How Tariff Changes Impact Foreign-Owned Entities: A Must-Read Guide to Adapting and Thriving in 2025

Disclaimer: The information provided below is for general informational purposes only. Tariff rates, customs regulations, and trade agreements are subject to frequent and often unpredictable changes due to factors such as trade negotiations, political developments, and economic policies. While we strive to provide accurate and up-to-date information, we strongly recommend consulting with a licensed customs broker, freight forwarder, or compliance expert to verify the latest tariff rates, HS code classifications, and country-specific regulations before making any business decisions.

A $2.2 billion loss. One quarter. One company.

That’s the kind of jolt that rattled PDD Holdings, Temu’s parent company. And the reason?

Well, a brutal mix of geopolitical chaos and ongoing tariff war!

In April 2025, President Trump declared April 2 “Liberation Day” and introduced a sweeping tariff overhaul.

A flat 10% tariff was slapped on almost all imports into the U.S. (except Canada and Mexico), followed by aggressive “reciprocal tariffs” for around 60 countries. Some of these shot up as high as 145%, and although they’ve temporarily been scaled down to 30%, the damage is already showing.

Temu, once thriving off low-cost exports to U.S. shoppers, took a direct hit due to these new changes. On May 2, the U.S. shut down the de minimis loophole, a rule that let foreign businesses send small parcels (under $800) into the country duty-free. 

Now? Every package from China and Hong Kong gets taxed.

Temu had no choice but to raise prices. They’re scrambling to partner with regional sellers just to stay afloat.

But it’s not just Temu. This is a warning siren for every foreign-owned business trying to access the U.S. market.

Margins are thinning. Shipping is more expensive. U.S. vendors are getting cautious.

And if you’re still trying to operate from abroad, without a U.S. entity or legal presence, you have to watch your steps closely.

Let’s take a stab at clearing all your doubts about these tariff changes, and how they’re actually going to impact you.

What Are Tariffs? How Do They Work?

Starting with the basics:  what does a tariff actually mean if you are a foreign business entity?

A tariff is a tax that a country charges on goods coming in from other countries. It’s applied at the border, right when the goods enter.

Governments use tariffs for three main reasons:

• Revenue Generation: Historically, before income taxes existed, tariffs were how countries made money.

• Protectionism: They make imported goods more expensive, nudging consumers to “buy local.”

• Trade Leverage: Tariffs are sometimes used to pressure or punish other countries during disputes.

So, if you’re a foreign business selling in the U.S., tariffs can make your products costlier and less competitive compared to local ones.

Who Pays the Tariff?

Not the exporter. The U.S. importer pays the tariff to U.S. Customs when the goods arrive.

Example: A business in China ships electric fans to a distributor in California.

• U.S. Customs calculates the tariff based on the type and value of the product.

• The California importer pays that fee, not the Chinese manufacturer.

• That cost then trickles down to retailers and consumers.

These categories are set by the U.S. Harmonized Tariff Schedule (HTS) and vary widely depending on the product type, country of origin, and trade agreements.

Recent Trends in the U.S. Tariff Policy

Let’s explore the recent trends in U.S. tariff policy and understand their implications for foreign-owned businesses, especially in sectors like tech, manufacturing, and e-commerce.

1. Universal 10% Baseline Tariff

As of April 2, 2025, the U.S. implemented a 10% universal tariff on most imports, excluding Canada and Mexico. This move aims to encourage domestic production and reduce trade deficits. 

What could be the probable outcome of this?

Expect re-shoring incentives to increase U.S. companies might move supply chains closer to home or to friendly trade allies.

• Importers could rework contracts or seek alternate suppliers from exempt countries (like Canada, Mexico).

• Price hikes across categories are likely, especially in consumer goods, as importers adjust margins.

• Could trigger global “tit-for-tat” responses, with other nations slapping back similar tariffs, affecting U.S. exports in return.

Out-of-the-box watchpoint: Watch for a rise in “nearshoring as a service” startups that help global companies relocate supply chains into NAFTA countries to bypass this tariff.

2. Elevated Tariffs on Chinese Imports

Like we mentioned earlier,  the U.S. imposed tariffs up to 145% on Chinese goods in April 2025.

However, following a 90-day truce agreement on May 12, 2025, these tariffs were reduced to 30%, combining the 10% universal tariff and an additional 20% “fentanyl tariff.”

What could be the probable outcome of this?

• Foreign-owned businesses operating from or sourcing in China may shift production to Southeast Asia or India.

• A potential slowdown in U.S.–China trade recovery, especially if the 90-day truce fizzles out without a lasting agreement.

• Custom product categories might spike in price, especially in consumer electronics, textiles, and machinery.

Unexpected angle: Brands may reposition their origin labels (e.g., “Designed in China, Assembled in Vietnam”) to soften consumer bias or tariff hits.

3. Revocation of De Minimis Exemptions

Effective May 2, 2025, the U.S. revoked the de minimis exemption for shipments under $800 from China and Hong Kong. This change affects e-commerce platforms like Shein and Temu, which previously benefited from duty-free low-value shipments.

What could be the probable outcome of this?

• Shein, Temu, and similar platforms will restructure their logistics models, likely pushing bulk shipments to U.S. warehouses instead of direct-to-consumer shipping.

• We may see a slowdown in impulse buying of low-cost imported goods on apps due to added costs and slower delivery.

• Domestic e-commerce brands may gain a competitive edge, at least temporarily, in terms of pricing.

4. 25% Tariff on Imported Automobiles and Parts

A 25% tariff was imposed on all imported automobiles and parts, excluding certain components. This policy impacts global automakers and could lead to increased vehicle prices in the U.S. market.

What could be the probable outcome of this?

• Global automakers may increase U.S.-based assembly operations to dodge the fee.

• Expect price inflation in both new vehicles and aftermarket parts, especially from European and Asian brands.

• Could disrupt the EV rollout in the U.S. if key battery components or parts are hit.

Underrated impact: Local garages and independent mechanics may hike repair costs for foreign-brand vehicles due to pricier imported components, changing how consumers calculate the lifetime cost of ownership.

Sector-Specific Impacts

Technology

• Apple: To mitigate tariff impacts, Apple increased iPhone exports from India to the U.S. by 76% in April 2025, while reducing shipments from China by the same margin.

Manufacturing

• TJX Companies: Parent company of TJ Maxx and Marshalls, TJX is reevaluating its product offerings due to increased import costs from tariffs, potentially removing popular items from shelves.

E-Commerce

• Shein and Temu: The revocation of the de minimis exemption has led these platforms to end low-price offers, as they can no longer ship goods duty-free to U.S. consumers. 

Direct Impacts on Foreign-Owned Entities

As someone looking at this from a foreign founder’s perspective, here’s the blunt truth: The U.S. is drawing a line in the sand, and if your business doesn’t have local roots, an LLC, a tax ID, or a local bank, it will become harder by the day for you to compete.

And foreign founders, especially solo operators or early-stage teams, are feeling the pressure multiply overnight. 

Let’s unpack how.

Tariff-Driven Cost Inflation Is a Crush

Yes, tariffs have always existed. But what we’re seeing now, especially with the universal 10% tariff and the 30% effective rate on Chinese goods, is quite different. It’s not incremental; it’s systemic.

How this changes things:

Previously, a smart supply chain could offset a lot of cost disadvantages. You’d manufacture abroad, ship D2C, and play the arbitrage game, get high margins in the U.S., and pay lower production costs at home.

But now? That margin has a name: Tariff.

If you’re selling $50 yoga mats or $20 makeup brushes and a 25–30% tariff kicks in? You’re no longer profitable at the same price. 

And if you raise your price? You lose your edge against domestic players.

Basically, you’re trapped unless you:

• Find a cheaper manufacturer (risky, slow)

• Or absorb the cost (unsustainable)

• Or restructure to become a U.S. seller on paper (that’s what we’ll get to in our next sections)

In short, if you’re running your business from overseas without a U.S. presence, you’re absorbing this hit raw, with no safety net and no real way to negotiate it down.

Your Supply Chain Becomes Vulnerable

Let’s be real, on paper, this particular advice sounds really good: 

Just diversify your supply chain. Move production to Vietnam or India to avoid tariffs.

But if you’re actually running a business, you know this isn’t some weekend fix. It’s a logistical marathon. Shifting production means starting over. You’re not just picking a new country and clicking “print.” 

You need to:

• Identify trustworthy suppliers who can meet your specs.

• Negotiate new contracts, often in unfamiliar legal and cultural environments.

• Test quality control, sample by sample, to avoid product disasters.

• And meanwhile, your existing factory is charging you more because of tariffs, and your customers are asking why shipping is late.

For big U.S. companies, that transition might take a quarter. For a solo founder or small team based overseas? Well, you’re looking at months of back-and-forth, delayed launches, and financial strain.

You likely don’t have ground teams in these new regions to verify compliance, check materials, or inspect production lines. 

While U.S. brands can fly someone out, lean on long-time partners, or absorb short-term costs, you’re stuck waiting, guessing, and reacting. 

And in 2025, where tariff rules change almost overnight, that kind of lag time can kill your momentum. “Wait and see” might feel safer. But in today’s climate, it’s often just a slow path to being priced out or timed out of the market.

Bottom line: If your supply chain can’t flex quickly, your business becomes reactive, and reactive businesses rarely survive policy shocks like this.

Your Pricing Strategy Is No Longer Viable Without Localization

Before tariffs, you could get away with charging a little more as a foreign brand. Customers were willing to wait. The “global” tag added intrigue and value.

But, not anymore. 

Today, customers want 2-day shipping, local returns, and transparent pricing. Tariffs + shipping costs + foreign seller fees mean your margins are being shaved from all sides.

And the worst part? You lose pricing control when you ship direct-to-consumer internationally.

But when you route inventory to a U.S. warehouse, you unlock:

• Flat-rate domestic shipping

• Access to Amazon FBA or U.S. 3PLs

• Faster delivery and fewer cart abandons

The only way to fix your pricing model in 2025 is by going local with your logistics. But that’s only possible when you have a U.S. entity. 

You’re Being Squeezed From Both Sides (Vendors And Customers)

The new tariff policies don’t just impact you, they also spook your U.S.-based partners.

Your 3PLs? They start asking for upfront deposits.
Your suppliers? They renegotiate terms.
Your payment processors? They delay payouts or ask for extra verification.

And your customers? They don’t care about your shipping drama. They just see that your $45 product is now $62 with longer delivery. 

That’s a deal-breaker.

Without a U.S. legal identity, you look unstable in the eyes of platforms, vendors, and buyers. And in times of uncertainty, nobody bets on instability.

That’s why a U.S. LLC changes the game. It lets you speak the same operational language as your partners, without always being seen as “the exception to the rule.”

Compliance Isn’t a Box to Tick, It’s a Business Risk Multiplier

The HTS code system is very volatile. One misclassification? You’re facing delays, extra duties, and sometimes legal risk.

Most foreign founders rely on freight forwarders or international shippers to “handle everything.” But when policies change as fast as they are now, outsourcing that compliance blindly is dangerous.

You need visibility, control, and access to professionals who know U.S. rules. And you only get that when you’re operating like a U.S. business, registered, taxed, and taken seriously.

The Future Belongs To Global-Local Founders

Here’s our honest take: being a “foreign founder” in the U.S. market used to be a cool differentiator. 

Now? It’s a liability, unless you localize your operations.

The winners in this new tariff environment aren’t just “compliant.” They’re adaptive. 

They are ready to:

• Launch a U.S. LLC and open a bank account.

• Work with U.S. vendors and payment platforms.

• Optimize pricing through domestic shipping.

• Build trust by looking and operating like a U.S. business.

And doola is making this possible without the visa drama, office lease, or legal chaos. If you’ve been waiting to go legit in the U.S., this is your sign. The longer you wait, the steeper the hill becomes.

Strategic Moves to Navigate Tariff Changes

Here’s doola’s advice that foreign-owned businesses can take to navigate, adapt, and win, despite this wild trade policy climate:

1. Rework Your Supply Chain. But Don’t Just Relocate, Rethink

There’s no “perfect country” to manufacture in now. Every option has pros and trade-offs. Instead of chasing the next low-cost zone, think in layers:

• Diversify your sourcing: Use China for components, Vietnam or India for assembly, and Mexico for final packaging. That way, you can shift where the product is “finished” to reduce tariff exposure.

• Explore nearshoring: For U.S. access, moving fulfillment or light assembly to Mexico or Central America gives you proximity without full exposure to Asian tariffs.

Remember, your goal isn’t to move everything, it’s to build flexibility into your operations. So you’re not caught flat-footed when the next tariff hits.

2. Use Tariff Engineering to Your Advantage

This might sound a little technical, but it’s a real power move: change the product or how it’s shipped to fit into a lower-tariff category.

For example, 

• Disassemble and ship in parts: Some finished goods are taxed higher than their components. Shipping separately and assembling locally could cut tariff costs.

• Reclassify with the right HTS (Harmonized Tariff Schedule code) code: One misstep in classification can cost you 15–25% more in duties. Correcting that, even with minor packaging tweaks, could save thousands.  

Tool for this: Use the new HTS Code Lookup Tool to double-check your product’s classification and explore alternatives. It’s boring work, but it’s free money once optimized. And if you don’t have a U.S. legal presence, customs brokers might not even take you seriously.

4. Work With Trade Advisors, CPAs, and Customs Brokers

U.S. import rules are a maze. HTS codes, de minimis thresholds, retaliatory tariffs, Section 301 lists… it’s not just confusing, it’s ever-changing.

And if you think one wrong detail can’t hurt, ask any founder whose shipment got stuck at customs for 4 weeks because someone checked the wrong duty classification.

That’s the thing about compliance. If you don’t get ahead of it, it will catch up with you, really fast. And in ways that don’t just cost money, but momentum, reputation, and customer trust.

So, start building a team that knows the game:

• A customs broker to help you clear shipments properly

• A CPA who understands international entity structures and how to keep your books clean across borders

• A trade compliance advisor to stay ahead of tariff shifts and filing deadlines

Here’s the annoying part, most of these experts won’t (or legally can’t) help you if you’re not a U.S. entity. No U.S. LLC? No EIN? You’re just another risky, hard-to-help client in their inbox. So they pass. Or charge you triple!

Legal and Compliance Checklist for Foreign-Owned Entities Doing Business in the U.S.

If you’re shipping into the U.S. or managing operations from abroad, this checklist breaks down exactly what you need to cover to stay legal, avoid penalties, and unlock tariff-saving opportunities.

1. Set Up Your U.S. Legal Entity

Before you can access U.S. logistics, partners, or even open a Stripe account, you need to form a U.S.-registered business, typically a Limited Liability Company (LLC) or a C-Corp.

This gives you a business identity in the system, allowing you to open a U.S. bank account, apply for an EIN, and look credible to customs brokers, vendors, and tax professionals.

Without it, you won’t be able to access the very tools you need to operate legally and competitively.

2. Register With U.S. Customs (CBP)

Once your business is registered, you need to get into the Customs system.

U.S. Customs and Border Protection (CBP) needs to know who you are and what you’re shipping. In most cases, your EIN functions as your importer ID. But just having an ID isn’t enough. 

You need to work with a licensed U.S. customs broker who will file your entry paperwork, handle all communications with CBP, and ensure your shipments clear customs without triggering penalties, holds, or seizures.

3. Classify Your Goods the Right Way

If you misclassify your product, and you could be charged too much… or not enough, which flags your shipment for investigation. Either way, you lose time, money, or both.

Use the official HTS lookup tool to identify the correct code and always confirm it with your customs broker to avoid expensive surprises.

4. Know Who’s Regulating You (And Why It Matters)

Multiple U.S. government agencies play a role in enforcing trade rules, and they don’t all talk to each other.

The IRS handles taxes, including income and sales tax for your U.S. business. CBP enforces the tariff rules and checks whether your shipments are compliant at the port of entry. 

The U.S. Trade Representative (USTR) is responsible for issuing new trade rules and tariffs, especially during geopolitical negotiations, and the U.S. International Trade Commission (USITC) maintains the official tariff database.

Knowing who does what, and staying subscribed to updates from each, can help you avoid accidental non-compliance when rules shift.

5. Understand the Cost of Non-Compliance

Non-compliance can result in your cargo being seized, denied entry, or delayed for weeks. You could also be fined, audited, or blacklisted from future imports.

Such delays can damage your reputation with customers, suppliers, and marketplaces like Amazon or Shopify. 

6. Keep Your Paper Trail Clean

U.S. authorities expect detailed documentation, and they don’t accept “I didn’t know” as an excuse. You need to keep thorough records of every shipment, classification decision, invoice, bill of lading, and customs form, for at least five years.

If CBP audits you, they will ask for proof. If you can’t produce it, even for one shipment, you risk being penalized or losing your trusted importer status. 

This is one area where it’s genuinely safer to be overly organized.

7. Stay Updated As Trade Policy Is a Moving Target

One of the hardest parts of staying compliant is that the rules are always changing. Tariffs get introduced or removed. Trade deals get renegotiated. Classifications get updated.

To stay ahead, subscribe to updates directly from CBP and the USTR newsletters. 

How doola Supports Foreign-Owned Entities

Let’s start with the obvious: doola helps you form a U.S. business without any hassle. 

But there’s more:

🚀 You Get a U.S. Identity That Opens Doors

🚀 No U.S. Address? No Problem

🚀 You Stay Compliant Without Losing Your Mind

🚀 Built-In Access to Advisors Who Get You

Get started with doola today!

FAQs

What are tariffs? How do they differ from duties or taxes?

Tariffs are taxes on imported goods. Duties are a type of tariff, and both are forms of taxes, but tariffs specifically target cross-border trade.

Are there tariff exemptions or programs foreign owners can use?

Yes. Programs like duty drawback, Free Trade Agreements (FTAs), and Foreign Trade Zones (FTZs) can reduce or eliminate tariffs if you qualify.

How can I restructure my supply chain to reduce tariff impact?

Shift manufacturing or assembly to countries with lower or no U.S. tariffs, or use multi-country sourcing to split production and reduce exposure.

What legal obligations must foreign owners meet during tariff shifts?

You must maintain accurate product classification, customs documentation, tax filings, and stay compliant with U.S. Customs and IRS requirements.

How does doola support foreign entrepreneurs with compliance and filings?

doola helps you form a U.S. company, get an EIN, handle state and federal filings, and connects you with trusted tax experts and compliance advisors.