Brace for Impact: How New US Parcel Taxes are Strangling UK Small Businesses

UK small businesses are reeling from the announcement of new taxes on low-value parcels sent to the US, which is set to create uncertainty and potential price hikes. Previously, the de minimis exemption allowed parcels valued under $800 (£592) to enter the US tax-free, but this exemption has been abolished, starting a cascade of complications for UK firms. The Federation of Small Businesses (FSB) warns that this move will disproportionately affect small businesses, making it tougher to compete with larger brands.

Helen Hickman, owner of Nellie and Eve, a wool company, has ceased shipments to the US due to the unpredictability concerning shipping costs and potential tariffs, stating, “I knew it was going to be an absolute chaotic mess.” The new regime means even a typical $100 order could incur 30% to 50% in additional costs due to tariffs, fees from shipping providers, and taxes. Business owners like Julian Boaitey of Yendy Skin and Jay Begum of Knots of Pine echo similar sentiments, highlighting the fear of incurring high costs and the added challenge of handling logistics amidst this confusion.

The FSB’s Tina McKenzie emphasizes that over 20% of small firms are considering terminating their exports to the US altogether due to these tariff complications. Statistics indicate that 28,000 small UK businesses exported goods to the US in 2023, making this change particularly impactful. Owners like Sophie Arnold of The Little Vintage Emporium and others are facing dire prospects, with American customers reportedly more hesitant to buy due to these evolving tariff structures.

As escalating costs loom, the FSB is urging the UK government to raise the Trading Allowance from £1,000 to £3,000 to help businesses cope. They argue for clearer, more practical regulations to facilitate international trade. In light of these challenges, the UK Treasury has been approached for comments as the government looks to review its de minimis rules, which currently exempt low-value imports under £135 from customs duties. Experts recommend that changes to the de minimis rule could level the playing field for domestic and foreign businesses, particularly as e-commerce becomes more entrenched in daily life.