• February 1: President Donald Trump announced a 10% additional tariff on imported goods from China. American shoppers now have to pay tariffs on small orders directly purchased from China, including goods that were already in transit before the tariff changes.

• February 5: President Donald Trump’s new tariffs on Chinese imports this month include a clause designed to close loopholes used by Chinese online retailers to export to the U.S. Online retailers like Shein and Temu typically take advantage of the “de minimis”exemption, which applies to packages valued under $800, allowing them to ship goods to U.S. consumers at a lower price.

• February 7: President Trump announced a temporary withdrawal of the "de minimis" loophole.

The Purpose of Increased Tariffs: National Interest at the Core

President Trump stated that the purpose of the tariffs is to revitalize the U.S. economy, reduce the impact of Chinese manufacturing on the U.S., promote domestic manufacturing, and protect and create jobs.

Who Will Pay the Tariffs? The End Consumer

While policymakers claim that tariffs are imposed on foreign trade partners, it is ultimately the consumers who bear the burden.

Businesses that import goods typically pass these costs onto the downstream supply chain, ultimately impacting consumers. A study in August 2019 showed that during the U.S.-China trade war, American consumers shouldered more than 90% of the tariff burden.

Additionally, in September 2024, Democratic presidential candidate Kamala Harris pointed out in a debate that middle-class American families would bear the cost of the tariffs.

Impact of Tariffs on Chinese Sellers

Rising Costs and Price Pressure

Direct Tariff Cost Increase: The additional 10% tariff will increase the cost of exported goods, forcing sellers to choose between raising prices or squeezing profit margins. For example, cross-border e-commerce platforms like Temu and Shein, which rely on the "cross-border small package" model (goods valued below $800), will still face challenges even though Trump temporarily withdrew the "de minimis" exemption. Despite this temporary measure, he has indicated a plan to create a system for handling and collecting tariff revenue more comprehensively, and the policy will likely be reinstated. Sellers will need to prepare for the potential increase in tariffs, from 0% to 25%-30%, leading to a 15%-20% rise in final product prices.

Supply Chain Cost Transmission: If sellers cannot fully pass on the costs, it could lead to a reduction in profit margins. The price advantage of platforms like Temu compared to Amazon FBA could decrease from 40% to 27%, weakening their price competitiveness.

Supply Chain and Logistics Challenges

Customs Clearance Efficiency Decline: If the low-priced goods exemption is eliminated, all goods will need to go through formal customs declarations, which could increase customs operation costs (such as a minimum of $2.62 per item) and extend clearance times, affecting logistics efficiency and customer experience.

Supply Chain Layout Adjustment: Some businesses may shift to an overseas warehousing model (such as Amazon FBA) to avoid high tariffs. However, this model incurs warehousing and upfront investment costs, which could put financial pressure on small and medium-sized sellers.

Market Diversification and Strategy Transformation

Reducing Reliance on the U.S. Market: The risks of over-relying on a single market have become more apparent, prompting sellers to explore new markets in Europe, Southeast Asia, and other emerging regions. For example, China's steel exports have already shifted to “Belt and Road” countries, with the U.S. market accounting for less than 1% of the total.

Branding and Value-Added Upgrades: The low-price competition model is unsustainable, driving sellers to focus more on brand building, technological upgrades, and product differentiation. For instance, the cross-border e-commerce industry may accelerate its shift toward high-value-added products.

Indirect Effects and Industry Volatility

Impact on Downstream Industries: The indirect exports of products in industries like steel, machinery, and home appliances may also be affected by tariffs. For example, reduced profits from home appliance exports could further affect the demand for steel.

China fights back against tariff increases

In response to the U.S. announcement of a 10% tariff on all imports from China, China implemented tariffs on U.S. products, including:

• A 10% import tariff on U.S. coal and liquefied natural gas (LNG), and a 15% tariff on crude oil.
• A 10% tariff on agricultural machinery, pickup trucks, and certain large vehicles.
• Export controls on 25 rare metals, which are key components in many electrical products and military equipment.

How Chinese Sellers Should Respond to Tariff Policies

Overseas Warehousing Model: With the elimination of the de minimis exemption for low-value packages (e.g., items under $800), direct shipping costs have surged. To mitigate high tariffs, transitioning to overseas warehousing solutions, such as Amazon FBA or third-party logistics providers, has become essential. Platforms like Temu and Shein have established warehouses in the U.S., allowing sellers to pre-stock inventory, thereby reducing logistics time and per-item tariff costs.

Balancing Risks and Benefits: While overseas warehousing can alleviate tariff pressures, it entails storage fees and potential inventory overstock risks. Small and medium-sized sellers are advised to employ data analytics to forecast sales and adopt a batch stocking approach to minimize these risks.

Diversifying Market Presence: To reduce dependence on the U.S. market, leveraging regional trade agreements is advantageous. For example, exporting through ASEAN countries like Vietnam to the U.S. or focusing on local markets can help mitigate policy risks.

Enhancing Product Value and Brand Transformation: In the face of high tariffs, the profit margins on low-priced items are compressed. Shifting focus to high-value products, such as smart home devices or premium electronics, can be a strategic move. Simultaneously, strengthening brand recognition can offset price disadvantages.

Optimizing Logistics and Customs Strategies: Implementing bulk customs declarations and centralized transportation methods, like containerized sea or air freight, can distribute per-item tariff costs. Collaborating with local logistics providers, such as UniUni in North America, to adjust customs strategies (e.g., transshipping through Canada) can enhance efficiency.

Adapting to Short-Term Impacts and Long-Term Strategies: In the short term, negotiating with platforms to share tariff costs (e.g., Temu sharing with sellers) or implementing modest price increases (approximately 10%-15%) can be effective. Long-term strategies should focus on supply chain diversification, product innovation, and brand development to build resilience against future trade policy changes.

Will the Trade War Happen Again?

Trump may not stop at the 10% tariff on China, as he previously claimed during his campaign that he would impose a 60% tariff on China.

Unlike Trump’s first term, where tariffs and other trade barriers were specifically targeted at China, he has now also imposed a 25% tariff on Mexico and Canada, which may lead to more retaliatory tariffs from China, Mexico, and Canada.

During the first U.S.-China trade war, the outcome was widely considered a failure for the U.S. economy. With the current three-party tariffs in place, the U.S. may face even worse economic consequences.