Tariffs Unleash a Tangle of Costs for Small Businesses | Invesloan.com

When Jon Calma Vagara’s packages came back to his doorstep in Singapore, he knew something had gone very wrong.

Vagara runs JCV Custom Works, a tiny 3D printing business that has sold stencils for fishing lures since 2019. Nearly all of his orders are bound for the US.

In late August, when the US scrapped its de minimis exemption on small-value imports, Singapore’s national postal service suspended shipping to America. So Vagara switched to a private courier — but his first shipments never left Singapore.

“I kept calling and they told me my goods were already in the US,” he told Business Insider. “Three weeks later, they returned everything. I was very angry.”

He eventually found another private courier that cleared the additional paperwork and got his parcels through in about a week.

But the fix came at a cost: Where he once charged a flat $15 for shipping, he now bills US customers $25. It’s a meaningful increase for his products, which cost $14 to $75 each. But it’s still below Vagara’s final cost of about $36 to ship each item, after taxes and other incidentals are accounted for.

Vagara also had to take time to study obscure Harmonized Tariff Schedule codes — previously a formality that is now critical in determining tariff rates for the four to five parcels he ships each week, with each one totaling $200 to $400.

“In the past, I didn’t have to declare the HTS code. Now it’s important,” he said.

His products are reaching buyers again, but his profits have taken a 10% to 15% hit, and he implemented a minimum order of $50 to manage costs.

He’s also now factoring in business costs — like faltering logistics or higher costs for replacing lost or damaged products — that could cut his takings by 40% to 50% compared to the pre-de minimis exemption period.

“I always guarantee that they’ll receive their products or I’ll send replacements for free,” he said.

The hidden costs of tariffs

Vagara’s stencil e-commerce business isn’t his bread and butter — he is a partner at an interior design firm by day — but the side hustle makes up 20% to 25% of his monthly income.

“Although this is just a side job, it helps me a lot in my monthly expenses,” he said.

His story highlights a larger issue: Tariffs themselves are rarely businesses’ only source of pain.

The damage also comes from the ripple effects: failed shipments, customs holds, surprise inspections, contract disputes, and additional paperwork.

“There’s a downstream effect where tariffs can cause US Customs to start doing more inspections — looking for HTS codes or different variants — and once that happens, the goods are frozen at the airports or ocean ports,” Shana Wray, the principal solutions architect at supply chain intelligence firm FourKites, told Business Insider.

Wray said she has seen detention and demurrage costs range from hundreds of thousands of dollars to as much as $8.5 million a year, depending on the company.

Larger firms, she said, can negotiate favorable terms and often receive priority at congested ports. Smaller businesses don’t have that leverage.

That means two businesses facing the same tariff rate can end up with wildly different outcomes. For multinationals, it’s a nuisance. For micro-exporters like Vagara, it’s survival.

“My previous shipping was a flat rate no matter how much they ordered, but because of the changes, I now have to charge more,” Vagara said.

Many of his customers, he added, may have accepted the higher prices because they support President Donald Trump and his policies. He reached that conclusion after seeing their social media posts and receiving custom orders for Trump-themed stencils.

Contracts won’t save you

For many firms, the pain doesn’t stop at logistics.

Companies that thought they were protected are learning that even contracts don’t shield them. Tariff hikes rarely qualify as force majeure, or what lawyers call an “act of God” clause, that excuses a company from its obligations when something truly unforeseeable happens.

“Most contracts won’t give you the right to damages or claim for delays just because tariffs changed. It’s not as simple as that,” said Kala Anandarajah, a trade lawyer at Singapore-based Raja & Tann, speaking at an industry event last month.

Large companies can diversify suppliers and shift manufacturing. Small businesses, like Vagara’s, can only pass on higher shipping fees, eat into their profits, or hope that customers remain patient.

Vagara said there’s an upside to the more expensive shipping rate he’s charging now: happier customers as packages reach them faster.

Still, the additional costs are painful for his small business.

“I’m just hoping that after Trump’s term is done, it goes back to normal,” said Vagara.