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New State of Play: Tariffs, Meta’s Algorithm Shift, and the Fight for Survival

Trade wars, shifting ad strategies, and an industry-wide reckoning—here’s how DTC brands are adapting in 2025.

Author

The DTC Times
March 16th, 2025

We regret to inform you that things are not getting easier. Margins are getting squeezed from every angle. Moreso.

Meta’s ad game continues to shift—if you’re not building brand awareness outside the platform, you’re losing. Oh, and A tariff war is making international sales costlier than ever.
taken altogether, DTC is facing its most challenging era yet, with rising costs, declining ad efficiency, and a market correction that’s reshaping eCommerce as we know it.

This week, we’re diving into:

Counter-Tariffs & DTC Exports: Why selling internationally just got way harder (and how brands are pivoting).
Meta’s Awareness Play: Why the brands winning on Facebook & Instagram are investing in TikTok, PR, and multi-channel strategies.
The DTC Reckoning: A breakdown of why DTC brands are struggling—and what the survivors are doing differently.
Quick Hits: A breakdown of the Poppi acquisition by Pepsi and how you can turn your irl magazine ads into compelling digital creative.

Let’s get into it. 👇

Counter-Tariffs: The Hidden Challenge for DTC Exporters

Apologies, but we need to talk about tariffs again. Dates and implications continue to shift under the Trump administration, so keeping on top of everything has proven…complicated.

Adding to the difficulties are the raft of counter-tariffs now being levied at the US. If you’re a brand that relies heavily on imported materials or products - our sincerest condolences.

Sigh. Let’s get into it.

The US Tariff Landscape – Quick Rundown

In the first months of 2025, the Trump administration has rapidly implemented new tariffs affecting DTC supply chains: an additional 20% duty on Chinese imports (on top of existing Section 301 tariffs), 25% tariffs on non-USMCA compliant goods from Canada and Mexico, and the suspension of the de minimis exemption for Chinese goods, eliminating the duty-free status of shipments under $800.

These changes are already forcing brands to reevaluate their sourcing and fulfillment strategies.

The counter-tariffs hitting US exporters.

As other countries respond to US tariff policies, DTC brands selling internationally are facing a wave of retaliatory measures that threaten to close off crucial growth markets…

🇨🇦 Canada's Immediate Response

Canada wasted no time implementing 25% counter-tariffs on $30 billion worth of US goods, effective since March 4th. The targeted products read like a who's who of DTC categories:

  • Beauty and cosmetics products

  • Apparel and footwear

  • Specialty foods (including coffee, peanut butter, orange juice)

  • Alcoholic beverages (wine, spirits, craft beer)

For US DTC brands with Canadian customers, this represents an immediate 25% price increase in a market that accounts for approximately 18% of US e-commerce exports.

🇲🇽 Mexico's April Deadline

Starting April 1st, Mexico will implement tariffs on $20 billion of US exports, focusing on:

  • Food products (pork, poultry, dairy, fruits)

  • Luxury goods and accessories

This timing gives DTC brands just two weeks to adjust pricing or absorb costs for one of the fastest-growing international markets for US direct sellers.

🌍 EU's 3 Phase Approach

The European Commission has announced counter-tariffs on $28 billion of US goods, to be fully implemented by April 13th. The EU is strategically targeting:

  • Craft spirits (particularly bourbon and whiskey)

  • Organic and specialty food products

  • High-end electronics and accessories

With the EU representing over 20% of international sales for many DTC brands, these tariffs threaten to erode margins in what has been a reliable growth market.

🇨🇳 China's Expected Retaliation

Though specific details are still emerging, China is expected to impose 25-50% tariffs on US exports beginning April 1st. Analysts project these will target:

  • Beauty and personal care products

  • Premium food and beverages

  • Luxury accessories

For the growing number of US DTC brands that have expanded into the Chinese market, particularly through cross-border e-commerce platforms, these tariffs could effectively close off access to the world's largest consumer market.

Strategic Responses for DTC Exporters

There’s no easy answer to this rapidly shifting landscape. Here are some ways to possibly combat the tariff war:

  1. Establishing EU and Canadian fulfillment centers to avoid cross-border duties

  2. Partnering with local manufacturers in target markets for "made in country" status

  3. Revising pricing strategies to maintain competitiveness while protecting margins

  4. Accelerating expansion in unaffected markets to offset expected revenue drops

Takeaway: For many brands, there is no quick, simple, or easy way to shift their supply chain in response to this emerging challenge. “Just manufacture in the US” is much easier said than done for a wide array of products.

For an industry facing margin pressure already, a protracted tariff war could do massive damage.

Want to scale on Meta? The new Awareness play

We’ve been tracking this trend for months, but it bears repeating: Scale on Meta now requires extensive work to grow brand awareness and interest outside of the platform.

Shorter version: Meta advertising simply doesn't work well in isolation anymore.

As David Herrmann notes above, "If you're not posting daily on organic, don't have any PR, and your brand isn't visible elsewhere, your Meta numbers will inevitably suffer."

This observation has been echoed across the industry, with data showing that brands relying solely on Meta for both discovery and conversion are seeing declining new visitor percentages and rising ad frequency—a recipe for deteriorating ROAS.

The core issue lies in Meta's algorithm evolution. According to Nate Lorenzen's technical breakdown, Meta has shifted to a sequence model that incorporates organic signals when determining ad delivery.

This means the platform now favors brands that users have encountered organically before showing them paid content.

The evidence is compelling: Olivia Kory's analysis shows that brands with strong multi-channel presence (particularly on TikTok and YouTube) consistently outperform those with Meta-only strategies.

This shift creates a strategic imperative for DTC brands:

  1. Diversify discovery channels: Use TikTok, YouTube, and organic social to build initial awareness before asking Meta to convert.

  2. Allocate budget deliberately: Top performers now dedicate 10-20% of marketing spend to testing emerging platforms rather than maximizing Meta spend.

  3. Integrate organic and paid: Brands seeing success are treating organic social as a crucial component of their paid strategy, not a separate function.

Ashvin Melwani summarizes it well: "The brands winning in 2025 are using TikTok and YouTube for awareness, then retargeting on Meta for conversions—creating a virtuous cycle where each platform does what it does best."

Takeaway: For a long time, the formula for many brands was simple: lean into Meta as much and for as long as possible. But now you need to up your holisitic marketing and branding game in order to profitably leverage Facebook and Instagram.

The Perfect Storm: Why DTC Is Facing Its Most Challenging Era Yet

Sean Frank's recent viral thread on the state of DTC in 2025 perfectly captures the convergence of challenges the industry now faces. As he puts it: "If you're winning right now - I am happy for you... But for everyone else - This isn't your fault."

What we're witnessing isn't just a market correction or temporary headwind. It's the culmination of a five-year perfect storm that's fundamentally reshaping the eCom landscape:

The Supply Chain Saga

Frank lays out how the typical DTC playbook has operated for the past decade: "Bob makes widgets in China... Bob takes loans from banks, sends the money to China, gets widgets, puts those widgets on shelves, puts it on his site, and then runs ads to generate widget awareness."

This model worked because it was effectively subsidized by China's manufacturing advantages and low-interest loans to factories. But as he notes, "Over the past 5 years, cracks keep showing up in Bob's business model."

It started with COVID disruptions in 2020. While logistics eventually stabilized, the aftershocks continue today, now compounded by the tariff war detailed in our first section.

With 20% additional duties on Chinese imports and de minimis exemptions suspended, the cost advantages that made DTC profitable have largely evaporated.

The Customer Acquisition Conundrum

"First, brands couldn't get products. Then, they couldn't get customers."

Just as supply chains stabilized, the ad ecosystem fractured. "2021. Then, the basic ads engines broke. iOS 14 killed thousands of brands," Frank writes.

This ties directly to our second section on Meta's shifting landscape. As we've seen, the brands still succeeding on Meta are those building awareness elsewhere first—making your marketing efforts more fractured and less trackable.

The Capital Crunch

"2022. Next, financing dried up. The DTC IPOs fall 70, 80, 90%. Who wants to invest in a category with no path to exit? What you get is a credit crunch."

This capital drought means brands can't easily fund the inventory or marketing experiments needed to navigate the changing landscape.

When combined with 2023's inflation wave and now 2025's tariff wars, we're seeing what Frank describes as a fundamental ecosystem challenge—not just a business model problem.

Where Do We Go From Here?

Despite this bleak portrait, opportunities still exist for resilient operators:

  1. Diversification is survival: Brands relying solely on Chinese manufacturing, Meta ads, or North American markets are most vulnerable. The winners are building redundancies across their entire business.

  2. Capital efficiency trumps growth: The days of venture-funded blitzscaling are over. Sustainable unit economics and controlled expansion are the new playbook.

  3. Brand value matters more than ever: In a high-CAC environment, customer retention and organic discovery become disproportionately valuable—making brand building an efficiency play, not just a vanity project.

Takeaway: As Sean concludes, this isn't about individual brands making mistakes—it's an ecosystem shift requiring a fundamentally different approach to DTC.

The brands that survive will be those that adapt to this new reality rather than hoping for a return to the golden era of cheap manufacturing, efficient ads, and abundant capital.

Quick Hits:

Resources & Further Reading

Tariffs & International Trade

Meta & Marketing Strategy

DTC Industry Analysis

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