THE US Postal Service’s flip-flop on inbound international packages from China and Hong Kong is throwing Chinese retailers that sell on Shein and PDD Holdings’ Temu platform into disarray.
Just hours after the mail service announced it was suspending some shipments, it reversed that decision, saying it was working with Customs and Border Protection to “implement an efficient collection mechanism for the new China tariffs to ensure the least disruption to package delivery”.
The moves stem from President Donald Trump’s decision to revoke a “de minimis” rule for China, which had allowed small packages under US$800 to enter the US duty-free. The exemption, often used by Chinese e-commerce companies, was scrapped as part of a new 10 per cent tariff on goods from China and Hong Kong, which took effect just after midnight Tuesday (Feb 4) Washington time.
While the postal service works on the logistics of Trump’s new tariff, Chinese online retailers are warning that any suspension of packages would significantly harm their North American business, potentially resulting in closures of factories that run on sliver-thin margins, and also result in higher costs for shoppers.
“Unless China’s government announces effective measures to fight back, the harm of the small-parcel suspension would be devastating to online platforms such as Temu and Shein, as well as small factories,” said Andy Guo, an online retailer of electronics products and founder of Waimaojia, a media platform for the cross-border e-commerce industry.
Temu-owner PDD Holdings’ American Depository Receipts fell as much as 4.6 per cent in early New York trading.
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Washington is cracking down on a loophole that retailers such as Temu and Shein have used for years to expand in the US, allowing them to ship high volumes of small packages and gain an edge over competitors such as Amazon.com. Critics say the flood of parcels from China is difficult to track and may contain illegal or dangerous goods.
For China’s exporters, however, the cross-border e-commerce has been a lifesaver amid a sluggish domestic economy and local oversupply after the US imposed higher tariffs on China. Without it, there may be “serious shipping delays and a wave of factory closures within three months”, Guo said.
Acute situation
According to Guo, retailers in China, anticipating such retaliation since May – when US customs suspended multiple brokers from importing small packages without paying duties and taxes – have reduced the proportion of their sales on platforms that heavily rely on small-parcel models.
Still, the situation is particularly acute for low-value products like socks, fashion accessories and other daily goods, where the “suspension of a cheap logistics solution would mean much bigger harm”, he said.
Tensions are already running high between Shein and Temu and their suppliers and merchants in China. Many have for years been protesting about razor-thin margins as the platforms push to drive down costs.
Several suppliers involved in the negotiations with the online platforms said factories have no room to lower prices because their profitability has already been squeezed to the limit. They declined to be identified discussing sensitive matters that are not public. They also warned that any suspension is likely to mean higher purchase costs for American consumers and longer shipping times for all but hot-selling items that are sent in bulk to overseas warehouses.
Wang Lun, a sales manager at a Guangzhou-based cross-border retailer that sells sweaters and jackets on Temu, Tiktok and Amazon.com, said he expects an instant sales drop if a small-package suspension is put in place, noting that logistics costs could rise as much as 30 per cent. That cost will have to be shouldered by consumers, he said.
“This is our most commonly used delivery method, and so we either have to suffer a reduction in orders or we’re forced to supply goods at an even lower price,” he said. BLOOMBERG
