What Tariffs Are Actually Doing to Lower Middle Market COGS

Tariffs don't hit your P&L the day they're announced.

They hit it 60 to 90 days later — buried in landed cost, right when you're trying to close Q2 and explain to your board why margin is down.

Here's what I'm seeing right now with clients in apparel, accessories, and consumer goods:

The math is getting complicated fast. A 10% tariff on imported goods sounds manageable until you run it through your full COGS stack — freight, duties, 3PL handling, and your existing vendor terms. For some brands, that's a 200 to 400 basis point margin hit before you've changed a single thing about how you operate.

The Founders Who Are Handling It Well

The founders who are handling it well are doing three things:

First, they've modeled it. Not a back-of-napkin estimate — an actual scenario that runs the tariff impact through their full cost structure, by SKU where it matters, and shows them exactly where the margin goes and what they need to do about it.

Second, they've opened conversations with their vendors. Not emergency calls — strategic conversations about payment terms, sourcing alternatives, and volume commitments that give both sides flexibility. Some are finding 30 to 60 days of additional terms that materially change the cash picture.

Third, they've looked at pricing. Not across-the-board increases — targeted adjustments on the SKUs where demand is inelastic enough to absorb it without volume risk. That analysis takes about a week and usually finds more room than founders expect.

The Founders Who Are Struggling

The founders who are struggling are the ones waiting for clarity. There isn't going to be clarity. The businesses built to handle this are the ones that already ran the downside scenario.

Have you modeled a 10% COGS increase scenario for 2026? What did it change for your business?