Here are some current (November 2024) tariffs for typical goods exported from the UK to the US (these are the 'normal trade relations' rates which apply to countries which do not have a preferential trade agreement with the US or are not under trade sanctions):
Scotch whiskey - free
Blankets (wool) - free
Blankets (cotton) - 8.4%
Chocolate - 5%
Biscuits - free
Paintings/artwork - free
Aircraft parts - free
Motor cars - 2.5%
Jewellery - 5-11%
Plastics - 0-6.5%
Tea/dish towels - 9.1%
As you can see, some goods incur sub-10% tariffs, while others are tariff-free. The impact of a universal 10% or 20% 'Trump tariff' on goods coming into the US, as was talked about during the US election of 2024, would therefore depend on the exporting industry and the current rates they pay.
My main ecommerce brand's flagship product is UK-made tea towels. As 'dish towels' are already subject to a 9.1% tariff on arrival in the US, a 10% universal tariff doesn't particularly bother me (though 20% is a different matter!). A Scottish whiskey brand would doubtless feel differently.
However - for small brands making small exports, or for brands relying on shipping direct to consumer from the UK to the US, there's the matter of the $800 'de minimis' threshold to consider. Right now, goods valued at less than $800 can be imported to the US tariff-free. This means I can ship a £14 tea towel to a US customer, directly from the UK, without it being stopped and charged anything at the border.
If that de minimis threshold is suddenly eliminated and replaced with a universal tariff applying to all goods, brands exporting to the US would face an immediate cost increase regardless of the current tariff levels for their goods. Not to mention increased administration and shipping delays if all packages have to be processed and stopped at the border. There could be huge delays while US Customs and Border Protection adapts to any changes.
But that's not the whole story, by far! New tariffs like this would doubtless change behaviour.
For one, the elimination of the de minimis threshold, and higher tariffs in general, increase the incentive for brands to set up as entities in the US, and export directly to themselves, before selling to the final consumer only after the goods are already in the US. This would allow them to declare the goods at the manufactured value on entering the US, rather than the retail value, as the goods would not yet have been sold to the end consumer.
This 'pre-importing' is what my brand already does. We bulk-export our goods to a warehouse 3PL partner in the US (essentially an intercompany transfer), with the goods declared at the manufactured value, and paying a 9.1% tariff on import on that (or nothing, for the occasional much smaller shipment below the de minimis threshold).
We can then offer our US customers fast and cheap shipping times, by encouraging them to order from our dedicated US website. The goods sent from that website are already in the US, so no tariffs apply to the end consumer, who has bought at retail prices.
Proper documentation to substantiate prices and values (such as manufacturer invoices) should of course be maintained, in case US CBP want to take a closer look at any intercompany transfer.
UK ecommerce companies who are currently shipping packages of less than $800 in value directly to consumers in the US may decide, in light of new universal tariffs, that shipping in bulk to a 3PL and paying tariffs on the lower manufactured value starts to make a lot more sense to them, especially when combined with the customer service benefits to the US customer.
The savings on bulk shipping, compared to multiple smaller shipment at below the de minimis level, might even cover the tariff costs - we find they do in our case (though that's at a 9.1% tariff). This doesn't factor in the costs of working with a 3PL, where you'd have storage and pick/pack costs, though these should be offset against whatever you'd have been paying back in the UK anyway.
Brands would also have to factor in the administration involved with a new 3PL partnership and any regulatory and tax implications, such as registering in a particular state and paying Sales Tax where there is a 'physical presence'. We discuss some of these considerations in our article on foreign ecommerce brands setting up a company in the US.
Possibly a good time to be a US 3PL then? Of course all of this has to be balanced against the wider impact of tariffs on the US economy, which could be inflationary and reduce overall trade. My point is simply that there may be winners as well as losers.
There is a question of where the economic burden of these tariffs would actually fall. If the cost is passed on to the end consumer, they would pay in the form of higher prices. If the cost is absorbed by the importing company, then obviously they would expect reduced profits. Or where the importer is a separate entity to the UK exporter, the exporter may be forced to reduce their costs and take the profit hit themselves.
A study on the tariffs imposed in the first Trump term suggested the economic burden fell on the consumer in the form of higher retail prices. But if consumers decide they can't bear this and reduce their spending accordingly, that may force retailers to compromise and limit price increases.
There's also the matter of separate tariffs on goods coming from China specifically, and how that could impact the overall economic picture. Tariff levels of 60% have been mentioned. UK ecommerce brands who's goods are manufactured in China may find themselves in hot water, assuming the tariffs can't be avoided by goods coming via the UK.
But for brands who's goods are manufactured in the UK, this could be a great benefit in two ways. Firstly and obviously because if tariffs hamper Chinese competition, UK brands will be able to better compete. Not just with Chinese brands, but even with US brands who are currently manufacturing in China.
Secondly because if Chinese brands are forced to reduce their US sales, or give up completely, there's likely to be a knock-on impact on the prices of digital advertising. In recent years, Chinese companies like Temu have spent many millions of dollars (at a loss!) buying up adspace on platforms like Facebook and Instagram, which has driven up the cost for smaller brands reliant on such paid social advertising. These Chinese companies have benefited greatly from the $800 de minimis threshold, so any change there would doubtless impact their strategy.
I think this latter point about higher Chinese tariffs could potentially greatly benefit certain ecommerce brands based in the US's non-Chinese trading partners, even in the context of a universal tariff. Just so long as they're not reliant on Chinese manufacture, which of course many are.
We'll just have to wait and see about the details, as tariffs could still face some hurdles in making their way through the US political system.
There's also talk of the UK being granted some kind of carve-out from the universal tariff. Especially given that US-UK trade is relatively balanced. Who knows, the US-UK trade deal could even be back on the table.
As with any regulatory decision, I advise doing further research or consulting an expert directly to ensure adherence to all applicable regulations at the time of taking action.
© Edwin Capital Ltd
