Which SKUs Went Underwater? Finding Negative-Margin Products After Tariff Changes

Published 2026-08-18 · by the TariffFox team

A tariff rate increase of even a few percentage points can flip a profitable SKU into a money-loser overnight. The problem is that most merchants don't find out until their accountant flags it — weeks or months after the damage is done. This guide walks you through a systematic process for identifying every product in your catalog that's now selling at a loss after recent tariff changes, so you can act before the losses compound.

Why Negative-Margin Products Appear After Tariff Changes

When import duties rise, your landed cost — the true cost of getting a product to your warehouse — increases immediately. Your Shopify prices don't. The gap between what you charge and what the product actually costs you can turn negative without any obvious signal in your dashboard.

Three things make this hard to catch:

• Tariff changes apply to specific HTS codes, not entire product categories, so only some SKUs in a range get hit
• Supplier invoices rarely break out duty costs clearly — they're often buried in freight charges or customs broker fees
• Shopify's margin reporting uses your cost field, which most merchants set at the supplier unit price and never update when duty rates change

The result: orders keep coming in, the margin report still looks acceptable, and you're funding the difference out of cash flow without realising it.

Which SKUs Are Most Likely to Be Underwater

Not all products carry equal tariff exposure. SKUs that typically flip negative first share a few characteristics:

• Low base margin: Products you were already selling at 20–30% margin have almost no buffer to absorb a 10–25% duty increase
• Country-of-origin concentration: Everything sourced from a single country takes the full hit if that country's rate changes
• High unit value with thin markup: A $200 product with a $35 markup can go negative with a relatively small duty percentage shift
• Commodity-like items: Products priced to compete with low-cost sellers have no room to raise prices without losing the sale entirely

If you carry a mix of high-margin private label and low-margin commodity SKUs, the commodity SKUs are almost always the ones to audit first.

How to Find Underwater SKUs: A Step-by-Step Audit

Step 1: Calculate Your True Landed Cost per SKU

Landed cost = supplier unit price + import duty + freight + customs broker fees + insurance + local handling

The duty portion is what changes with tariff updates. To calculate it:

Duty cost = (supplier unit price + freight) × applicable duty rate

Use your customs broker's entry summaries or your country's official tariff schedule to find the current rate for each product's HTS code. If you're importing from multiple countries, each origin applies a separate rate — don't average them.

Step 2: Pull Your Current Selling Prices

Export your product catalog from Shopify (Products → Export). The CSV includes your price, compare-at price, and cost fields. If your cost field hasn't been updated since you set up the store, it's reflecting your old supplier unit price — not your post-tariff landed cost. You'll need to update it with the figures from Step 1 before any margin calculation means anything.

Step 3: Calculate Margin per SKU and Sort Worst-First

Margin % = ((Selling price − Landed cost) ÷ Selling price) × 100

Any SKU where this number is negative is selling at a loss. Any SKU sitting below roughly 15% is worth flagging — it may not be underwater yet, but a further small tariff adjustment could push it there.

Here's what a simplified audit looks like across five variant examples:

Step 4: Check Variants, Not Just Parent Products

This is where most manual audits fail. A product with three color variants might source two from Vietnam (affected by new duties) and one from Mexico (unaffected). The parent product averages out fine; the two Vietnamese variants are underwater. You need to audit at the variant level, not the product level — otherwise you'll miss exactly the SKUs that are costing you money.

What to Do With Underwater SKUs

Once you have your ranked list, you have four options for each product:

Raise the price. Calculate the minimum price needed to hit your target margin and update accordingly. The risk is losing price-sensitive customers on commodity items. Test on a small batch first if you're uncertain about price elasticity in that category.

Negotiate with your supplier. If a significant portion of your catalog is affected, that's leverage. Suppliers dealing with tariff pressure from multiple buyers are often more willing to negotiate than merchants expect — particularly if you can commit to volume or faster payment terms.

Switch sourcing. If the tariff applies to a specific country of origin, products with viable alternative sources in lower-tariff countries are worth evaluating. This takes time but can permanently fix the margin problem for high-volume SKUs.

Discontinue or bundle. For very low-velocity, low-margin SKUs, the math sometimes doesn't support any of the above. Discontinuing or bundling them with a higher-margin product is cleaner than continuing to sell at a loss.

For the repricing work itself, going through a CSV manually becomes impractical once you have hundreds of SKUs to evaluate. TariffFox scans your entire Shopify catalog, ranks every variant by its true post-duty margin worst-first, and lets you bulk-reprice the underwater ones in a single step — with an instant revert if a price change doesn't land the way you expected.

Building a Tariff Monitoring Habit

Finding underwater SKUs right now is a one-time fix. Staying ahead of future changes requires a repeatable process:

• Set a quarterly calendar reminder to check HTS code rate changes on your top 20 products by revenue
• Update your Shopify cost fields whenever you receive new supplier quotes or customs entry summaries
• Track landed cost in a separate spreadsheet if your products span multiple source countries — the Shopify cost field is a single flat number and doesn't capture per-origin complexity
• Ask your customs broker to flag HTS code changes proactively — in many cases, brokers will add you to a change-notification list at no extra charge

The merchants who get hurt most by tariff changes are the ones who treat import costs as a fixed background number set at store launch. Treating landed cost as a live variable that needs periodic auditing is the difference between catching a problem in week one and catching it in month six, after you've shipped hundreds of units at a loss.

Frequently Asked Questions

How do I know which of my products are affected by a specific tariff change?

Each imported product has an HTS (Harmonized Tariff Schedule) code that determines its duty rate. Your customs broker or import entry summaries will list the HTS code for each product. When a tariff change is announced, the government publishes the affected HTS code ranges — cross-referencing your product codes against that list tells you exactly which SKUs are hit. If you're unsure of a product's HTS code, your supplier or freight forwarder can usually confirm it.

What counts as "landed cost" for margin calculations?

Landed cost includes everything you pay to get a unit into your warehouse: the supplier's unit price, import duties (calculated on the customs value, typically supplier price plus freight), international freight charges, customs broker fees, port handling, and domestic delivery to your warehouse. Insurance is typically a small addition. Many merchants calculate landed cost as supplier price × (1 + duty rate) + a fixed freight allocation per unit, which gets you close enough for margin ranking purposes.

My Shopify cost fields are all wrong — what's the fastest way to fix them?

Export your full product catalog as a CSV (Shopify Admin → Products → Export → All products). Add a calculated landed cost column using your duty rates and freight allocation. Then reimport the CSV with updated cost values — Shopify will match on the handle field and overwrite cost without touching other fields. For large catalogs, this is significantly faster than editing products one by one, though it still requires you to have accurate landed cost figures to enter.

Is it better to raise prices or absorb the tariff cost on underwater SKUs?

In most cases, raising prices is the right first step — absorbing losses indefinitely isn't a sustainable strategy. The exception is when you're in a highly price-elastic category where any increase would push customers to competitors who haven't yet adjusted their own pricing. In that scenario, a short-term absorption while you negotiate with your supplier or source alternatives can make sense, but treat it as a temporary bridge, not a permanent solution. Track those SKUs separately so you know exactly how much the absorption is costing you each week.