The National Retail Federation is raising a number of concerns about proposed tariffs from former President Donald Trump. (Photo by sharafmaksumov from Depositphotos.)
Regardless of your political leanings or beliefs in the merits of tariffs, it’s time to accept that tariffs are a tax—and they should be managed as such. As companies and an industry, we have a duty to our shareholders and customers to minimize the financial impact of these taxes, maximizing profitability and avoiding unnecessary price increases for our customers.
I’m JJ Hjalmarson, founder of First Sale Tariff (FST), a consultancy and platform designed to guide importers through the complexities of international trade in 2025. Our expertise includes product and Harmonized Tariff Schedule (HTS) code optimization, First Sale declaration implementations, and comprehensive tariff-related tax reduction strategies. I’ve partnered with Home Accents Today to share actionable insights for importers looking to reduce their Cost of Goods Sold (COGS) through strategic tariff management.
When meeting importers for the first time, the primary question I pose is, “Do you prioritize margin dollars ($) or margin percentage (%)?” The response to this foundational question guides the approach to unexpected COGS increases resulting from tariffs. While there isn’t a right or wrong answer, your organization’s strategic emphasis here directly influences your pricing and tariff mitigation strategies. Let’s consider the practical impact of a hypothetical new 20% tariff from China:
| 20% Tariff Situation | ||||
| No Tariff | Absorb Increase | Maintain Margin $ | Maintain Margin % | |
| Product Purchase price | $100 | $100 | $100 | $100 |
| Tariff % | 0% | 20% | 20% | 20% |
| Landed Cost | $100 | $120 | $120 | $120 |
| Sell Price | $200 | $200 | $220 | $240 |
| Price increase | – | 0 | 10% | 20% |
| Margin $ | $100 | $80 | $100 | $120 |
| Anticipated Margin % | 50% | 40% | 45% | 50% |
| Margin $ Delta | – | ($20) | $0 | $20 |
| Margin % Delta | – | -20.00% | -9.09% | – |
The pricing and margin strategy you adopt in response to tariffs will not only shape your financial outcomes but will also influence customer perception of your brand in the marketplace. While every company’s decision will depend on its unique structure and goals, I advocate prioritizing margin dollars, as this directly relates to your capacity to pay bills and maintain healthy operations.
The second critical question is, “When was the last time your organization evaluated and optimized your Harmonized Tariff Schedule (HTS) codes, including incorporating product development strategies to leverage lower-duty codes?” Many businesses default to historical classifications without re-examining potential savings. For instance, consider decorative versus functional metal lanterns: historically, decorative lanterns (HTS 8306.29.0000) have had significantly lower duties compared to functional lanterns (HTS 9405.50.4000), which incur higher tariffs. By navigating the nuanced differences between decorative and functional classifications, companies can strategically design and source products to reduce duty exposure significantly. HTS optimization provides immediate savings, whereas product redesign and sourcing adjustments typically require a longer timeframe to implement.
The third, and often most impactful, question is, “Have you stripped non-dutiable costs from the declared value of your goods?” Many importers traditionally declare the full purchase price paid to suppliers as the customs value. However, tariff regulations allow specific non-dutiable costs to be excluded through a First Sale declaration.
Just like any other form of taxation — property, income, estate — the impact of tariffs cannot be completely eliminated, but it can certainly be minimized. By strategically aligning organizational goals with actionable tariff and sourcing strategies, your organization can mitigate the adverse financial impacts and maintain strong market competitiveness, even in challenging tariff environments.
