UK retailers mull US subsidiaries amid tariff hikes

British retailers are struggling under the weight of possible impending US tariffs, with the likes of NEXT reportedly considering restructuring its US operations or halting exports altogether.

In the past week, Donald Trump has imposed an additional 10% tariff on Chinese-made goods, as well as scrapping and then reinstating "de minimis" rules, which allow goods worth $800 (£644) or less to be imported without being subject to import duty.

The decision to reverse the latter was made on Friday night after packages piled up at the US border. It soon became obvious that the US Postal Service would be unable to check and sort the roughly one billion parcels that enter the country each year. The measure would largely affect Chinese online retailers such as Shein and Temu, as well as many British ones.

To offset tariffs, The Times reports that NEXT is understood to be mulling a US corporate entity. Rather than shipping direct to consumers, retailers would ship orders to a US subsidiary, making them liable for tariffs solely on the cost price of the goods, rather than the selling price.

However, for smaller businesses, setting up a US entity comes with challenging administrative burdens.

Meanwhile, Superdry has stopped shipping Chinese-made products directly to American consumers to avoid the extra 10% tariff.

CEO Julian Dunkerton told The Times: "[Tarrifs] just make them unprofitable. We are also worried about shipments with products of mixed origins — like some being from China and some from Turkey — it just becomes a horrible mess. It adds complexity that wasn’t there before, but we will get to a solution."

One sportswear retailer said US wholesalers were also nervous: "They’re thinking ‘Will this product be taxed? How will that affect my margin?’. Everything is taking longer and the general sense of uncertainty is hurting everyone … it’s making it harder to do business harder out there."

The possibility that the de minimis exemption may be permanently removed is particularly worrying for fast-fashion giant Shein, which has used the tax break to make hay while the sun shines.

Shein plans to lower its target valuation for its upcoming London listing to around $50 billion £40.3 billion), nearly 25% less than its $66 billion (£53.2 billion) valuation in 2023.