As sweeping US tariffs reshape global trade dynamics, UK retailers are under pressure to adapt. From shifting sourcing strategies to deploying advanced technologies and redefining communication, businesses are navigating a volatile environment. Silvia Iacovcich, senior reporter at Retail Systems, examines the strategic responses and market implications in a sector balancing risk, resilience, and innovation.

In early April, a pivotal moment in global trade unfolded as the US imposed a 10 per cent base tariff on imports from most countries, including the UK. This marked a significant escalation in President Donald Trump’s broader trade offensive, which has extended to nearly every nation—except for a few, such as neighbouring Canada and Mexico, which face separate trade disputes with Washington, as well as Russia, North Korea, and smaller nations like Belarus and the Vatican.

However, not all tariffs introduced by the US were part of the April measures. On 12 March, the US separately implemented a 25 per cent tariff on aluminium and aluminium-containing products under national security provisions. This was followed on 5 April by the broader 10 per cent base tariff, which applies to a wide range of goods.

In addition, UK exports of steel, cars, and car parts to the US are subject to separate 25 per cent tariffs, with no current exemptions in place. These measures are layered atop the April tariffs and reflect a fragmented but escalating approach to trade protectionism.

Certain UK exports—such as copper, pharmaceuticals, semiconductors, timber, energy products, and other minerals not available domestically in the US—remain exempt from the new duties. While these tariffs initially triggered economic challenges, particularly in the context of rising tensions between the US and China, Trump has since signalled a potential easing of tariffs on Chinese goods.

Although a 145 per cent tariff on certain Chinese imports was introduced in response to trade disputes, this measure has been paused as both countries have indicated a willingness to negotiate. Chinese officials have denied that formal discussions are underway, adding uncertainty to the situation.

These shifting tariff policies, coupled with the unpredictability of trade negotiations, have complicated global supply chains and created an environment of volatility for businesses and consumers alike. Although neither the EU nor the UK are yet to impose retaliatory tariffs on US goods, the effects of the US measures are already exposing the complexity of global supply chains.

These disruptions are generating new market trends and are expected to raise costs for UK businesses and consumers, according to Patrick Young, managing director at consultancy group PRS In Vivo. Young forecasts that due to the tariffs and the fragility of supply chain relationships, prices across entire product categories in the UK may increase significantly.

"Many consumer goods brands are tied to China, either directly or through supply chains, as China produces a large share of packaging materials and films used by international companies," he explains.

UK brands and retailers are currently evaluating how much of the price increases they can absorb to maintain market share without immediately transferring the full burden to consumers. However, if the situation persists, the costs will eventually be passed on, Young warns.

The government, in consultation with UK businesses, meanwhile has published a 417-page document listing thousands of American products that could potentially face British tariffs. The extensive list includes items ranging from bourbon whiskey and children's clothing to firearms and crude oil and covers approximately 27 per cent of imports from the US, carefully selected to have "more limited impact" on the British economy, according to the Department for Business and Trade.

Consumers and retailers: a careful balance

Claire Wallis, consumer goods and retail director at consultancy firm BearingPoint, expresses a similar perspective."British retailers will experience the effects of consumer uncertainty around spending, which creates confusion within businesses about the best strategic response in such an unpredictable environment," she says.

Wallis notes that consumer spending rose in March as shoppers anticipated price hikes tied to the tariffs. "Customers are anxious about potential price increases, which could ultimately lead to decreased spending," she observes.

The retail sector already faces major challenges, including price wars, manufacturer-driven price increases, and inflation affecting everyday goods.The introduction of tariffs adds further complexity. At the same time, consumers—already facing rising costs—may resist absorbing further increases."Retailers are under pressure to cut prices, while consumers contend with higher interest rates, council tax, and utility bills," Wallis adds.

Historically, these conditions have triggered unpredictable consumer behaviour. "They shop less frequently, purchase smaller quantities, buy in bulk for better value, or switch to lower-cost retailers," Young explains. The effects of these behaviours will vary across different retail sectors.

Different sectors, different outcomes

Wallis points out that larger, cash-rich companies are better equipped to take risks and maintain financial stability, whereas small and medium-sized enterprises (SMEs) may struggle due to their limited capacity to absorb economic shocks.

Sectors with long and intricate supply chains are especially vulnerable. For example, the UK food sector is facing increasing costs and price hikes, with some products heavily sourced from China. "Approximately 80 per cent of garlic, a common ingredient in frozen foods, comes from China," Young notes. Other industries at risk include fashion and luxury goods, which rely on long-distance supply chains from countries now subject to high tariffs. This could result in significant price increases, Wallis adds.

Consequently, several UK brands are reassessing their presence in the US market. London-based menswear brand Percival has recently decided to stop selling to the US due to tariffs. Jaguar has also suspended car exports to the US, as more brands weigh the reputational risks of rising prices against the cost of lost sales.

As the US becomes a less attractive market, companies are exploring alternative sources of supply, though this is not without difficulties."Other markets cannot easily replace the US's consumer base and purchasing power. No comparable market is readily available, and shifting focus may result in reduced returns," says Christian van Tienhoven, chief executive of e-commerce specialist Global-e Europe.

Young concurs. "Existing supply chains are deeply entrenched and complex. Current suppliers offer significant advantages, including high-volume production, cost efficiency, and value-added services."

Nonetheless, in response to the tariffs, UK retailers may begin reevaluating their sourcing strategies, potentially relocating supply chains closer to home—particularly within Europe. Wallis notes that British retailers could shift to regions with lower trade barriers, maintaining product availability while controlling costs.

She draws a parallel with Trump’s 'Make America Great Again' rhetoric, suggesting that the UK might experience a revival in domestic production as businesses seek to bypass tariffs.Young agrees. "UK retailers may become both risk-averse and innovative, promoting British products and accelerating market innovation," he states.

Matt Pavich, senior director of strategy and innovation at Aptos company Revionics, observes that as UK retailers anticipate further government action on tariffs, sourcing US products is becoming increasingly risky and expensive. Some US products are also more easily substituted. "Categories such as wine have alternatives from Europe and other regions," he explains. "Soy can be sourced from South Asia, but niche items like certain US bourbon brands are more difficult to replace."

Trump’s tariffs and rising US-China tensions could also affect seasonal sales. Pavich mentions a possible "Christmas tax effect," where tariffs on Chinese goods—particularly toys and electronics—could lead to higher prices and reduced availability during the holiday season. As exports to the US decline, Chinese goods may be redirected to the UK and EU markets.

In response, the UK may strengthen trade ties with China. "Retailers, especially in electronics, are pausing. With China’s reduced access to the US, Chinese manufacturers may channel affordable goods to the UK," Wallis explains.

Indeed, a British Chamber of Commerce report from December highlighted a significant rise in UK-China cooperation and investment, with 76 per cent of British firms maintaining or expanding their presence in China. The UK was also the guest of honour at the Chinese Products Expo in Haikou this week, signalling deeper bilateral engagement.

Beyond tariffs

Retailers face not only tariffs but also related complications. van Tienhoven, whose company provides assistance with cross-border transactions, points out that stricter customer checks have also added significant administrative burdens.

While packages worth up to $2,500 could previously enter the US with minimal documentation, stricter customs checks that came into effect alongside Trump's tariffs earlier this month have lowered the threshold. "Now, even $800 items must undergo formal clearance," van Tienhoven explains. "This increases paperwork, customs checks, potential requests for customer information like social security numbers, delays, and costs."

The effects are already being felt. In mid-April, DHL announced its decision to suspend global business-to-consumer shipments exceeding $800 to US customers because of a significant increase in red tape at customs.

This suspension was attributed to the extended clearance times resulting from recent modifications in US customs regulations."UK retailers are pausing long-term investments. Companies manufacturing in China are effectively ‘stuck,’ and relocating production to places like Vietnam or Turkey carries policy risks," he adds.

A single Chinese-made item in a multi-product order can now trigger complex customs procedures, complicating pricing and logistics. "For each retailer, we’ve reviewed millions of products and verified their origin to identify legacy sourcing from China," van Tienhoven says.

To address this, some retailers are removing Chinese-sourced items from their US catalogues. "This typically affects low-volume, non-essential items," he notes.
"Next week, more brands may announce their withdrawal from the US market. Their messaging will be critical," he adds.

Communication is critical

Amid volatility, communication strategies are vital to managing challenges.
With consumers already experiencing rising costs, additional tariff-related increases make clear messaging even more important.

Experts agree that transparency is key to maintaining consumer trust and sustaining sales."Retailers must explain price increases in a manner consistent with their brand voice, helping customers understand the reasons behind the changes," Van Tienhoven says. Possible strategies include labelling products with a "T" to denote tariff-related costs or recommending local, tariff-free alternatives to encourage substitution.

However, Young cautions that stores may not be the best venues for these explanations. "Brands need a broader strategy that engages consumers before they reach the store, offering context for price changes," he says. UK retailers are also increasingly using platforms such as TikTok, Instagram, and LinkedIn to communicate about tariff issues and pricing decisions.

Wallis points to grocers as leaders in effective communication during challenging times, offering a model for others."Loyalty programmes like Tesco Clubcard and Sainsbury’s Nectar are valuable tools. They help maintain trust and explain challenges, making consumers feel informed and respected," she says.

She also mentions retailer-government collaboration, noting that major grocery chains liaise with government through the British Retail Consortium. Though mostly individual, she envisions greater alignment. "The current climate presents an opportunity for more coordinated dialogue with government to protect consumers and support spending," she says.

AI and technology as tools

UK retailers are rethinking investment priorities, placing greater focus on automation and digital tools to address inefficiencies and broader challenges.

Wallis highlights that technologies like generative AI, dynamic pricing, and electronic shelf labels (ESLs) could provide a competitive edge by allowing rapid pricing adjustments. "Tesco is trialling ESLs in St Neots, enabling dynamic pricing," she says.

She adds that these technologies could encourage pre-emptive purchases, offering short-term sales benefits. "Advanced AI tools help retailers make data-informed pricing decisions, factoring in product origin, tariffs, production costs, and consumer sentiment," Pavich explains.

Yet Wallis stresses that no universal solution exists. "Each business must assess its situation and devise tailored strategies," she says. "The goal is to build more resilient and adaptable models in an uncertain landscape."

Conclusion

The UK retail sector faces a volatile future. Segments will encounter varied pressures, including pricing competition, complex sourcing, and significant tariffs—particularly due to the revised de minimis threshold.

To succeed amid instability, adaptability, agility, and customer focus are crucial.Technology and communication are the most powerful tools available. Innovations such as ESLs and AI-driven pricing can manage price volatility, boost efficiency, and support growth.

Likewise, effective communication and strong customer relationships will provide a critical advantage. As the British government prepares its response, agility and innovation will be key for UK retailers to sustain performance and unlock new opportunities.

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