Tariff Turbulence: How Ecommerce Brands Can Respond Without Raising Prices or Cutting Teams

On April 2, 2025, President Trump declared a national emergency and announced sweeping new tariffs on imported goods, citing economic and national security concerns. These tariffs include a universal 10 percent rate on all imports and significantly higher country-specific rates, most notably a 120 percent tariff on Chinese goods. Days later, the administration announced a 90-day pause for most countries. However, tariffs on Chinese imports remain active, and many ecommerce brands are already feeling the consequences. The sudden increase in inventory costs has forced leaders to re-evaluate their financial models in real time. The brands that navigate this moment successfully will not be those that panic or slash budgets across the board, but those that understand how to shift spending intelligently, especially in their marketing operations.

What you need to know:

• Tariffs on Chinese imports are active and as high as 120 percent.
  
  
• If your brand imports goods from China, your cost of goods sold (COGS) may have doubled overnight.
  
  
• This is not just a margin issue—it is a cash flow disruption that hits now, not later.
  
  
• Brands must rebuild their financial models quickly to determine new break-even thresholds.
  
  

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The Real Impact on Ecommerce Brands

For most ecommerce brands, profit margins are already thin. A typical direct-to-consumer brand might operate at 10 percent EBITDA. When tariffs increase COGS by 10 to 15 percent or more, that margin can be wiped out instantly. The impact is not just theoretical. If you have a $1 million purchase order in progress and the tariff adds 100 percent to that cost, you now need $2 million in working capital to receive the same inventory. This affects your cash flow immediately, even though the product may not sell for weeks or months. And while raising prices or cutting operational costs are possible responses, both come with significant risks to customer demand and internal morale. There is a smarter, more sustainable way forward.
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Key implications to consider:

• A 10 percent increase in COGS can reduce EBITDA by half or more.
  
  
• Capital is tied up earlier in the inventory cycle, reducing liquidity.
  
  
• Passing costs to customers risks slowing sales, especially in price-sensitive categories.
  
  
• Cutting staff or overhead may reduce flexibility when you need to move quickly.
  
  

Why This Is a Marketing Problem, Too

Tariffs affect the supply side of your business, but the pressure flows directly into marketing. If COGS rise but advertising spend remains constant, your customer acquisition cost (CAC) to gross margin ratio deteriorates quickly. Marketing teams must now re-align with finance, understand new break-even points, and adjust strategies accordingly. Many brands continue to rely on platform-reported ROAS or outdated attribution models to guide spend decisions. In a time when every dollar must earn its keep, this approach introduces real risk. What looks good on a dashboard might not hold up under scrutiny, especially when that dashboard cannot distinguish correlation from causation.

What this means for marketing leaders:

• Your old break-even CAC may no longer apply.
  
  
• Reported ROAS does not tell you whether the ad caused the sale.
  
  
• Without better measurement, you may be scaling unprofitably without knowing it.
  
  
• Marketing decisions must now be made in the context of contribution margin, not just top-line revenue.
  
  

How Incrementality Testing Helps Protect Profitability

Incrementality testing allows you to isolate whether an ad campaign actually causes a lift in sales, as opposed to simply being present in the customer journey. This is especially valuable when you're deciding where to cut or reallocate spend. In a recent test result for a Stella client, cutting 25 percent of Meta ad spend had no negative impact on revenue. Instead, it saved over $150,000 in wasted spend. Another brand reduced Google Pmax spend and reinvested in YouTube, gaining both reach and profitability. The common thread? These were not random budget cuts. They were the result of structured experiments designed to identify where dollars were working and where they were not.
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Incrementality testing helps you:

• Cut non-incremental spend without hurting revenue.
  
  
• Reallocate budget to channels with higher profit contribution.
  
  
• Understand what to cut surgically instead of slashing broadly.
  
  
• Maintain or even improve performance with less total spend.

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Never done a holdout experiment before? Stella makes it easy. Try our virtual demo below:

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Using Media Mix Modeling to Guide Strategic Allocation

Media Mix Modeling (MMM) helps marketers understand how all channels contribute to revenue over time, accounting for seasonality, pricing, promotions, and brand equity. It complements incrementality testing by helping you see the forest, not just the trees. If incrementality helps you identify tactical inefficiencies, MMM helps you shape long-term investment strategy. For example, MMM might show that Meta performs well during Q4, while YouTube drives more consistent performance throughout the year. Used together, these tools enable brands to both optimize in the short term and plan effectively for the quarters ahead.

Media Mix Modeling provides:

• A high-level view of marketing’s total contribution to revenue.
  
  
• Insights into how channels interact and influence one another.
  
  
• Strategic guidance on how to shape future budgets.
  
  
• A foundation for confident, data-backed decision making.
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Never done a Media Mix Model before? Stella makes it easy. Try our virtual demo below:

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Why You Must Recalculate Your Break-Even CAC

Many brands set CAC targets months ago, based on pre-tariff margins. Those targets are now outdated. With higher COGS, your allowable CAC to break even has narrowed. Let’s say you previously had $43 in contribution margin after costs on a $70 average order. If tariffs add just $3.50 per unit, that drops your break-even CAC to under $40. It may not seem like much, but across thousands of transactions, it’s the difference between profitability and loss. Without adjusting your CAC thresholds accordingly, you may be overspending—even if performance looks “good” in platform dashboards.
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You need to:

• Rebuild your unit economics with updated COGS, shipping, and fees.
  
  
• Set new CAC targets that reflect current financial realities.
  
  
• Identify which channels or campaigns exceed that CAC.
  
  
• Use incrementality testing to validate whether they’re worth keeping.
  
  

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What Smart Reallocation Actually Looks Like

You do not need to slash your total marketing budget to respond to tariff pressure. What you need is to spend more efficiently. Many brands are using structured incrementality tests to identify the bottom 10 to 20 percent of spend that is delivering the least impact. Once identified, they cut that spend or move it to higher-performing tactics. This kind of optimization can lead to six-figure improvements in profit with no change to topline revenue. In a volatile environment, smart reallocation is the single most reliable path to preserving both margin and momentum.

Steps to take today:

• Run a geo-holdout or spend-level incrementality test on your largest channel.
  
  
• Identify diminishing returns or non-incremental spend.
  
  
• Move spend into channels or tactics with proven causal impact.
  
  
• Focus on profit-per-order, not just reported ROAS.
  
  

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Final Thoughts: Precision Beats Panic

Tariffs have changed the economics of ecommerce in a very real way. But you are not powerless. You do not have to raise prices and risk customer churn. You do not have to cut staff and sacrifice speed. What you need is clarity—about where your money is going, and whether it is working. Incrementality testing and media mix modeling are not luxuries anymore. They are the minimum requirement for smart decision making when margins are under pressure.

The brands that survive this moment will be the ones that choose precision over panic. That test before they cut. That reallocate before they retrench. That understand marketing not as a fixed cost, but as a lever that—if used wisely—can help absorb shocks like these while still moving the business forward.

Stella makes incrementality testing and media mix modeling affordable and accessible for brands generating over $10m per year in revenue. Stella is the most affordable tool on the market, no data scientist is required.

If you are ready to learn more, book a demo with our team here.