Many UK-based independent sellers on marketplaces such as eBay and Amazon could suffer a significant hit to US sales from planned changes to import rules under Donald Trump, with experts comparing the impact to a second Brexit.
The new rules, which mean all parcels originating or made in China and being sold into the US must pay import duty – of as much as 15% on fashion items – and an additional 10% tariff, are also expected to impact bigger online clothing retailers such as Asos and Boohoo.
The changes were introduced at the start of February in an attempt to protect US retailers from a surge in competition from the likes of Chinese online marketplaces Shein and Temu, but were indefinitely paused after the US customs service struggled to cope with the massive increase in parcels requiring checks last week.
However, they are expected to be implemented within the coming months, potentially driving up prices for US consumers and hitting sales for online retailers.
Before the change, parcels with a value of less than $800 (£635) shipped to individuals in the US were exempt from import tax and did not pass through the usual customs checks. That scheme, originally designed to help smooth online shopping, is being revoked after it emerged that the number of shipments under the “de minimis” rules had ballooned to more than 1bn, valued at $54.5bn by 2023 – most of them from China or Hong Kong via firms including Shein and Temu.
“You are looking at an increase of $30 to $50 per consignment [group of parcels],” said Brad Ashton at the advisory firm RSM. “It is creating a perfect storm for online retailers putting goods into the US market. It has a lot of the hallmarks of Brexit in terms of its potential impact on small traders.
“Businesses will see their margins eroded because costs will increase. We may get to a point where the changes make a UK business uncompetitive in selling to the US.”
The widespread use of Chinese factories for many British brands, particularly in fashion, means businesses such as Asos and Boohoo will be drawn in, as well as many UK independent marketplace sellers.
It will not just affect goods made in China and then sent from the UK, but potentially a much wider array, as any package containing even one product made in China may have to pay import tax and pass through customs checks, further increasing costs, according to experts.
There is also an expectation that the de minimis rules will eventually be scrapped for all imports, no matter their origin.
About $5bn worth of parcels were exported to the US from the UK under de minimis rules in 2021, according to a Congressional Research Service analysis of data from US Customs and Border Protection. About 80% of that was estimated to be related to online retail, with fashion likely to be a large proportion of it.
Chris White, at the logistics company Fulfilmentcrowd, said that during the brief period when the rules were in place in early February, one-third of the parcels it shipped to the US from the UK were found to be of Chinese origin and subject to the new taxes.
Fast-fashion specialists Asos and Boohoo sell about £300m of clothing a year to the US. Both are already struggling to compete with the rise of Shein and high street retailers, which have revived after the Covid pandemic. John Stevenson, a retail analyst at Peel Hunt, said Asos and Boohoo would have to “adjust prices or take a view on [the] profitability of operating in the US”.
As well as the higher tax charges, customs checks required after the rule change will add as much as two days to the processing of orders, making UK retailers less competitive with US-based operators on the speed of delivery.
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Stevenson said the hit to Asos and Boohoo was “not business-critical” in the way it could be for Shein or Temu, which he believed were heavily reliant on the tax benefit, but that it would have an impact.
In the short term, online sellers will probably have lower sales because of uncertainty among US shoppers over possible taxes. White said that during the period when the new rules were in place, similar parcels were loaded with different levels of duty as local customs officers made different decisions.
He said a further element of the rule change might be to expose brands that were “trading on an image of being British or European” as being “made in China and not Savile Row”, potentially damaging their appeal.
There would be “lots of crossed fingers and puzzled faces” over the changes in legislation, with retailers potentially opening more US warehousing or, longer term, to switch sources of supply, White added.
Boohoo closed its US warehouse earlier this year, and Asos is scheduled to close its facility there in November. However, a reversal could be on the cards if the de minimis rules are confirmed. Many fast-fashion companies have already diversified their supply chains – making more in India, Bangladesh or Turkey. Trump’s tax changes could accelerate this further.
Shein is reportedly incentivising Chinese suppliers to set up in Vietnam, according to a report by Bloomberg.
It is not clear when the new rules might be implemented as the US tries to put the technology and workforce in place to handle the new system. Experts say it could take weeks or months.
While there is a chance that Trump will change his mind, as he has done on tariffs with Canada and Mexico, no business can bet on which way the US might jump.
