US Crackdown on Cheap Chinese Goods
The US President Donald Trump has destroyed the business model of Temu and Shein, two popular e-commerce platforms, by suffocating their flood of cheap Chinese goods to the USA. In 2024, 1.36 billion shipments included the so-called de-minimis rule in the USA, creating worth $800 (€704) from import duties. This number marks a nine-time increase from 153 million in 2015.
Impact on Temu and Shein
Goods bought by Temu and Shein last year, which accounted for 30% of daily US low-value packages, are now subject to a 30% tariff or flat fees of up to $50, and $145 for imports from China. As a result, prices for US consumers have more than doubled, causing the profit margins of these retailers to collapse. Temu and Shein will likely shift their focus to Europe, taking advantage of the European Union’s de-minimis gap to maintain their inexpensive model.
Europe’s De-Minimis Gap
Although the EU exemption of €150 (170 US dollars) is lower than the US limit, Temu and Shein’s explosive growth has not slowed. In 2024, 4.6 billion low-value packages flooded the EU market, a doubling of 2023 and three times that of 2022, with 91% coming from China. These 12.6 million daily packages are delivered duty-free, undermining European retailers who are burdened by higher costs for working chains, supply chains, and compliance.
Security Concerns
The influx of cheap goods not only threatens the profitability and triggers layoffs of EU companies but also raises alarms over product safety. Many Chinese goods often fail to meet EU security standards, with groups collecting extensive evidence of poisonous makeup, faulty toys, and devices. Consumers are unknowingly endangered by their health and security.
EU Plans to Scrap De-Minimis Gap
The European Commission suggested scrapping the EU’s de-minimis exemption two years ago, but the plan is still waiting for approval from the 27 EU member states and the European Parliament. This delay offers little relief to European companies already confronted with violent Chinese competition. Many EU merchants fear that this could mean Temu and Shein will flood European markets with even cheaper products, putting them out of business.
VAT Fraud
There is growing evidence of other illegal practices by Chinese sellers, including suppressing the value of goods to avoid sales or VAT (VAT), which ranges from 20% to 27% depending on the EU state. Fraudsters claim the wrong value for their goods to fall under the threshold and avoid customs formalities. The EU’s anti-fraud office and Polish authorities recently unveiled a sophisticated VAT fraud system where Chinese goods were imported into the EU, with fraudsters claiming the goods were led to other EU countries to avoid tax and customs tasks.
France’s "Fraud Control" Measures
While the European Commission’s plan to scrap the €150 exemption remains, some EU countries have started taking action. The French government plans to increase inspections of low-value imports, analyzing product safety, labeling standards, and environmental standards, and calculating an "administrative fee" for each package. European policymakers must contain fraud, ensure compliance, and promote fair competition without limiting consumers’ access to affordable goods from Chinese retailers.
