By Dani Mechlowitz, CRO at ITD Global Group
Whilst the new trade tariffs introduced by President Donald Trump’s continue to evolve, their impact is already being felt by ecommerce businesses worldwide who are trying to understand and adapt (at speed), to the latest changes in regulation.
As an international logistics and ecommerce management and delivery specialist, providing end to end logistics and fulfilment solutions for eCommerce brands and retailers, we have been working with our clients to understand the immediate implications for those businesses selling to the US, and support any alternative strategies they are pursuing to mitigate the effects on their profit margins.
eCommerce brands selling to the US are currently subject to huge tariffs
Essentially, if you manufacture your goods in the UK then, as of today, nothing has really changed. However, eCommerce brands that import goods into the UK first, for example for value added services, before sending them to the US, will be taxed according to where the goods were originally manufactured. This is currently a massive 145% border tax which does not apply to products valued under $800 to a customer in the US as they will typically not be subject to import duties or taxes. However, from 2nd May the US de minimis exemption will no longer apply to products from China and Hong Kong, and all imported goods that would historically qualify for the exemption, will also be hit with the new 145% border taxes.
As a result, some of our eCommerce brands who manufacture some, or all of their products in China or Hong Kong and ship a lot to the US, are rethinking their manufacturing strategy, and also the markets in which they are selling your products. Now is absolutely the time to consider new manufacturing locations and marketplaces where crippling taxes don’t apply. Although costs may be higher with a UK manufacturer, the huge savings on import tariffs may massively outweigh the increase in manufacturing costs.
Logistics experts can help eCommerce brands to mitigate the impact of new tariffs
At ITD Global our unique business model allows our customers to switch carrier providers almost instantly and without penalty, to accommodate any changes in their business such as new geographies. So, any eCommerce brands and retailers that are reconsidering their current business models can use our expertise and established relationships with carrier providers to change the location of their manufacturing sites or help them to deliver goods into Europe rather than the US.
We have partnerships with over 1000 carriers worldwide meaning that our clients benefit from our collective buying power, ensuring they’re not tied into an expensive distribution contract as and when business needs change.
There may be potential opportunities as a result of the tariffs
With any change comes opportunity, and although it is still uncertain how China will react in response to the new tariffs, there will likely be a surplus of unsold stock available from East Asia, previously sent to the US, presenting opportunities for UK businesses and consumers. There may also be excess capacity in factories that will drive down process and we may also see a reduction in freight costs for the same reason.
Conclusion
The only thing we can say with any certainty at the moment is that the next few weeks look pretty unstable as the trade war plays out. Staying informed about tariff updates will be crucial for businesses aiming to sustain competitive advantage and working in partnership with an agile and reliable logistics expert will undoubtedly help eCommerce brands to explore new markets and manufacturing strategies.
