The effect of punitive tariffs on e-Commerce

 

Shortly after his inauguration, US President Donald Trump introduced new tariffs, ranging between 10-25% on imported products arriving in the US from Mexico, China, Canada and the EU. Experts refer to the new tariffs as punitive, considering they are much higher than symbolic tariffs usually are. This is especially true for the up to 200% tariffs President Trump threatened on champagne and wine arriving from the EU, in response to the EU’s 50% tariff proposed on US whiskey - which itself was a response to the original 25% tariff on EU aluminium and steel.

 

But what are punitive tariffs, and how do they affect the economy?

 

 

What you need to know about punitive tariffs

As its definition states, punitive tariffs are very high duties imposed on imports from another country, normally levied to protect domestic producers. Governments imposing these tariffs usually define what product groups, which countries of origin, and what import quantities should be affected by them.

 

In theory, punitive tariffs work well because they make the incoming products so expensive that consumers turn to domestic alternatives instead. However, real life is usually not as straightforward as theory.

 

Consumers in the country levying the tariffs may not be happy about the suddenly decreasing array of products to choose from. US shoppers can already see how the abolishment of the $800 duty-free threshold affects them: consumers ordering goods from China via Temu and SHEIN now have to pay duties on their cross-border purchases. No wonder that last month, Temu’s US sales fell by 32%, and SHEIN’s by 41%.

 

There’s an added problem of special products that are only manufactured in a specific part of the world. Like the aforementioned wine and champagne are protected by geographical indications that can only be produced in specific regions of the EU. US consumers won’t have a chance to substitute those products and will have to pay the higher price, or simply stop buying them.

 

However, consumers aren’t the only ones who feel the effects. Manufacturers who import raw materials from the affected countries also have to deal with the increasing prices, which usually leads to them increasing their own prices as well.

 

In addition, the countries affected by the tariffs may resort to similar measures, which significantly limit international trade and contribute to rising inflation and cost of living in all countries concerned, including the ones that originally imposed punitive tariffs.

 

 

AI-generated illustration of a customs officer inspecting imported goods

 

 

The current trade war

Some effects of the new US tariffs can already be seen. Following the introduction of the punitive duties on its US exports, China responded with similar counter-tariffs. Although the US administration granted Canada and Mexico an exemption from the new tariffs until the beginning of April, Canada already announced counter-tariffs, with Mexico and the EU threatening to do the same. Responding to the tariffs on steel and aluminium exported to the US, the EU will impose counter-tariffs on whiskey, jeans, motorbikes, boats and peanut butter arriving from the US. To balance the effect of the new US duties, the EU’s measures affect goods in the value of 26 billion euros.

 

Since trade with Canada, China and Mexico constitutes nearly half of all US foreign trade, the tariffs and counter-tariffs could have a serious effect on the US economy.

 

 

Infographic displaying bilateral trade amongst the US and Canada, China and Mexico. Source: https://www.cfr.org/article/what-trumps-trade-war-would-mean-nine-charts

 

 

Analysts predict that US gas prices could increase significantly, as well as food and energy prices. Cars, crude petroleum, electronics and motor vehicle parts are among the sectors that are most affected by the new tariffs.

 

 

Infographic displaying the economic sectors hardest hit by the new tariffs. Source: https://www.cfr.org/article/what-trumps-trade-war-would-mean-nine-charts

 

 

However, Canada’s and Mexico’s economies can suffer even more than the US’, considering that these countries conduct between 70% and 80% of all their foreign trade with the US. China is less dependent: “Only” 15% of the country’s exports go to the US.

 

Europe's economies are set to suffer great losses due to the impending US tariffs. Germany, for example, expects a 15-17% decrease in exports, which could endanger the jobs of 1.2 million workers. Car manufacturers can be hit especially hard.

 

 

The effects of punitive tariffs on brands

As online brand protection experts, our main concern is always how any situation affects our clients. Unfortunately, it’s quite likely that most brands will feel the effects of the US’ punitive tariffs, at least to some extent.

 

The rising prices of original products can lead to the creation of grey markets and the increase of counterfeit goods offered in the market. It’s easy to see why: consumers used to a product may not be able to afford it any more, which can turn them to cheaper “alternatives”, i.e. fake or grey market products.

 

Find out why people buy counterfeit products!

 

But consumers don’t even need to go “rogue,” as they can also easily switch to other brands whose products are, for some reason or other, cheaper than yours.

 

The general economic uncertainties created by punitive tariffs provide an unhealthy environment that doesn’t support growth. A great example in this environment is how consumers may try to curb their spending and save some funds for an increasingly unpredictable future, which is detrimental to your brand’s sales figures.

 

There’s not an easy solution to this set of problems, but it’s definitely a good idea to diversify your markets as much as possible. Having your options open means that if one market falls due to tariffs or any other circumstance, you still have others to rely on.

 

Related topics

What companies have to consider while running a business in the EU

 

International e-Commerce expansion and brand protection

 

Counterfeits and lookalikes caught by customs in Germany

 

 

How globaleyez can contribute to lessening the effects of punitive tariffs

External circumstances, like punitive tariffs, may have curbed your brand’s opportunities and increased the dangers you have to face. But that doesn’t mean you can’t do anything about it. In fact, there’s quite a lot globaleyez can do to diminish the damage and increase your opportunities.

 

First, let’s talk about damage control. Have grey markets and counterfeit offers popped up in the wake of punitive tariffs? No problem! Our marketplace monitoring service is perfect for detecting IP infringing product listings on over 150 online marketplaces worldwide.

 

Our powerhouse software solution traxster, created and led by irreplaceable human expertise, uncovers unauthorised listings, whether they are offering your original products (grey markets), or fake versions of them (counterfeits). This way, damaging product listings are flagged for removal from the internet, limiting their impact on your brand.

 

As a next step, let’s discuss how to widen your opportunities. Our marketplace sales tracking service can contribute to scouting for new markets and learning how products similar to yours are doing there. We’ll give you a comprehensive report with best performing products and sellers, which is essential when preparing a market entry to a new country.

 

If you want to learn more about a product, we recommend our test purchase service. We can buy any product in over 50 markets and gather crucial information about its seller and its origins to help you with both damage control (in case of an infringing offer) and widening your opportunities.

 

Finally, we can enforce your rights and demand the removal of any infringing content from the internet, including marketplaces, social media, domain registries and registrars, search engines and much more.

 

 

Conclusion

The introduction of new, punitive tariffs suggests a new era in global trade where brands have to face more restrictions and increasing dangers.

 

Don’t let this ruin your brand! Team up with globaleyez and together, we’ll create a strategy to protect your brand and set it on a new path to success.

 

Contact us and let’s get started.