What Changes Should Dropshippers Expect?
Dropshippers who still rely on China imports will face higher costs on the products themselves. But that’s not all the warning signs they should be aware of.
Expect higher costs
China tariffs are increasing 10%, on top of the pre-existing tariffs. This means that the costs for passing through customs will increase for traders, and traders will boost brokerage fees to pass the costs along. The total cost to dropshippers? Many are estimating an increase of between 10% and 30%.
Expect shipping delays
Should the de minimis provision be cut entirely for China, Hong Kong, or other locations, anyone ordering products from these countries will face a range of problems, whether the good would have qualified for de minimis or not. Either way, the shifts will likely cause shipping delays and supply chain disruptions, none of which will lower operational costs.
How long will the delays be? It’s tough to predict, and varies based on the products. One business owner has noted an increase in their supplier’s shipping time from 8 to 10 days to 24 to 28 days.
Order cancellation impacts
In the short term, orders may be cancelled by suppliers who can’t handle the sudden change in their own operational costs. Those cancellations will leave the dropshippers who rely on them up the creek. Customer complaints might be inevitable.
Trust issues
The discussion of tariffs comes with a lack of clarity on multiple fronts. We don’t know when additional tariffs may be imposed, how large they’ll be, or even how other countries may retaliate with their own tariffs. That uncertainty is leading plenty of traders and suppliers to attempt to hedge their bets, either by frontloading shipments or, in some cases, demanding 30% deposits upfront.
Why High-Margin Dropshippers Might Be Okay
All right, so it’s a lose-lose situation for dropshippers. However, that doesn’t mean that the business model will collapse entirely: If the costs of buying the product were low enough in relation to total sales revenue, even a 10% tariff increase might not add up to very much.
Dropshippers have already been putting up with tariffs on China imports, and anyone who buys in bulk likely hasn’t been benefiting from the de minimis provision, either. Businesses who already pay a 20% tariff for their products might not blink when it jumps up to a 30% tariff.
One dropshipper shared their personal experience on Reddit: Their product costs them just $0.36 in raw material, and they’ll be selling it at $9.99, which they consider low. With these margins, a business can keep profits up — even if the extra tariffs aren’t exactly welcome.
