It doesn’t take an economic genius to pinpoint the allure of Chinese e-commerce giants. The rapid growth of platforms like Shein, PDD Holdings’ Temu and Alibaba Group’s AliExpress was never about the quality of their products, ethical supply chains, customer service, or even US consumerism and excess. It’s always been about their ultra-low prices.
As cost-of-living anxieties skyrocket and lingering inflation continues to bite household budgets, these digital outlets have been especially important for low-income Americans to obtain everything from phone chargers and dresses to blazers for a job interview. It may seem trivial, but these ultra-cheap marketplaces can make a difference, especially in rural areas underserved by discount retail chains.
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US President Donald Trump’s revoking of the ‘de minimis’ rule, the tariff exemption that allows packages under $800 to enter duty-free, will no doubt hurt Chinese e-com players’ business models. But these companies have been preparing for it. The bigger pain will be felt by the US households that are already struggling to get by.
Research has shown that de-minimis shipments matter to many; 73% of direct imports shipped to the poorest zip codes of the US are in this category, and the share from China was more than double compared to the richest zip codes. Researchers found that eliminating the policy would “raise the cost of living disproportionately more for non-White households.” The economists also calculated that it would result in the poorest zip codes facing average tariffs of 11.8%, compared with 6.5% for the richest. And this isn’t even taking in Trump’s fresh announcement of additional 10% tariffs on Chinese goods.
The likes of Temu, Shein and AliExpress have been diversifying shipping bases and stocking bulk inventory in the US, but it’s not clear if they will be able to sustain low prices. The trade war will cause new headaches, but these firms will likely still grow, Bloomberg Intelligence analysts wrote in a note this week. They can partly offset the damage by cutting logistic costs per unit, done by tapping their expanding network of American warehouses.
The move to revoke the duty-free loophole is already causing chaos domestically as the US Postal Service temporarily suspended inbound packages from China and Hong Kong—before reversing course just hours later.
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Trump has said that he hopes the move will stop the flow of lethal drugs like fentanyl from coming in. But the majority of fentanyl seizures happen via land transport, not the air cargo used for Chinese e-com deliveries. It doesn’t seem like the most effective plan to address the drug crisis.
Without looking at revoking ‘de minimis’ specifically, the Budget Lab at Yale University forecasts that Trump’s tariff policy could cost the average US family an additional $1,200 per year. As more households feel the pinch, it’s very likely that an erratic trade war could backfire. Working-class voters largely viewed Trump as better able to handle the economy than his opponent. They are expecting him to bring prices down, not up.
There are valid concerns from US stakeholders about competition from ultra-low-cost Chinese e-com platforms hurting US retailers. Though Temu shoppers are more likely to take business from US dollar stores, which are also expected to raise prices as a result of China tariffs. Some business leaders, including Amazon.com Executive Chairman Jeff Bezos —who watched the presidential inauguration court-side— may welcome the scrapping of ‘de minimis.’ The loophole gave Chinese online stores an edge in keeping prices lower than the American e-com giant.
There’s also mounting global scrutiny on their environmental impact. And Washington has shown increasing concern over the data collected by apps originating from China. But right now the rise of these platforms is exposing realities about the financial state of many Americans.
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Consumer spending helped cement the US economy’s position as the world’s largest in 2024. Time will tell how people will respond to the raft of tariffs and changing marketplaces.
US policymakers have repeatedly said they recognize that the burdens of high inflation fall heaviest on those who are least able to bear them. Or as writer and Civil Rights activist James Baldwin put it, those who have struggled with poverty know “how extremely expensive it is to be poor.”
It’s these communities that Trump promised not to overlook during his campaign that will feel the sharpest impact from a trade war likely to only escalate.
Ultimately, Trump’s opening trade blows will hit China and these exporters. But American consumers will feel the whiplash. ©Bloomberg
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