US tripling of small-package duties delivers further blow to Shein and Temu

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The US has tripled planned duties on low-value packages arriving from China, in a major blow to fast-growing ecommerce platforms Shein and Temu. 

The White House announced late on Tuesday that it would increase duties to 90 per cent of the parcel’s value or a $75 flat fee that would rise to $150. The duty comes in on May 2, and the flat-fee increase will take effect after June 1.

US President Donald Trump had signed an executive order last week ending a loophole that allowed Chinese goods under the “de minimis” threshold of $800 to arrive duty-free. Instead, there would be a duty of 30 per cent of their value levied or $25 per item, increasing to $50 after June 1.

The change courted criticism that Shein and Temu would still be able to sell in the US more cheaply than rivals paying higher tariffs on Chinese goods imported wholesale.  

The big increase represents a major hit to Shein and PDD Holdings-owned Temu in the US, which analysts estimate is their largest market by country and where they have been able to undercut competition with eye-wateringly cheap goods, in part by bypassing import duties.

Both companies had been preparing for an end to the exemption by building up warehouse capacity in the US. However, the preparations have been engulfed by the escalating tariff war between the US and China.

The duties on low-value packages are still lower than the tariffs on Chinese imports, which now add up to 104 per cent. They came into effect at midnight Washington time, pushing the world into a full-blown trade war.

Analysts warn the ending of de minimis exemptions will not only upend the business models of these cheap retail platforms and other Chinese ecommerce players, but will also slow down delivery times. Brittain Ladd, a US supply chain consultant who previously worked at Amazon and Dell, said ports would be overloaded with packages.

He added that the commerce department had rolled out a new software system to handle the duty payments, but there would still be delays as “the volume of packages that have to be processed is massive”.

The majority of Shein’s goods sold on its platform are made in China. The fast-fashion giant has sought to diversify outside the country, including in Brazil and Turkey, but it has struggled to match the efficiency and responsiveness of Chinese factories.

The upheaval brought by Trump’s trade moves has thrown Shein’s initial public offering plans into doubt. The Singapore-based company was seeking approval for a listing in London, which has been delayed several times amid regulatory uncertainty.

The Financial Times reported that Shein’s profits dropped by more than a third last year, as it battled with rival Temu, driving up marketing and logistics costs.

Temu and Shein did not immediately respond to requests for comment.