The United States has recently announced a significant increase in the duties imposed on low-value packages arriving from China, which poses a major challenge to fast-growing e-commerce platforms such as Shein and Temu. The White House revealed on Tuesday that the new duties would amount to 90 percent of the parcel's value or a flat fee of $75, which is set to rise to $150 after June 1, 2023. These changes are scheduled to take effect on May 2, marking a critical turn in U.S.-China trade relations.

This decision follows an executive order signed by President Donald Trump last week, which closed a loophole that had previously allowed Chinese goods valued under the “de minimis” threshold of $800 to enter the United States duty-free. Under the new regulations, these goods will now incur a 30 percent duty based on their value or a flat fee of $25 per item, which will increase to $50 after June 1. This action is part of a broader strategy to address trade imbalances and protect domestic industries.

The announcement has garnered criticism, particularly concerning how it affects companies like Shein and Temu. Observers note that despite the increased duties, these platforms may still be able to offer lower prices compared to their rivals, who are facing higher tariffs on wholesale imports of Chinese goods. Analysts suggest that the new tariffs significantly threaten the competitive edge that these e-commerce platforms have enjoyed in the U.S. market, which is considered their largest by country.

In preparation for the anticipated end of the exemption, both Shein and Temu had taken proactive measures, including expanding their warehouse capacities within the United States. However, the ongoing escalation of tariff disputes between the U.S. and China has overshadowed these efforts, leaving the companies in a precarious position.

Despite the changes, the duties for low-value packages remain less burdensome compared to the existing tariffs on Chinese imports, which currently reach as high as 104 percent. The sweeping duty adjustments came into effect at midnight Washington time, exacerbating tensions and essentially pushing both nations deeper into a full-blown trade war.

Experts warn that the elimination of the de minimis exemptions could disrupt the business models of not only Shein and Temu but also other e-commerce players operating from China. Furthermore, the proposed changes are likely to lead to longer delivery times for consumers. Brittain Ladd, a U.S. supply chain consultant with a history at Amazon and Dell, emphasized that the volume of packages that the ports will need to process is colossal, predicting that the resulting congestion could significantly delay deliveries.

Most of the items sold on Shein’s platform are manufactured in China. Although the fast-fashion retailer has attempted to carve out operations in other countries like Brazil and Turkey, it has struggled to achieve the same level of efficiency and responsiveness as its Chinese factories, which have become known for their rapid production capabilities.

The disruption caused by these trade measures has also cast uncertainty over Shein's plans for an initial public offering (IPO). The Singapore-based company has been seeking approval for a listing in London, but this process has encountered several delays due to ongoing regulatory and market uncertainties. Reports from the Financial Times indicated that Shein’s profits plummeted by more than a third last year as it faced fierce competition from rival Temu, leading to increased marketing and logistics expenses.

As of now, neither Temu nor Shein have responded to requests for comments regarding the new duty rates and their potential impact on their businesses.