Impact of 2025 Tariffs on our Industry
4/4/2025
Well folks, the only good news is that the news could be worse.
Tariffs announced late on 4/2 will affect all imports, but the manner in which they’ll affect imports in our industry may be different – And generally less – than you think. It’s been a long time since I even attempted an audit of any kind, but I’d estimate approximately 60% of the fish we sell originate overseas. Luckily in our case it’s only aquatics we’re dealing with here; All of our mammals, birds, bugs, everything but fish, is all domestic and should therefore be unaffected, except to the extent that the tariffs may impact the market overall. We deal with 13 foreign countries, with tariffs ranging from 10% to 54%, but this will not translate into a 10-54% increase in prices; This is where the good – Or “Less Bad” – News begins.
There is a big difference between importing a box of fish and importing a shipping container full of smartphones, and that difference is freight. Most of the overseas importing into our country is done by sea, in huge container ships that would make The Titanic look like a dinghy. A quick cursory search suggests that a 40’ container, nearly the size of a typical tractor-trailer, would only cost around $3000-$5000 to ship from China to the U.S. This container would hold – Just off the top of my head – Maybe about 6 months’ worth of our imports. But obviously you can’t pack fish in such a way that they can survive a 30-day trip; So all the inter-continental trade in our industry is done by air, where it is perhaps 50 times the cost. That sounds like a bad thing, but in this case, it’s not, because that much higher freight cost is already built into our pricing structure.
It is only the price actually charged by the foreign vendor that is subject to the tariff, sometimes called the “FOB Price,” that is subject to the tariff. In the case of the carton of smartphones, this could represent 95% of the overall “Landed” cost. The cost of that smartphone would increase dramatically, as nearly all of the “Landed” cost is subject to the tariff. But in our case, the freight is much higher per dollar of product, meaning the increase will be much less proportionally. At a quick glance at our most recent purchase order and quick formula, the proportion of FOB-to-Landed cost ranges anywhere from 87% (Titanium Flowerhorn) to just 8% (Redtail Tinfoil Barb), with an average of just 35% across 44 items. So in simplest terms, if you take the average tariff of 24.6%, then apply it to the average FOB cost of 35%, you wind up with an average increase of only about 8.6%. This is much lower cross-board than what will be suffered by other industries with higher FOB proportions, but this is just an average and not all products are made – or in this case, taxed – equally!
Which products will be most affected?
At Real Pets, tracking landed costs is nothing short of an obsession, and we firmly encourage our customers to do the same (If you did, a WHOLE lot less of you would be having your fish delivered by FedEx! ;). As such, luckily, it won’t take a lot of work on our end to add in the tariffs and recalculate prices, as much of the infrastructure to do so is already in place. The answer as to which items will see the highest increases depends upon 2 variables; 1.) The amount of the tariff itself, which ranges from 10% (Brazil and a host of others) to 54% (China); And 2.) The FOB-to-Landed Cost proportion of the fish.
Essentially, as a rule, the following apply:
- Domestic fish will be unaffected, except to the extent that the tariffs may impact the broader economy. This applies only to fish that are born, bred, and distributed within the U.S. Please note, many “Farm-style” mega shippers that raise fish also do a great deal of importing!
- Larger fish, and fish that ship individually (Peacock cichlids, for example), typically have a larger freight cost than smaller, gang packed fish. Their tariff impact will typically be lower.
- More expensive fish relative to their size will typically have a higher FOB cost, and therefore be more impacted by tariffs. The price of a 2” Discus will be impacted much more than a 2” Tinfoil Barb.
- Fish subject to higher tariffs will obviously have a higher tariff impact.
Unfortunately, that information doesn’t provide you with a tidy formula you can plug into your typical ordering patterns and determine the ultimate costs; Doing so would take pages of spreadsheets and formulas that would take days to work through. This is more or less what we’ll be doing here over the next week. With every new Purchase Order we generate, we’ll be evaluating the new landed costs against our current margins, and updating prices when necessary. As some of you are already aware from discussions we’ve had, generating orders and ultimately P.O.’s is already the most intense part of my week, so the next few weeks will be doubly so; Updating prices is actually a pretty intensive process here, whether updating up or down, and slows the workflow substantially. That will be my problem, but I’ll give you a quick example.
For the most part, as far as freight and customs charges are concerned, a betta, is a betta, is a betta. Same size, same proportion of the freight, same proportion of the box charge and therefore the broker’s markup, regardless of how much it “Cost” in Thailand (where maybe 90% of the world’s bettas originate). But their respective tariff impacts will vary wildly.
- A “Regular” / Assorted Female betta has a low FOB Cost; MOST of our cost for this item is in surcharges, which are not subject to tariff. Its overall cost would only be increased 7%, despite the 36% tariff being levied against that country. You would see a modest, almost unnoticeable increase on this product, or no increase at all.
- By way of comparison, a standard Male Koi Betta has a very high FOB cost; A VASTLY higher proportion of its overall cost is subject to the tariff. Its overall price would be increased by 32%. Products such as these would see noticeable price increases, or simply fall away from our availability completely, if we believe you will not pay the increase.
Now please don’t take that analysis to mean that more expensive fish will see the highest increases; That’s not automatically true. The example shown is among 2 products of identical size, with identical landing fees, and identical tariff rates, but with profoundly different FOB costs – That is, again, the actual price charged by the foreign seller.
Even as I’m writing this I’m trying to keep up with the news, and the truth is we don’t really know what’s going to happen, but strap in, it’s going to be a bumpy ride!
In my opinion as we ride this out; If the tariffs remain as they’re currently enacted, we will see more a restructuring of the industry than a price hike overall. Deals will be cut, suppliers will be switched, some items will fall off the earth only the return later when another country picks up the slack – Things like that. I take some comfort in the belief that our firm is better equipped to handle this than some of our competitors, and in the fact that our industry – The live sector of it where we reside, anyway – Will be affected less than many other industries. For your dry goods (gritting my teeth)… Let’s just say good luck and I’m praying for you.
The time is now 3:17PM and in a moment I’ll post this to a page, link it to the eblast and leave to enjoy my weekend, and I encourage you guys to do the same! (Well, the enjoying your weekend part at least). At this time the Dow is down nearly 2000 after yesterday’s nearly 1500 drop, so there is going to be tremendous political pressure to back off or moderate these tariffs… It’s possible even by Monday that we’ll be looking at a different scenario. But there’s nothing we can do about it but roll with it and do the best we can, as I know we all already do. Updates as I get em – Have a fabulous weekend! ~Kevin