Tariffs and Customs Duties in 2025: What Businesses Need to Know About Import Costs

International trade is the process of buying and selling products or services between countries, each with its own legal framework and taxation policies.

Tariffs (taxes on imported products), customs duties (charges applied when shipments cross a border), and other import-related taxes and fees (like handling or inspection costs), directly affect how much it costs to ship products between countries, and whether doing so still makes financial sense.

When these cost structures are not well understood, businesses can run into unexpected fees and delays that disrupt shipments. Knowing how tariffs, customs duties, and other import charges affect cross-border trade is part of being prepared for the real costs and risks of doing business internationally.

What Are Tariffs?

Tariffs are taxes charged when products are brought into or sent out of a country. If a business is importing items in 2025, there’s a good chance it will need to pay a tariff before the shipment clears customs. Governments impose tariffs for two primary reasons:

1. To protect domestic industries.

In its most basic form, the intended effect of tariffs is to make foreign-made products more expensive so that domestically produced alternatives are more competitive. This strategy is often used to support industries considered strategically important, such as agriculture, energy, or manufacturing.

In practice, the outcomes are mixed. Many U.S. businesses rely on imported products that are not always manufactured domestically. As a result, tariffs designed to help one sector may increase costs for another. For example, tariffs on products like the Nintendo Switch 2, assembled overseas using globally sourced parts can raise costs for U.S. retailers. These businesses aren’t involved in manufacturing or supply chain decisions but still absorb the added expense when tariffs are imposed on finished electronics.

To further cement the understanding, let’s use another example: Tariffs on imported steel are often intended to support U.S. steel manufacturers by making foreign steel less competitive. But most U.S. businesses that rely on steel, like equipment manufacturers, metal fabricators, or commercial builders may not have the option to easily switch to domestic suppliers. U.S. steel production doesn’t always meet demand, and when it does, the pricing, lead times, or product specifications may not align with what buyers need. As a result, these businesses still depend on imported steel and absorb the added costs. Tariffs in this case may not offer protection, but may increase material costs and squeeze margins.

2. To exert leverage in trade negotiations or respond to foreign policy concerns.

Tariffs are also used as a tool to pressure other countries into changing specific trade behaviors, adjusting regulatory practices, or addressing political concerns. In these cases, the goal isn’t to protect a domestic industry directly, but to influence the terms of engagement between governments.

This strategy has been used in a variety of ways: to demand stronger labor protections, to respond to environmental or human rights violations, or to retaliate against subsidies (when a foreign government helps its own companies sell things for less by covering part of the cost, making those products cheaper when sold in the U.S.). Tariffs become a way for one country to raise the cost of doing business with another until a change is made, or at least negotiated.

While the intent is diplomatic leverage, the practical impact often lands on businesses that are caught in the middle. For example, during the 2025 trade disputes between the U.S. and China, tariffs were applied to products ranging from electronics to machinery to clothing, not because of quality concerns or domestic supply issues, but as part of broader pressure campaigns over intellectual property rights (legal protections for things like trademarks, patents, and copyrighted materials) and trade imbalances (when one country consistently sells more to another than it buys in return, creating an uneven flow of money between the two).

The result? U.S. importers of those products faced higher costs, even though the underlying dispute had nothing to do with their business. Many of those businesses couldn’t find alternative suppliers or shift production quickly. Instead, they were forced to absorb the increased costs, rework pricing, or delay inventory restocks while the political negotiations played out.

This use of tariffs treats trade policy as a bargaining chip. But the financial pressure it creates often falls on U.S. businesses with no control over the policy decisions driving those costs.

2025 U.S. Tariff Rates on Imports

Key Notes:

• Baseline Tariff: A universal 10% tariff applies to most imports from all countries, effective April 5, 2025.
• Reciprocal Tariffs: Higher country-specific tariffs were announced on April 9, 2025, but many have been suspended for 90 days to allow for negotiations.
• Exemptions: Certain electronics, such as smartphones, laptops, and semiconductors, have been exempted from the higher tariffs.
• De Minimis Threshold: The $800 de minimis threshold for duty-free imports from China has been eliminated, effective May 2, 2025.

Please note that tariff rates and trade policies and rates are subject to change. For the most accurate and up-to-date information, consult the U.S. Customs and Border Protection or a trade compliance expert.​

How to Calculate Tax on Imported Goods (Tariff Cost)

To calculate the cost of a tariff, you need to start with the total value of the shipment, which includes:

• The price you paid for the product (invoice value)
• The cost of shipping to the U.S.
• Any insurance included during transit

This full amount is called the dutiable value and it’s what the tariff percentage is applied to. Tariffs can take two forms:

• A percentage-based tariff, like 10% or 25%, applied to the shipment’s total value
• A fixed fee per unit, such as $2.50 per item or per kilogram

Example:

You import a shipment of electronics from China:

• Product cost: $15,000
• Shipping: $1,200
• Insurance: $100
• Dutiable value = $16,300

If the product is subject to a 25% tariff:

• Tariff cost = 25% of $16,300 = $4,075

That $4,075 is the tariff tax you’ll need to pay before your shipment is released. The specific tariff rate depends on how the product is classified and which country it’s coming from. Rates can change due to trade disputes or shifts in policy, so it’s important to check the most current tariff schedules before placing an order.

What are Customs Duties and Taxes?

Unlike tariffs, which are often used as political or economic tools in response to trade disputes, customs duties and taxes are a standard part of international shipping. They’re based on product classification (HTS code or “Harmonized Tariff Schedule” code, which is a standardized numerical code used to classify imported goods for customs purposes, determining applicable duties, taxes, and regulations) and origin, and apply broadly to thousands of product categories. For U.S. businesses, these charges are predictable, though sometimes an overlooked cost of importing.

Customs duties and taxes are charges applied by a government when products are imported into or exported out of a country. These charges are assessed during the customs clearance process and must be paid before a shipment is released.

The purpose of customs duties can vary. Some are designed to protect local industries by raising the cost of foreign-made products. Others are simply a way for governments to collect revenue on the flow of products across borders. Many of these duties have been in place for decades and apply regardless of who the trading partner is or what the current political climate looks like.

Below are the types of customs duties:

• Basic Customs Duty (BCD) – Standard tax on imported goods.
• Countervailing Duty (CVD) – Imposed to offset subsidies provided by exporting countries.
• Anti-Dumping Duty – Levied to protect domestic industries from imports at unfairly low prices.
• Protective Duty – Used to protect domestic industries from foreign competition.
• Safeguard Duty – Temporarily applied when imports surge unexpectedly.
• Export Duty – Charged on goods being exported (less common).

For importers, the cost can affect product pricing, sourcing decisions, and profit margins. Missteps during customs clearance, like using the wrong classification code, failing to provide the correct documentation, or misunderstanding trade agreements can lead to overpayments, delays, or shipment holds. In industries with slim margins or high volumes, those errors aren’t minor, they’re often felt.

How to Calculate Customs Duties for Compliance

Customs duties are determined based on the HTS code of the product type, the value of the goods (including shipping and insurance), and any relevant trade agreements between the countries. They are calculated as a percentage of the total shipment value. In the U.S., this includes:

• The price you paid for the products (invoice amount)
• The cost of shipping to the U.S.
• Any insurance charged as part of the shipment

This combined amount is called the dutiable value. It’s the value customs will use to determine what you owe.

Example:

You import electronic components from Thailand:

• Product cost (invoice): $10,000
• Shipping: $1,000
• Insurance: $100
• Dutiable value = $11,100

If the duty rate is 7%, then:

• Duty owed = 7% of $11,100 = $777

Important: Customs duties are calculated only on the dutiable value (the combined total of the product cost, shipping to the U.S., and any insurance during transit). Additional charges, like port handling fees or inspections are not included in the duty calculation, but they still affect your total landed cost. (the full cost to bring the product in). Landed cost includes the product, shipping, insurance, duties, and all import-related fees. Knowing the difference helps you avoid surprises.

Tariff vs. Customs Duty

How Businesses Can Reduce the Cost of Tariffs and Customs Duties

You may not be able to avoid tariffs or duties entirely, but you can often reduce what you pay, or avoid unnecessary charges by making more informed decisions. Here are practical ways to manage costs in 2025, when rates remain high on many imports:

• Use Foreign Trade Zones (FTZs) in the U.S. or Abroad: An FTZ is a designated area where goods are treated as if they’re outside a country’s borders for customs purposes. This allows businesses to defer tariffs, duties, and taxes until goods are shipped, improving cash flow and providing flexibility in case rates change. In the U.S., fees are based on the rates at the time of import. In contrast, countries like Canada apply rates at the time of shipment—potentially lowering costs if tariffs decrease during storage.
• Use trade agreements when applicable. Countries like Mexico and Canada have duty-free access under USMCA (United States–Mexico–Canada Agreement), but that only applies if your product qualifies and the right paperwork is filed. If the origin or documentation doesn’t meet requirements, standard duty rates still apply.
• Know what counts toward the shipment’s value. Tariffs and duties are calculated based on the full shipment value, not just the product price. That includes shipping and insurance, which are often overlooked. Misunderstanding this can lead to overpaying. Find affordable shipping and insurance options.
• Check if you qualify for duty refunds. If you import materials and export finished products, you might be eligible for a duty drawback (a partial refund of what you paid). This option isn’t automatic, but it may apply if the goods you import are later exported, either as-is or as part of a finished product.
• Use the correct product classification. The classification code (HTS) assigned to your product determines the rate you pay. Small differences in wording can change your duty rate significantly. This matters even more when importing from countries like China, where many products are still subject to Section 301 tariffs (a separate tax created during a U.S.–China trade dispute).
• Monitor tariff policy changes. Tariff rates can shift with little notice. The list of products affected by Section 301 has changed multiple times in recent years, and what’s taxable this quarter might not be next. Staying updated can help you adjust sourcing or timing before rate changes take effect.
• Get help when the rules aren’t clear. Working with a freight forwarder, customs broker, 3PL company, or trade consultant may help you catch missteps in classification, valuation, or documentation. Their involvement doesn’t eliminate the risk entirely, but it can reduce errors that lead to higher charges.

Ready to Simplify Trade and Shipping?

Customs brokers and trade consultants can help you avoid classification and documentation errors, but once the shipment clears, the handoff matters too. If you’re rethinking how you manage storage, prep, or cross-border logistics, we can help. Get in touch to see how Warehousing and Fulfillment can support the way you manage imports.