Navigating US Tariffs: Insights From the Accountants for Retail Sector Companies

The rapid introduction, withdrawal, and changes to US import tariffs have, of course, meant that thousands of UK businesses, particularly those in the retail industry with core customer bases in America, have been juggling an ever-changing picture over the last few months.

Following a Supreme Court ruling that found some tariffs illegal, there is also the potential for firms that have already paid steep import tariffs to claim a refund, although this applies specifically to emergency tariffs.

In the meantime, and with the caveat that the position may be subject to further upheaval, the previous US de minimis threshold, which exempted global imports worth $800 or less, has been removed, making strategic financial planning vital.

The Background and Impact of the Removal of the US De Minimis Threshold

Previous rules allowed overseas goods shipped to US customers to claim exemption from import tariffs provided the contents were valued at up to $800. While the duty-free status of gifts worth under $100 remains in place, the de minimis allowance has been removed entirely.

Initially, some international couriers, including Royal Mail and DHL, suspended shipping services to the US due to the complexities this created for their internal systems, but deliveries have since resumed.

However, this now means that, after a six-month transition where mail carriers could apply flat-rate duties of between $80 to $200, all parcels sent by post or private courier will be subject to full import rates, which include:

• A default 10% tariff on most UK goods
• 50% on most steel, aluminium and derivatives
• 25% on cars and other vehicles, plus 25% on component parts
• 50% on copper and derivatives
• 25% to 50% on wood and timber products

There are a few exclusions, but these apply primarily to minerals and pharmaceuticals that aren’t produced in the US and therefore must be imported from elsewhere.

For retail clients, getting to grips with changes in US trade dynamics, alongside reforms to UK tax laws, will ensure they prioritise financial stability and can continue to focus on business growth.

How UK Retailers Can Incorporate American Import Tariffs Into Their Budgeting

As with any major change to overheads and tax obligations, the best advice for companies dealing with an additional 10% cost is to consult a professional accountant with expertise in the retail sector.

While the right ways forward will depend on multiple variables, such as the proportion of revenue originating from US customers, the current health of a company’s cash flow management, and the profitability and tariffs applied to the products sold, accurate oversight is necessary to make informed decisions.

The first step is often to review budgets and forecasts to incorporate tariffs, ensuring they have been calculated correctly and that there is no potential for unanticipated charges, including handling fees and administrative costs that may be applied in addition.

Tailored advice is essential, ensuring that tariffs are reflected in pricing models and delivery charges, and that companies make clear decisions to minimise disruption, whether by absorbing tariffs, passing them on to customers, or aiming for a balance between the two.

Retail accountants can advise on all aspects, including updating forecasts and management accounts, reviewing liquidity to ensure businesses can continue to meet their tax deadlines, and advising on where retail accounting methods might need to change to facilitate new stock valuation or revenue recognition processes.

The key is proactivity and adaptation, creating structured plans to avoid or reduce financial pressure that would otherwise only increase over time.

Recommendations for British Retailers to Improve Efficiency

US tariffs might present an additional cost for UK retail businesses, but there may be ways to optimise your tax planning and achieve greater efficiencies, compliantly and strategically, reducing overall tax exposure or creating operational advantages.

Many British companies underclaim tax benefits, such as capital allowances on their investments in infrastructure and equipment. If those investments are made to support export functions, this may further reduce costs.

Consolidating orders or shipments, comparing retail vs wholesale distribution costs, and even considering the financial advantages of your trading structure could help streamline your logistics and simplify your financial processes. 

Reviewing other aspects, such as stock management, could also be worthwhile, as excess capital tied up in stocks or insufficient inventory that leaves you unable to meet demand can limit cash flow flexibility and lead to lost sales opportunities you may rely on to manage the additional costs of trading.

The Benefits of Specialised Accountancy Services for Retail Sector Companies in Uncertain Times

Although the removal of the de minimis threshold occurred some time ago, further changes to US trade policy are at least possible, if not likely. We recognise that many UK retailers are still trying to catch up, or waiting to see how recent geopolitical volatility will affect their trade.

Those who take a more proactive stance may uncover new opportunities that could limit the impact of US tariffs or make them less of a concern. Some of the many strategic changes we’ve supported clients with include:

• Expanding or entering into international markets with more favourable trade terms or jurisdictions with lower competition
• Developing existing customer bases in the EU and UK, or introducing new products that meet demand within European consumer demographics
• Adjusting product material compositions or baseline materials to avoid exposure to the higher-rate categories
• Looking at partnerships with distributors or warehousing services in the US that can provide economies of scale and direct-to-consumer shipping.

Assuming that the US market is the only major base for your business, or waiting to see how the situation progresses, is inadvisable. With professional support from the retail accountancy experts, you’ll be able to review the financial and commercial outcomes of any decisions you make.

Rising utility costs and disruptions to global supply chains are undoubtedly going to have additional ramifications, but by identifying inefficiencies, maintaining consistent oversight through management accounts and cash flow forecasts, and responding quickly to changes in tax regulations, businesses can stay a step ahead.

If you’d like more information about current US tariffs and how these are affecting your business, or would like to sit down with one of our experienced retail accountants to discuss your position, you are welcome to get in touch with the James Todd & Co team at any time.