If your COGS changed on February 24th, your break-even ROAS changed with it.
The Supreme Court struck down all IEEPA tariffs on February 20th. Within hours, Trump reimposed tariffs under a different law (Section 122 of the Trade Act) at a flat 15% rate. For brands sourcing internationally, landed costs shifted - in some cases dramatically.
If you're running the same targets you were running last week, you're either leaving money on the table or scaling into losses, depending on where you source.
This is the 30-minute P&L audit every operator should run this week before making any spend decisions.
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…Getting creators authenticated.
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The case has been made:
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If you're running Meta and not scaling Partnership Ads because the authentication side is a grind, this is worth a look.
What Changed
The ruling happened on February 20th. New tariffs took effect on February 24th. Here's the breakdown:
Section 122 is a flat 15% on virtually all imports, regardless of country. No more country-specific rates (with limited exceptions for USMCA-qualifying goods and certain Section 232 products).
Section 301 tariffs on China (the pre-IEEPA ones covering $370B in goods at 7.5-25%) remain in effect and stack on top of the 15%. So China-sourced goods face Section 301 + Section 122 combined.
Section 122 tariffs expire in 150 days (July 24, 2026) unless Congress extends them. This is a window, not a permanent reset.
The de minimis exemption ($800 threshold) remains dead. No duty-free treatment for low-value shipments from any country.
What Happened to Your Landed Costs
The direction of the change depends entirely on where you source. Find your situation below:
If you source from countries that have high IEEPA reciprocal rates (Vietnam, India, Indonesia, Bangladesh - where a lot of DTC apparel, accessories, and home goods come from), your COGS just improved.
If you source primarily from China, the change is smaller and depends on your specific product's Section 301 classification.
How to Recalculate Your Break-Even ROAS
This is the framework. Walk through it for your top 10 SKUs (the ones getting ad spend).
Step 1: Recalculate Landed Cost
Pull your current COGS per unit. Identify the tariff rate that was applied under IEEPA (check your customs entries or ask your broker). Replace with the new Section 122 rate (15% flat, or 15% + Section 301 if China-sourced).
Recalculate landed cost = product cost + new tariff + shipping + duties + fulfillment.
Step 2: Recalculate Contribution Margin
Contribution Margin = (Selling Price - All Variable Costs) / Selling Price
Variable costs include: COGS (with new tariff), shipping, fulfillment, payment processing, returns.
Target benchmark: 30-40% contribution margin for healthy DTC (the metrics we covered a few weeks ago).
Step 3: Recalculate Break-Even ROAS
Break-Even ROAS = 1 / Contribution Margin %
Example: if contribution margin improved from 35% to 42% because tariffs dropped, break-even ROAS went from 2.86x to 2.38x.
That's a big shift. It means you can now profitably acquire customers at a lower ROAS threshold, which means you can scale more aggressively or maintain spend while generating more profit per order.
Step 4: Decide What to Do With the Headroom
If break-even ROAS dropped: you have room to either (a) scale spend into the gap while maintaining profitability, or (b) keep spend flat and pocket the margin improvement.
If break-even ROAS increased (China-heavy sourcing with Section 301 stacking): you may need to tighten targets or risk scaling into losses.
One caveat: Section 122 tariffs expire July 24. Any spend decisions should account for the 150-day window. Don't restructure your entire business around rates that expire in 5 months.
IEEPA Tariff Refunds
One more thing worth checking this week: Up to $175B in IEEPA tariffs were collected in 2025. The Supreme Court ruled those collections were unlawful.
Importers have 180 days from liquidation to file protests with CBP for refunds. If you imported goods under IEEPA tariffs last year, you may be owed significant cash back, and the clock is ticking.
This is informational, not legal advice.
Questions you should be asking your broker this week:
- Were any of our 2025 imports subject to IEEPA tariffs?
- What's the liquidation date for those entries?
- Are we within the 180-day protest window?
- What documentation do we need to file?
Why This Matters More Than Your Ad Account Right Now
87% of ecommerce merchants raised U.S. prices to offset IEEPA tariffs. 49% of DTC brands reported that tariffs significantly increased their landed product costs. 41% paused growth plans entirely.
The brands that recalculate first and adjust their ROAS targets to reflect new margins get to scale into the gap while competitors are still running last month's numbers.
The administration is simultaneously launching Section 301 investigations to rebuild tariff authority through different legal channels. Section 122 expires in 150 days. This relief is temporary.
The brands that treat it accordingly will make better decisions than those who assume it's permanent.
Final Thoughts
If your landed costs have changed, it’s time to recalculate.
The spreadsheet matters more than the ad account right now. Run the numbers above before you change anything in Ads Manager.
If your break-even ROAS dropped, you have room to scale. If it increases, tighten up. Either way, you're deciding with updated math.
And if you imported under IEEPA tariffs in 2025, talk to your broker about refunds this week. The protest window closes fast.
If you want a growth partner who is invested in helping you build a profitable business, someone who is going to push you to make changes that focus on profitable growth. Book a call - let’s chat.
P.S. - We don't do long contracts, so you're never locked in. We earn our place with you every single month. Can your current agency say that?
