stock. This could also cause manufacturers to raise their price points - affecting other buyers outside of the US.

If you’re considering starting a brand now, you might need to:

- Explore alternative suppliers in regions like Vietnam, Bangladesh, or Mexico.
- Find local manufacturers to avoid import duties (though this often comes at a higher cost).
- Raise your retail prices to cover increased expenses, potentially making it harder to compete with established brands.

While the new tariffs create obstacles, they also present opportunities for businesses willing to adapt. Whether through local production, alternative markets, or new pricing strategies, the brands that innovate will be the ones that thrive in the post-tariff landscape.

 

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