US Tariff Changes: What UK Businesses Need to Know

The new US Administration has introduced a series of new tariff changes that could have serious financial and operational consequences. A series of Executive Orders have been signed by President Donald Trump placing additional tariffs on not only several products but also on specific countries. In December, we speculated on the potential changes that might be introduced and provided advice on how you can prepare for changes to US tariffs. The changes now implemented mean an additional 10% blanket tariff on imports from China and a 25% tariff on all imports of steel and aluminium regardless of the source country.

The US remains the UK’s second largest export market with UK goods exports to the US reaching £192 bn in the four quarters leading to Q1 2024. Whilst the UK has largely avoided these punitive measures, businesses should prepare themselves for the worst-case scenarios.

In this article, we’ll explore what these changes could mean for UK businesses by outlining what changes have happened and steps that you can take to mitigate the impact.

US Tariff Changes: What’s new?

Many UK exporters have historically relied on the s321 exemption also known as the $800 de minimis limit which allowed goods to be imported into the US free of taxes.

Are changes coming to the $800 de minimis limit?

Initially, the original executive order signed by Donald Trump stated that the limit would be abolished for Chinese goods subject to additional Section 301 tariffs (otherwise known as Trump Tax tariffs). He has, however, paused this measure. We understand this is to allow the US Postal Service to put in place processes to collect the additional duties due. Once the systems are in place, we’ll likely see the abolition re-instated.

Are Section 301 tariffs still in place?

In President Trump’s first tenure, several Section 301 tariffs were coined Trump Taxes. These imposed tariffs of up to 25% on a range of products imported from China.

These tariffs remain in place and from the 1st Jan 2024 they have been imposed on a further range of products including medical items, and high-technology components. It’s currently unclear if the list of affected goods will be increased further over the coming months.

What about the Duty Drawback?

One of the main selling points of the e-commerce environment is the ability to order several items to try with unsuitable items being returned.  Currently, where goods imported into the US are subsequently re-exported, it is possible to claim for duty drawback to recover the duty previously paid, including the original Section 301 Tariffs.  However, under the February Executive Order, the ability to make a duty drawback claim for the additional 10% Section 301 Tariff was also removed.  This means that, even if the goods do not remain in the US, the additional 10% duty at import will be due.

This has significant implications for e-commerce providers who have a large volume of returns from customers.

Are changes coming to UK exports next?

The question for UK exporters is whether the proposed removal of the $800 de minimis will be extended to goods imported into the US which originate outside of China.  Although these have also been deferred, the executive order that imposed additional Section 301 Tariff for Canada and Mexico also included the removal of the Section 321 exemption.

Furthermore, in September 2024, the Biden-Harris Administration proposed a similar sanction with the US Customs and Border Protection (CBP) issuing a Notice of Proposed Rulemaking (NPR) on 21 January 2025 proposing that merchandise subject to specified trade or national security actions be ineligible for the Section 321 exemption.

This indicates that imports from other jurisdictions may also be at risk in the future.

What might changes to UK exports look like?

If the Section 321 exemption is removed, UK e-commerce businesses selling in the US will face:

• Higher costs for US consumers – A garment that currently sells for $500 could cost an extra $80 in duties, making UK brands less competitive.
• Increased customs clearance delays – Every package will require customs processing, potentially leading to shipping delays.
• Complications with returns – Businesses relying on easy returns may face additional costs, as duties paid on returned goods will no longer be reclaimable.

This could lead to reduced sales, increased prices, and potential loss of market share as customers turn to local alternatives.

Should Businesses Still Source from China?

China has long been the go-to option for affordable, mass-produced goods, but with tariffs of up to 35%, UK businesses selling to the US must rethink their supply chain strategy.

• Key considerations:

1. Cost vs. tariff impact – While Chinese goods may be cheaper to manufacture, the added tariffs can erase cost savings.
2. Alternative sourcing – Exploring suppliers in regions like Vietnam, India, or Europe could help businesses reduce exposure to US tariffs.
3. Supply chain flexibility – Diversifying suppliers could protect businesses from sudden trade policy changes.

For companies heavily reliant on Chinese goods, now is the time to evaluate alternative sourcing strategies before higher tariffs take full effect.

What is the Impact on UK e-commerce businesses?

This would have a significant impact on UK e-commerce businesses selling goods into the US as customs duty will need to be paid at the US frontier on all imports, regardless of value.  This would not only mean an increased tax burden on the US consumer but could mean that delivery times are severely disrupted whilst goods clear customs.

Furthermore, importers into the US would need to consider whether the additional tax burden and the requirement to pay duties either on the doorstep or at the local post office, would put customers off altogether.

Businesses will also have to factor in the potential additional duty cost arising from returns, particularly where this is a major part of the business model.

The $800 allowance has helped to fuel significant growth in many UK e-commerce platforms that sell low-cost goods to US consumers.  In particular, many clothing retailers have benefitted where there continues to be strong demand for UK fashion with the average duty on apparel imported into the US being circa 16%.

If the Section 321 exemption was removed, a garment currently retailing for $500 would potentially cost the US consumer on average $80 more.  If the garment is of Chinese origin, the price to US consumers could be over £150 more.

How Can AAB help?

It’s always better to be proactive, rather than reactive and that’s why we are encouraging any UK businesses who regularly export goods to the US, particularly those with a high volume of Chinese-sourced goods, should plan for every eventuality to ensure they are not hit with unexpected tax increases, or worse, the loss of business in a key market.

While the increased tariffs would be unavoidable our team of experts is equipped to support businesses with a range of bespoke solutions that can assist UK retailers to lower their overall duty spend into the US.

If you have any queries about the changes coming to US tariffs or want to find out more about how our team can support your business going forward, please do not hesitate to get in contact with Alistair Duncan, or your usual AAB contact.