Analysis of the Impact of Trump's Cancellation of Tariff Exemptions for Small Packages Between China and Hong Kong on the E-commerce Industry

I. Impact and Challenges on the E-commerce Industry

1. Rising Costs and Declining Price Competitiveness

   • Surge in Tariff Costs: Low-priced goods—such as clothing and electronic accessories—that previously entered the U.S. duty-free through the "De Minimis" policy will now face a tariff of either 30% of their value or a fixed rate of $25 per item (rising to $50 per item after June 1). For instance, for a product valued at $50, the tariff expense could exceed 60% of its selling price, forcing companies to either raise prices or compress their profit margins.
   • Increase in Logistics Declaration Costs: Carriers will be required to submit additional shipping details and pay for an international carrier bond, further driving up logistics expenses.
   • Impact on Typical Companies: Chinese fast-fashion e-commerce platforms, exemplified by companies like Shein and Temu—whose business models heavily rely on direct shipping of small packages to U.S. consumers—will see their price advantages significantly eroded by the new policy.

2. Pressure from Supply Chain Restructuring

   • Need for Production Line Relocation: To evade the burden of high tariffs, some companies may consider shifting production to other countries or to Mexico. However, in the short term, these companies face risks of disrupted supply chains and incur significant migration costs.
   • Transformation in Inventory Management: Companies will need to pre-stock goods in U.S. overseas warehouses—via sea or air transport. This move, however, might be financially challenging for small and medium-sized sellers burdened by storage costs.

3. Rising Compliance Risks and Increased Operational Complexity

   • Certification of Origin and Product Classification Review: The U.S. Customs and Border Protection (CBP) will intensify checks on package contents. Even if a product is produced in China but is rerouted through a third country, it may still be subject to additional tariffs. As a result, companies must accurately determine and prove the origin of their products.
   • Tightened Crackdown on Prohibited Items: Under the pretext of intercepting fentanyl smuggling, U.S. authorities have stepped up inspections. This heightened scrutiny increases the risk that an entire shipment could be detained or even destroyed if a misclassification or error occurs.

4. Increased Market Consolidation

   • Risk of Small and Medium Seller Exit: Smaller e-commerce businesses that cannot absorb the higher tariff and compliance costs may be forced to exit the market, leading to further concentration of industry resources in the hands of larger platforms.
   • Shift in Consumer Behavior: With the price increases on low-cost products, U.S. consumers might turn to domestic e-commerce platforms or alternative supply chains from Southeast Asia, which could result in a declining market share for Chinese sellers.