Tariff Impact on Import Costs 2026

You import wood dining tables from a factory in Guangzhou, China. Your wholesale cost is $200/unit (FOB). You sell them in the US for $599. In 2026, the effective tariff rate on Chinese wooden furniture (HTS code 9403.30.00xx) is 25%.

That 25% doesn't land on your retail price. It lands on your FOB cost, and it fundamentally changes your margin math.

How Tariff Calculations Actually Work

Tariffs are applied to the dutiable value — generally the FOB value of the goods (the factory price, excluding freight). The formula:

Tariff duty = FOB value × tariff rate

On your $200 table:

• Tariff duty: $200 × 25% = $50 per unit
• New landed cost (FOB + tariff): $200 + $50 = $250

But your landed cost also includes ocean freight, insurance, and destination charges. Estimate for a full container load (FCL) of furniture from China to a US distribution center:

• Ocean freight (20ft container, ~300 tables): $3,000-$5,000 per container = $10-$17/unit
• Marine insurance: $2/unit
• US customs broker fee: $1.50/unit
• Drayage to warehouse: $3/unit

Total additional charges: ~$16-$23/unit

Full landed cost pre-tariff: $200 + $18 = $218 Full landed cost with 25% tariff: $200 + $50 + $18 = $268

Your cost increased from $218 to $268 — a $50 jump that represents a 22.9% increase in landed cost even though the tariff rate is 25% of FOB.

The Three Options When Tariffs Hit

Option 1: Absorb the Tariff

Pass no cost to customers. Keep the $599 retail price.

Old margin: ($599 - $218) / $599 = 63.6% New margin: ($599 - $268) / $599 = 55.3%

Margin drops 8.3 percentage points. If you're running a 55% gross margin target, you're now at the floor. If you have other cost pressures (shipping rate increases, warehouse costs), you're likely already below breakeven on this product.

Absorption only makes sense if: (1) you have pricing power that would be damaged by a price increase, (2) competitor pricing prevents you from raising, or (3) you expect tariffs to roll back within 6-12 months.

Option 2: Full Pass-Through

Increase the retail price to maintain margin.

To preserve 63.6% gross margin with $268 landed cost: $268 / (1 - 0.636) = $736 selling price

That's a $137 increase, or 22.9% higher than your current $599 retail price. This is the price increase required to be fully revenue-neutral on margin.

The question is whether your customers will accept 23% higher prices. For furniture with $599 psychology (under $600), crossing to $736 may cause material volume loss.

Option 3: Partial Pass-Through

Split the difference. Raise price to $649 (8.3% increase):

New margin at $649: ($649 - $268) / $649 = 58.7%

You absorb $19 of the $50 tariff impact (38%) and pass $31 through to the customer (62%). Margin drops from 63.6% to 58.7% — a 4.9 point hit instead of 8.3 points.

Whether this is viable depends on your category. For commodity goods with price-sensitive buyers, 8% price increases are risky. For premium or branded products, 8% is within normal annual pricing movement.

Understanding HTS Codes and Their Tariff Rates

The tariff rate on any product depends on its HTS (Harmonized Tariff Schedule) code — a 10-digit classification assigned to every importable product.

How HTS codes affect your tariff rate:

• Wood furniture for household use (9403.30): base 0% + 25% Section 301 China tariff = 25%
• Metal furniture (9403.20): base 0% + 25% Section 301 = 25%
• Upholstered seating (9401.61): base 0% + 25% Section 301 = 25%
• Plastic storage (3926.90): base 3.4% + 25% Section 301 = 28.4%
• Electronics accessories (8504.40): varies widely by subcategory

The key distinction for China imports: Column 1 (MFN) tariff rate + any Section 301 additional duties that apply to your HTS subheading. For most Chinese manufactured goods in 2026, Section 301 rates of 7.5%-25% apply in addition to the base MFN rate.

Re-Sourcing: When the Math Forces a Change

At a 25% tariff, the furniture example still works with partial pass-through. But tariff rates on some categories are much higher. If rates were 50% or more, re-sourcing becomes the rational choice.

Alternative sourcing countries for furniture:

• Vietnam: Popular since 2018 tariff escalation. Now facing scrutiny for transshipment of Chinese goods. Some subcategories have additional duties. Manufacturing quality and capacity have improved significantly.
• Mexico (USMCA): 0% tariff on qualifying goods with sufficient North American content (generally 75%+). Higher labor cost than Asia but zero tariff advantage.
• India: 0% base tariff on most furniture; not subject to Section 301. Higher freight cost (longer transit). Quality control and production scale are improving.

Break-even calculation for re-sourcing: If a Vietnamese supplier charges $230 (vs. $200 from China) with 0% tariff:

• Landed cost (Vietnam): $230 + $18 freight = $248
• Landed cost (China at 25%): $268

The Vietnamese supplier is $20/unit cheaper once tariffs are included. At 5,000 units/year, that's $100,000 in annual savings — enough to justify a sourcing audit.

This article provides general business guidance. Consult appropriate professionals for decisions involving significant financial commitments.