US tariff hike on small orders to harm trade

The United States government's latest move to raise tariffs on small packages and low-value items imported from China will disrupt normal international trade order and harm the interests of US consumers, while prompting Chinese cross-border e-commerce platforms to adjust supply chain networks and diversify their business layouts in emerging markets, experts said.

In the face of rising trade protectionism and unilateral bullying, China's cross-border online retailers should accelerate the establishment of overseas warehouses, and enhance brand competitiveness globally by improving the added value of products, to navigate challenges from Washington's sweeping tariff hikes, they added.

Their comments came on the heels of the US administration's announcement that shipments valued at or under $800 from China to the US will face 120 percent tariffs or $100 per item from May 2 to June 1, and then $200 per item beginning June 1. Prior to that, the Trump administration has decided to end the duty-free de minimis treatment for low-value imports, starting on May 2.

Sang Baichuan, dean of the University of International Business and Economics' Institute of International Economy, said the tariffs levied on small packages will undoubtedly increase consumption costs for US shoppers, affect their shopping experiences, and reduce the frequency of purchasing, thus ultimately curbing the growth of the US economy.

Sang said the tariff policy of the Trump administration jeopardizes the stability of the global economy and international economic and trade activities. "It not only adds uncertainties to investment and cooperation among countries around the world, but also to US companies themselves."

Hong Yong, an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation, said the elimination of de minimis tariff exemptions and increased duties on small packages will push Chinese cross-border online marketplaces to expand procurement and sales channels, and optimize supply chain management to reduce dependence on a single market.

Hong said that in order to mitigate the impact of the tariff hikes, Chinese e-commerce platforms should invest more in establishing overseas warehousing, accelerate steps to expand their footprint in more diverse and emerging markets, and strengthen cooperation with international logistics enterprises to improve delivery efficiency and lower logistics costs.

As an important practice supporting the development of cross-border e-commerce, overseas warehouses allow domestic retailers to transport commodities in bulk to overseas locations in advance, which is conducive to lowering shipping costs and facilitating the efficient delivery of goods to consumers abroad, market observers said.

Chinese cross-border e-commerce platforms including Shein and PDD Holdings' Temu have gained popularity among US consumers as they offer a wide selection of merchandise at competitive prices.

The two online discount retailers have taken steps to cushion the impact of the revocation of the small-package tax exemption. Temu began adding Chinese sellers to its site that have inventory at US warehouses last year, allowing it to ship packages faster to US shoppers.

PDD Holdings has recently announced plans to invest 100 billion yuan ($13.7 billion) over the next three years to support the Chinese merchants on its platform, step up subsidy efforts to small and medium-sized enterprises, and help them cope with challenges in the process of overseas expansion.

Shein has opened distribution centers and a supply chain hub in the US, and started to diversify its supply chain, adding more suppliers from Brazil. It has also strengthened its presence in European countries including Germany, the United Kingdom, France, Italy and Spain, as part of a broader push to explore diversified markets and work with local manufacturing suppliers.

Zhu Keli, founding director of the China Institute of New Economy, said the US government aims to crack down on China's cross-border e-commerce enterprises and weaken the competitive advantages of Chinese goods by raising tariffs on low-cost packages, which will result in fewer choices for US consumers.

Zhu stressed the need for Chinese online retailers to improve the added value of products and service levels, enhance brand awareness, strengthen localized operations in overseas markets and expand their footprint in Southeast Asia and South America.

The de minimis provision has existed since the 1930s in the US, but the threshold has increased and its use has come under increasing scrutiny in recent years. In fiscal year 2024, at least 1.36 billion shipments utilized de minimis, an increase of 637 million in 2020, according to US Customs and Border Protection.