Tariffs create a tangle of costs for small businesses

When Jon Calma Vergara’s packages arrived back at his door in Singapore, he knew something was seriously wrong.

Vergara runs JCV Custom Works, a small 3D printing company that has been selling fishing lure stencils since 2019. Almost all of his orders go to the United States.

In late August, when the United States removed its de minimis exemption on small-value imports, Singapore’s national postal service suspended shipments to America. Vergara therefore opted for a private courier, but his first shipments never left Singapore.

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

He eventually found another private courier who sorted out the additional paperwork and shipped his packages in about a week.

But that solution came at a cost: While it once charged a flat $15 for shipping, it now charges U.S. customers $25. This is a significant increase for its products, which cost between $14 and $75 each. But that’s still less than Vergara’s final cost of about $36 to ship each item, after accounting for taxes and other incidental fees.

Vergara also had to take the time to study the arcane codes of the harmonized tariff schedule — previously a formality that is now essential for determining customs duty rates for the four to five packages he ships each week, each totaling between $200 and $400.

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

His products are reaching buyers again, but his profits are down 10 to 15 percent and he implemented a $50 minimum order to manage costs.

He also now takes into account costs to his business – such as faulty logistics or higher costs to replace lost or damaged products – which could reduce his revenue by 40 to 50% compared to the pre-de minimis exemption period.

“I always guarantee they will receive their products or I will send them replacement products for free,” he said.

The hidden costs of tariffs

Vergara’s stencil e-commerce business isn’t his livelihood — he’s a partner in an interior design firm by day — but the side hustle makes up 20 to 25 percent of his monthly income.

“Although it’s just a side hustle, it helps a lot with my monthly expenses,” he said.

His story highlights a larger problem: Tariffs themselves are rarely the only source of pain for businesses.

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

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

Wray said he found detention and demurrage costs ranged from hundreds of thousands of dollars to $8.5 million a year, according to the company.

Larger companies, she explained, can negotiate favorable terms and often receive priority at congested ports. Small businesses don’t have this leverage.

This means that two companies facing the same tariff rate can end up with very different results. For multinationals, this is a nuisance. For micro-exporters like Vergara, it’s a question of survival.

“My previous shipment was flat rate regardless of the amount ordered, but due to the changes I now have to charge more,” Vergara said.

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

Contracts won’t save you

For many businesses, the problem doesn’t stop with logistics.

Companies that thought they were protected are discovering that even contracts don’t protect them. Tariff increases are rarely referred to as force majeure, or what lawyers call a “force majeure” clause. which relieves a company of its obligations when something truly unpredictable happens.

“Most contracts don’t entitle you to damages or delay claims just because rates have changed. It’s not that simple,” said Kala Anandarajah, a commercial lawyer at Singapore-based Raja & Tann, at an event last month.

Large companies can diversify their suppliers and modify their production. Small businesses, like Vergara’s, can only pass on the higher shipping costs, eat into their profits, or hope that customers will remain patient.

Vergara said there’s a benefit to the higher shipping rate he currently charges: happier customers because packages get to them faster.

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

“I just hope that once Trump’s term is over, everything will go back to normal,” Vergara said.

Correction: October 23, 2025 — An earlier version of this story misspelled Jon Calma Vergara’s last name as Vagara.