The United States has ended tariff exemptions on small packages entering the country from abroad, sparking concern among small businesses and warnings of consumer price hikes.
President Donald Trump’s administration cited the use of low-value shipments to evade tariffs and smuggle drugs in ending duty-free treatment for parcels valued at or under $800.
According to Trump’s trade adviser, Peter Navarro, closing this “loophole” helps restrict the flow of “narcotics and other dangerous and prohibited items” while bringing fresh tariff revenues.
However, the month-long lead time provided by Trump’s order has sparked a frenzy, with postal services in several countries, including France, Germany, Italy, India, Australia, and Japan, suspending their services to the US.
The impending change has brought confusion and concern to small businesses, with many struggling to adapt to the new tariffs.
UK retailer Liz Nieburg, owner of SocksFox, an online business selling socks, undergarments, and sleepwear, has stopped shipping products to US customers while the Royal Mail works out a system to honor the changes.
US buyers form about 20% of her sales, and she sees little choice but to hike prices if new duties are here to stay. “Our margins are too tight to be able to absorb that,” she said.
Similarly, Ken Huening, whose California-based business CoverSeal manufactures outdoor protective covers in China and Mexico, has had to eliminate free shipping for customers.
“Textile and manufacturing is not available in the US currently,” Huening said. “It might be in the future, but by that time, we’re all out of business.”
Cornell University professor Li Chen warned that it takes time for postal services to establish systems for duty collection. “It’s not like there’s a switch you can turn on and turn off,” he said. “On the consumer side, there will be potential delays, because now all the parcels have to clear customs,” Chen added. Prices may also rise if businesses pass on the tariffs.
Haley Massicotte, owner of Canada-based cleaning products company Oak & Willow, said it’s a super confusing time for her customers.
“We are going to do everything in our power to not raise prices,” she stressed. Similarly, ceramics retailer Sarah Louise Jour in Bangkok is trying to keep shipping costs down after facing issues with Thailand’s postal service. “I don’t have time to worry, because I have to think about my team,” she said. “I have rent I need to pay for the office.”
The US decision to end tariff exemptions on small packages has sparked widespread concern among small businesses and consumers.
While the Trump administration argues that this move will help restrict the flow of narcotics and other prohibited items, small businesses are worried about the potential impact on their operations and prices.
As Massicotte said, “This tariff war is just going to hurt the American and the Canadian consumer, especially small business owners.”
Online retailers are adapting to the new tariff policy by changing their business strategies. Some companies, like Temu, have halted shipments from China to the US and are now promoting products stored in local US warehouses.
This shift aims to avoid additional import charges and maintain competitive pricing. Other retailers, such as Shein, have acknowledged potential price changes but emphasize that most items remain affordable.
Small and medium-sized businesses are particularly vulnerable to the new tariffs. Many rely heavily on Chinese manufacturing and may struggle to absorb the increased costs. According to Cindy Allen, CEO of Trade Force Multiplier, some businesses may choose to exit the US market altogether due to the dramatic rise in import costs and administrative burdens.
While the new tariffs may harm online retailers, local businesses could benefit from the shift. British fast-fashion retailer Primark, which sells clothes in the US only through its physical stores, may gain an advantage over online competitors.
Similarly, George Weston, CEO of Primark’s parent company, Associated British Foods, suggests that Americans might return to shopping centers to find value, potentially boosting foot traffic and sales for local retailers.
The US decision to end tariff exemptions on small parcels may have far-reaching implications for global trade.
The policy change could lead to increased costs and complexity for international trade, potentially disrupting supply chains and affecting businesses worldwide. As the situation continues to evolve, it will be essential to monitor the impact on global trade and commerce.