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New U.S. Tariff on Small Shipments Hurts Sales of Chinese Platforms and Forces Mass Layoffs, Understand Everything Below.
The trade war between the United States and China has taken a new turn in April 2025, with the focus now on e-commerce platforms like Shein and Temu, as well as the Chinese industrial framework that supports them. Learn more about the growth of Shein: What is Shein and Why Did It Become One of the Largest Retailers in the World.
With an executive order signed by Donald Trump, the U.S. has ended the tax exemption for shipments up to US$ 800, known as De Minimis, which radically changes the game for Chinese e-commerce.
The decision by the current American president, who seeks to force China to renegotiate trade tariffs, directly impacts the business model based on direct shipping from factory to consumer. Platforms like Temu, which grew by offering cheap products with free international shipping, are among the most affected.
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In addition to the end of the exemption, the U.S. imposed import tariffs of up to 120%, accompanied by a fixed cost of up to US$ 2 per postal item. The result is already being felt: declining sales, cuts in advertising, and factory closures on Chinese soil.
End of De Minimis Exemption in the U.S. Hurts Sales of Shein and Temu
Platforms like Shein and Temu, which structured their operations based on cheap international shipping and tax exemptions, now face a new reality. April reports show that Temu lost 30% of sales in the United States in just a few weeks. Shein, on the other hand, has reduced its advertising budget by 90% in the country.
These measures reflect the collapse of a model that relied on direct-to-consumer shipping, without intermediaries, using the so-called D2C (direct to consumer) system. With the tariffs now applied, many products have become financially unviable, affecting the competitiveness of the platforms in the world’s largest consumer market.
Factories in China Close Their Doors Amid the Collapse of International E-Commerce
With the drop in sales of Chinese products in the United States, hundreds of factories have begun shutting down their operations. The region of Xin Village, known for producing items for Shein, reported a demand drop of up to 50% in recent weeks, according to Reuters.
Supplier companies reported that the suspension of orders is widespread. Workshops with dozens of employees have already halted production, accumulating stocks of clothes and accessories that can no longer be sold. In just two months, several industrial warehouses have been shut down, according to local reports published by outlets like Bloomberg and Global Times.
Trump’s Measures Directly Target the Heart of China’s Strategy in Global Trade
Donald Trump’s executive order has a purpose beyond fiscal objectives. It is a strategy to force China to negotiate. While Beijing imposes high taxes on American products, the U.S. previously exempted products worth up to US$ 800 from any tariffs—an advantage that benefited Chinese trade.
With the end of De Minimis, Washington seeks to rebalance the trade deficit and create diplomatic pressure. In addition to the 120% tariffs on Chinese products priced up to US$ 8, there will be an additional fee of US$ 1 to US$ 2 per item starting in June 2025. This makes cheap international purchases unfeasible and primarily affects online platforms in China.
Shein’s Attempt to Transfer Production to Vietnam Was Blocked by China
In the face of the crisis, Shein attempted to transfer part of its production chain to Vietnam, seeking to cut costs and escape the new American tariffs. However, the Chinese government intervened, according to Bloomberg, “advising” the company not to diversify its supply chain. Understand how Shein built its global production model in this article: Understand the Business Model That Led Shein to the Top.
Beijing’s fear is that a mass migration of factories to neighboring countries will weaken China’s industrial economy, worsening unemployment and recession in certain provinces. Therefore, even in the face of a sharp decline in sales to the United States, large companies are pressured to maintain their operations on Chinese soil.
European Union Also Studies Tariffs on Products from Platforms Like Temu and Shein
With the increase in Chinese exports to Europe, the European Union is also evaluating new tariff measures against platforms like Shein, Temu, Shopee, and AliExpress. The bloc fears a “flood of Asian products,” which could jeopardize local production and create unfair competition—a practice known as dumping.
While the United States has been applying the new restriction policy since May, European authorities are discussing similar models to limit the advance of direct e-commerce from China. This further pressures large platforms, which are trying to redirect their marketing and logistics efforts to new markets.
Brazil Also Suffers Side Effects of the New Tariff War
Brazil, while not adopting a stance as aggressive as the United States, is already feeling the effects of the trade war with China. Recently, the Brazilian government began taxing international purchases below US$ 50, which directly affected consumers using platforms like Temu and Shein.
Just like in the U.S., the official argument is the need to “balance the market” and generate revenue. But there is pressure from the national retail sector and the industrial segment to impose stricter barriers on the entry of low-declared Chinese products.
China’s Internal Economic Crisis Worsens with Factory Closures and Mass Layoffs
The Chinese growth model, supported by exports, low wages, and a devalued currency, faces increasing resistance. The real estate crisis, coupled with trade tensions, makes the scenario even more challenging.
Recent reports show that entire factories are being shut down, warehouses are being abandoned with stocks of unfinished clothes, and thousands of workers are being laid off. Small workshops and family businesses, which produced for brands like Shein, are the most affected.
According to local sources interviewed by Bloomberg, many of these factories lack sufficient capital to adapt to new logistical chains, such as a potential shift to Vietnam or Bangladesh.
Donald Trump States That He Will Not Remove Tariffs Without Substantial Concessions from China
Former President Donald Trump, when questioned about the measure, made it clear that the tariffs will not be removed unless China offers relevant concessions. “It would be great if they opened up their economy, but I don’t expect them to do that,” Trump told the American press.
Trump’s strategy aims to expose the closed nature of the Chinese economy, which for years has benefited from mass exports with easy access to Western markets, without commercial reciprocity. For him, it is time to balance the scales and demand more openness from Beijing.
The escalation of the trade war between the United States and China directly impacts the daily lives of consumers and businesses in various countries. Platforms like Temu and Shein, once symbols of accessible e-commerce, now face drastic revenue declines and uncertainty about their global operations.
With factories closing, workers being laid off, and new tariff barriers emerging in Europe and Brazil, the direct shipping model from China to the consumer may be coming to an end. And, it seems that the clash between Washington and Beijing is far from over. Shein: From Chinese Warehouses to the Top of Global Retail.
In the coming months, the world will watch to see if China will respond with new tariffs, seek logistical alternatives, or finally yield to pressure for trade reforms. In the meantime, consumers and companies are adjusting their strategies in light of a new scenario for global trade.
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