Trump’s Trade War Strikes Again

In a bold return to his protectionist playbook, U.S. President Donald Trump has reignited economic tensions with China by reimposing sweeping tariffs—this time, targeting low-cost parcel shipments under $800. The results have been immediate and jarring: China’s low-value parcel exports to the U.S. dropped by 40% in May compared to the same period last year.

With a 54% tariff slapped on inexpensive goods, what was once a booming sector—fuelled by platforms like Shein and Temu—is now facing a sharp reckoning. The move underscores Trump’s vision to curb Chinese dominance in the U.S. consumer market, while also revealing the fragile balance of globalized trade in the e-commerce age.

A Tariff Barrage and a Market Reeling

According to China’s General Administration of Customs, the value of small parcel exports to the U.S. fell to just over $1 billion in May—the lowest level since early 2023. The steep 40% drop from the previous year signals more than a temporary slowdown; it marks a structural shift in how Chinese exporters engage with American consumers.

At the core of this disruption is the elimination of the long-standing “de minimis” exemption, which allowed duty-free entry for goods under $800. That exemption had become a lifeline for cross-border e-commerce sellers in China, enabling them to flood the U.S. market with fast, cheap shipments while bypassing tariffs. With that window now slammed shut, thousands of merchants—from solo entrepreneurs to major platforms—are being forced to rethink their strategies.

Casualties of Tariff Policy: Shein, Temu, and Small Traders

The impact has been deeply felt by fast-fashion powerhouse Shein and its rival Temu, both of which built their business models around the duty-free loophole. In the week following the tariff hike, both platforms reportedly experienced double-digit sales declines—early signs of waning demand and rising costs.

But beyond the giants, the real pain is being felt by small exporters. Wang Yuhao, an incense entrepreneur based in Kunming, told Bloomberg that the tariff shift has made his U.S. business model nearly unviable. “Without the exemption, it would mean tougher business to us, and much fewer options for consumers, and potentially higher prices,” he said. He now loses about $2 on every parcel sent.

To adapt, many small businesses are attempting to pivot to bulk shipments stored in U.S. warehouses. But this approach comes with steep entry barriers—namely, upfront costs exceeding 100,000 yuan ($13,800) just for inventory and storage. For thousands of micro-exporters, that’s simply out of reach.

Strategic Goals vs. Global Fallout

Trump’s administration has framed the move as a necessary step to curb what it calls “unfair advantages” enjoyed by Chinese sellers. In their view, the de minimis exemption created an uneven playing field, allowing foreign sellers to undercut U.S. businesses while avoiding import duties.

While the tariffs are clearly creating short-term pain for Chinese exporters, they also reflect a broader strategic intent: to reduce American dependency on Chinese goods, protect domestic industries, and reclaim control over critical supply chains. However, critics argue that the policy risks triggering inflation and reducing consumer choice in the U.S.—particularly for low-income buyers who depend on affordable imports.

China Adapts, the U.S. Market Shifts

Despite the hit to U.S.-bound exports, China’s small parcel industry is far from collapsing. Chinese customs data shows that global parcel shipments from China actually rose 40% year-over-year in May, with Belgium, South Korea, Hong Kong, Hungary, and Malaysia emerging as alternative growth markets.

Notably, while the U.S. remains China’s top parcel destination, Malaysia absorbed over $700 million worth of such shipments in May alone. This reflects a swift pivot by Chinese exporters seeking new markets and revenue sources in a rapidly evolving trade environment.

A New Chapter in a Familiar War

The latest round of Trump-era tariffs is more than a policy shift—it’s a declaration of continued economic rivalry between the world’s two largest economies. While Trump’s actions are aimed at curbing China’s e-commerce dominance and protecting American interests, the fallout is being felt globally—by exporters, platforms, and consumers alike.

The 40% drop in small parcel exports to the U.S. underscores how fragile and reactive global supply chains can be. Yet, in the face of political headwinds, Chinese firms are already recalibrating, searching for resilience in diversification. Whether these tariffs achieve their long-term goals or lead to new forms of retaliation remains to be seen—but for now, the cost of protectionism is being measured in parcels, prices, and policies.