The End of an Era? US Retailers Abandon Free Shipping to Offset Growing Costs

Rising tariffs and escalating shipping rates

At the heart of this shift are escalating tariffs and climbing shipping costs. In early 2025, the US government implemented broad import duties: a 10% baseline on most international goods and up to 145% on Chinese-origin items. These changes hit businesses hard, especially those that rely on overseas production. At the same time, carriers such as UPS and FedEx raised their shipping rates by 5.9%, pushing the average cost to ship a package to $12.50, up from $9.53 just six years ago. For many retailers, the math no longer supports covering shipping fees out of pocket.

Small retailers first to feel the pinch

Smaller businesses have been the first to feel the squeeze. While big-box retailers like Walmart haven’t yet changed their shipping policies, many direct-to-consumer brands are being forced to act. For instance, Modern Picnic, which sells upscale lunchboxes, raised their free shipping threshold from $150 to $300 and now charges a $15 fee for lower-order values. Even then, the fee doesn’t fully cover the cost, but it helps offset tariff-driven expenses. Similarly, KURU Footwear has shifted to offering free shipping only to loyalty program members; all other shoppers now face an $8.99 fee, still less than the company’s actual shipping costs. However, this move has coincided with a dip in conversion rates, prompting internal concern. Lovevery, a high-end toy subscription service, also dropped free shipping in April after customer research suggested it was one of the least objectionable changes they could make. So far, they report minimal customer loss.

The numbers reflect a broader trend. According to retail technology firm Narvar, the average minimum spend to qualify for free shipping jumped from $82 in 2023 to $103 in 2025. As Narvar CEO Anisa Kumar explained, brands are trying to avoid backlash by adjusting elements that are less visible to consumers, like delivery thresholds and return policies, rather than drawing attention to tariffs at checkout. While subtle, these changes have a significant impact on customer behavior.

Consumer resistance and cart abandonment

That impact is evident in cart abandonment data. Satish Jindel, president of ShipMatrix, emphasizes that unexpected shipping costs are one of the top reasons online shoppers abandon their purchases. KURU Footwear’s CFO, Matt Barnes, echoed this concern, stating that their recent decline in conversion rates likely ties back to shipping fees. Consumers have come to expect free shipping as a default, especially in a market shaped by Amazon Prime’s influence, which normalized fast, free delivery starting in 2005. But those expectations are becoming harder to meet as shipping and tariff costs continue to rise.

Broader economic ripples

The ripple effects of these changes extend well beyond checkout pages. Tariffs are shaking the broader economy, especially as the US–China trade relationship remains uncertain. In May, US container imports from China dropped by 28.5%, the steepest decline since the pandemic. Meanwhile, the closure of the “de minimis” loophole in May, ending duty-free treatment of low-value packages from China, has imposed new costs on buyers and sellers, with rates as high as 145% or flat fees nearing $200 per shipment.

Consumers are feeling the pinch too. Recent survey results show that 35.8% of shoppers have experienced noticeable price hikes, and over 20% say they’re reducing spending or switching to cheaper alternatives. Retailers in key states like New York and New Jersey are also reporting that they’ve passed tariff costs directly onto consumers. Many importers are now turning to bonded warehouses to delay the financial hit, although this workaround comes with its own set of challenges and costs.

What lies ahead?

Even with a 90-day tariff reprieve currently in place, the uncertainty is palpable. About 64% of retailers say they reassess sourcing strategies each quarter, and nearly half have already made pricing changes. E-commerce growth forecasts have been revised downward—from 8% projections earlier this year to just 5.2% in a moderate-tariff scenario, and potentially as low as 1.8% if the current environment persists.

To navigate this economic minefield, retailers are experimenting with a range of strategies. Some are raising their free shipping thresholds, while others are adding modest shipping fees or tying free delivery to loyalty programs. A few are reshoring or diversifying production away from China, though only 30% of brands expect to significantly increase US-based sourcing long term. Others are relying on inventory placement and cross-border logistics to ease cost pressures.

As delivery costs rise and trade policy uncertainty lingers, the once-standard offer of free shipping is disappearing from the digital storefront. Whether consumers adapt, retailers find new efficiencies, or government policies shift, one thing is clear: the era of frictionless, free delivery is coming to an end, and the entire retail economy is being reshaped as a result.