China’s e-commerce suppliers react to Trump’s tariff and tax crackdown

Some Chinese businesses have begun shifting production to the US to avoid tariffs.

China’s e-commerce suppliers are reassessing their strategies after US President Donald Trump announced plans to end a tax exemption critical to small-scale exporters, as reported by the Financial Times.

De minimis rule under threat

Trump’s executive order last month targeted the de minimis rule, which exempts shipments under $800 from tariffs and customs checks. Although he later paused efforts to eliminate the exemption for packages from China, the US still intends to phase it out once screening systems are in place.

In addition, Trump announced an extra 10% tariff on Chinese goods this week, adding to the 10 percent levies imposed in February. These measures have forced Chinese cross-border e-commerce businesses to adjust their operations, expand production in the US, explore new markets, or pass additional costs onto consumers.

“Tariffs will definitely reduce sales and market share in the US,” said Yarong Wuliu, former deputy secretary-general of the cross-border e-commerce division at the Communist Party-backed Chinese Association for Small and Medium-sized Enterprises, in comments to the Financial Times.

E-commerce adapts to shifting trade conditions

Many small exporters turned to selling individual low-value orders through online platforms after Trump’s first-term trade policies disrupted traditional wholesale trade to Western markets. Cross-border e-commerce grew by over 60 percent in four years, reaching 2.63 trillion Chinese yuan in 2024 and accounting for almost 6 percent of China’s total goods trade, according to official data.
Guangzhou-based textile supplier Zhao Xiuxiu, who sells via platforms like Shein, said her company would now focus on wholesale trade to Africa and the Middle East. “If there are tariffs, it’s definitely bad news,” she said, adding that sales had already halved in the second half of last year.

Companies move production abroad

Some Chinese businesses have begun shifting production to the US to avoid tariffs. Hong Kong-based phone case manufacturer Casetify, for instance, built printing facilities in the US last year in response to fears over the de minimis rule’s removal. “Casetify needs to move quickly, so it ships blank cases in bulk to the US first and then prints them there,” a source told the Financial Times.
Factory owners in China have also reported slowing production and declining demand. “Production lines are not firing on all cylinders like they were a year earlier,” said Zhang Zhongbao, founder of Xingcheng Excellent Swimwear Consultancy, which supplies Shein and Temu. “Factories don’t dare stock up due to concerns over US tariffs.”

Expanding outside of China

To mitigate risk, some Chinese exporters are increasing production in countries unlikely to be targeted by US tariffs. Logistics executives report that companies that had already been establishing international supply chains are now accelerating those plans.
“E-commerce merchants that previously operated large manufacturing and distribution hubs in China have been looking to boost production elsewhere,” said John Pearson, CEO of DHL Express, in comments to the Financial Times. “Now, some of those plans have been sped up.”

Consumers likely to bear the cost

Despite rising tariffs, many exporters believe they will remain competitive by passing costs on to American consumers. Huang, a Temu seller of home decor and holiday decorations, said he had only slightly raised prices since Trump’s executive order. “For us individual sellers, a tariff only means a slight reduction in profit margins,” he said. “Consumers can afford it, and it hasn’t affected orders.”

Temu, which sets its own prices, raised them by 42% after Trump’s order before adjusting downward when the plan was temporarily put on hold, according to a Goldman Sachs survey.

Other sellers believe customers will ultimately bear the cost of new tariffs. Liu, an exporter of circuit boards on Amazon and eBay, said he expects retailers to itemize customs duties separately in the future. “In the end, tariffs will definitely be passed on to consumers,” he said.