Companies are quietly stripping features and swapping materials without telling consumers. The hidden costs of ‘tariff engineering’

You might not care whether the shirt you’re buying has a "nurse’s pocket" below the waist, but redesigning products is one way companies are getting around tariffs that are costing them — and their customers — more money.

As U.S. President Donald Trump’s ‘reciprocal’ tariffs take effect, companies are increasingly employing ‘tariff engineering,’ in which they redesign or reclassify commodities so they fall into lower-duty categories.

It’s part of a broader range of tactics, such as stripping features from products, swapping out materials that are heavily tariffed or selling formerly included components separately. Some companies are also shrinking the size of products without decreasing the price — a strategy referred to as shrinkflation.

Tactics used by companies to avoid these steep fees could, in some cases, quietly transfer hidden costs to Canadian households — like a tool sold without its battery, furniture arriving with more assembly required or household goods built with cheaper substitutes that raise long-term ownership costs. Here’s what consumers should know.

What is tariff engineering?

Tariff engineering involves “changing an item’s materials, altering its dimensions or compositions so that the finished products can be justified to fit in a different ‘harmonized system code,’” according to experts interviewed by CNBC (1).

In other words, by making certain design or manufacturing tweaks, a company’s product could qualify for a lower import duty classification. That might mean switching from aluminum to fiberglass (to avoid tariffs on aluminum) or assembling electronics in free trade zones.

Tariff engineering isn’t new — it long precedes Trump’s tariffs — but the practice has ramped up since Trump unveiled sweeping reciprocal tariffs in April. And it’s entirely legal.

There is “nothing inherently illegal or even untoward about leveraging strategic design choices that result in creating different products that are subject to different tariff classification and duty rates,” John Foote, a customs lawyer at Kelley Drye & Warren in Washington D.C., told CNBC. “Tariff engineering is one of the few things you can do to try to get it right and reduce your duty liability.”

For example, to lower its duty rate, Converse added felt to the bottom of its sneakers so they’re classified as slippers instead of shoes. And Columbia Sportswear added small zippered "nurse’s pockets" to some of its shirts, saving money on duties.

Some companies are open about it. Columbia Sportswear has a whole "team of people that work together with designers and developers and merchandisers and with customs” to ensure they’re considering the impact of tariffs during the design process, Jeff Tooze, the company’s VP of global customs and trade, told Marketplace during Trump’s first term (2).

But in many other cases, this is happening quietly — no labels, no warnings, no disclosure. While not every material swap is harmful, consumers may want to increase their vigilance around purchases and perhaps even alter their buying behaviour.

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How to protect your wallet

Tariff engineering won’t affect all purchases (like how Marvel reclassified its action figures as toys instead of dolls to lower its tax rate back in 2003) (3).

But if companies swap out certain materials — like wood, leather or steel — for substitutes that aren’t as heavily tariffed, it could mean you’re not getting the quality or durability you were expecting from that product.

While shrinkflation isn’t the same thing as tariff engineering, the end game is similar: to help companies cope with increased costs caused by tariffs. With shrinkflation, the company keeps the price the same but reduces the product’s quantity or size.

Even in 2024 — before Trump’s tariffs took hold — LendingTree researchers found that about a third of 98 products they analyzed in the U.S. had shrunk in size or quantity, with paper products (such as toilet paper and paper towels) seeing the highest rate of change. Some products had not only shrunk in size, but also increased in price. Along with paper products, cereal, snacks and candy were some of the highest offenders (4).

So what can you do about it? Check labels for changes in net weight or quantity. In some cases, it may be obvious: a box of what used to be eight granola bars is now six. Or the paper towel brand you usually buy now has fewer sheets per roll. In other cases, there may be more subtle changes, like a slightly smaller package design.

While many consumers are loyal to certain brands, it may be time to comparison shop and switch brands if you’re getting a better deal elsewhere. Buying in bulk is also an option — another LendingTree study found that shoppers could save up to 27% on average when buying in bulk (5).

For items such as electronics, small appliances or furniture, look closely at what’s included. Does the product include batteries, power adapters or tools required for assembly? Or are those now "sold separately"?

Look at materials: Has the manufacturer swapped out heavily tariffed materials for substitutes that aren’t subject to the same high duties? If so, how could those substitutes impact the product’s quality or durability?

You might also want to check reviews or Reddit boards to see if other customers have noticed a drop in quality or other changes to a specific product.

While it won’t solve shrinkflation or tariff engineering, a rewards credit card could help you get some of that cash back and earn other rewards. You can also wait until items go on sale or stick with brands known for their transparency and consistency. Another option is to buy products made in Canada with Canadian raw materials.

Ultimately, the burden of vigilance now falls heavily on consumers, who may otherwise pay more for goods that deliver less.

Article sources

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CNBC (1); Marketplace (2); Apex (3); LendingTree (4, 5)