On April 10, 2025, the United States imposed a 145% tariff against import goods from China. China in turn, on April 12, imposed a 125% tariff on American goods.
To put this in real terms, a product that previously cost $4 would now cost over $10 after tariffs and shipping.
Those most affected in this trade war are small e-commerce businesses who source goods from China either directly or via a dropshipping model.
As usual, when elephants fight, the grass suffers. The tariffs are revealing how disconnected policy making can hurt small businesses and ordinary people.
How are the major e-commerce platforms supporting their customers?
Shopify
Shopify is the largest platform, with 29% of market share.
90% of Shopify stores are classified as small businesses. Most of these stores sell 1 to 9 products, and are the most likely to be affected by tariffs.
Shopify has responded by adding product adjustments to their platform. These include:
- Duty and tax calculations at checkout: Sellers can now display and charge custom duties during checkout. This reduces the possibility of customers being surprised by extra charges.
- Country-specific product filters: Customers can now filter products by country of origin. This will allow them to make informed purchasing decisions based on potential tariffs.
BigCommerce
BigCommerce’s features to help sellers adapt to the new tariff landscape include:
- Dynamic pricing adjustments: Sellers can use built-in tools to adjust product pricing in real-time, reflecting increased costs due to tariffs.
- Transparent tax calculations: BigCommerce integrates with tax automation services like Avalara AvaTax. This software allows customers to accurately calculate duties and taxes at checkout, once again reducing surprises.
- Encouraging sellers to explore alternative suppliers: Countries not as affected by the tariffs, such as Vietnam or Mexico, have been recommended to ease reliance on Chinese imports.
- Educational resources: The platform offers resources and support to help sellers understand the implications of tariffs.
WooCommerce
WooCommerce provides:
- Customizable checkout: Sellers can modify checkouts to include detailed duty and tax information.
- Integration with tax and shipping plugins: By integrating with plugins that calculate taxes and shipping costs, sellers can provide accurate pricing that reflects the additional costs imposed by tariffs.
Just like BigCommerce, WooCommerce is also suggesting that its users diversify their sources. It is also providing forums and documentation to help their clients deal with new trade policies.
How could tariff-driven losses for small businesses impact the software platforms they depend on?
Right now, it’s too soon to say.
Until May 2, small businesses in the United States have a de minimis threshold of $800. Goods under $800 will not have extra duties applied until then.
Platforms like Shopify and BigCommerce rely on a large base of small and micro-businesses.
With the exception of WooCommerce (which is a WordPress plugin), most e-commerce platforms make money via a multi-faceted revenue model:
- Charge monthly subscriptions for use of the platform
- Charge per transaction
Many small businesses sell low-cost, imported products (especially via dropshipping). They also have tight profit margins and are sensitive to shipping, pricing, and supply chain disruptions.
When their sources and profits affected, such businesses could fail to renew their subscriptions or delay launching new stores.
For those customers who remain, e-commerce platforms will have to deal with a spike in customer support requests. This will result in a loss for the platforms, as they are not able to offset these costs with transaction fees.
Ancillary services that integrate with e-commerce platforms (e.g., payment processors, shipping, logistics, email marketing, crm and customer services) will also lose income as fewer customers use their services.
Why pivoting to tariff-free countries won’t work
Some platforms have advised sellers to pivot either to domestic or tariff free countries. While optimistic, there are reasons why China has been a popular source until now.
- Tariff-free alternatives like Mexico or Vietnam may not match China’s pricing or production scale.
- There may also be limited selection and longer lead times.
- Sourcing new suppliers and vetting quality will take time. As will, on a human level, building relationships with suppliers.
To cope with the fallout from the higher product prices and thinner profit margins their customers are experiencing, e-commerce platforms will either raise their subscription rates, or reduce their level of service.
This creates one more obstacle for small business owners trying to stay in business.
Sources:
https://productscope.ai/blog/how-does-shopify-make-money/
https://www.yaguara.co/shopify-statistics
https://uptek.com/shopify-statistics