Shares of United Parcel Service appear lost in transit at the start of 2025, trading down 23% year to date, and falling to a near-five-year low at the time of writing.
The logistics giant has been grappling with multiple challenges over the last several years, adjusting to excess post-pandemic capacity and sluggish shipping demand. While the company has a plan in place to address its shifting operating environment to support more profitable growth, a big headwind looms. Sweeping trade tariffs being implemented by the Trump administration have some major implications for UPS’ business and its stock price outlook.
Let’s discuss what tariffs mean for UPS investors now.
After months of back-and-forth messaging, the Trump administration unveiled specifics of a transformative new trade policy on April 2. The United States is imposing a 10% baseline tax on all imports from every country, alongside higher “reciprocal” tariffs ranging from 11% to 50% on 57 specific nations identified by their trade surpluses.
Though these tariffs were telegraphed since Trump’s presidential campaign, Wall Street saw the details and extent of the measures as much more aggressive than previously estimated, translating into a steep stock market sell-off. The administration says the measures are aimed at addressing international trade imbalances. Experts anticipate the policies to cause short-term disruptions in supply chains and higher consumer prices as businesses begin to pass along the increased tax burden.
For UPS, the tariff effect is multifaceted:
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Customers using the company’s air and freight network for importing goods into the U.S. will face higher costs levied as an import duty. This increase could curb demand for international shipping volumes, a critical revenue driver that accounted for 20% of UPS’ $91 billion in total sales last year.
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One detail of the new tariff regime is that it ends a “de minimis” exception directed at Chinese goods, previously allowing duty-free entry for shipments under $800. This exclusion covered significant volumes of direct-to-consumer e-commerce sales for items like apparel and electronics. As a result, UPS may not only see a slowdown in business, but also incur additional costs to comply with customs operations on small parcels.
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The third dynamic to consider is the possibility of retaliatory tariffs representing the response from U.S. trading partners. China has already enacted a 34% retaliatory tariff on all U.S. goods. In this scenario, UPS’ U.S. shipping volumes may also slow as international customers reassess their costs and business outlook.
