The End of $800 De Minimis: Is Cheap Shopping Over?
Who Will Survive the Tariff War?
The Trump administration has escalated trade restrictions on Chinese imports, imposing a 10% tariff increase and revoking the $800 de minimis exemption for small parcels, effective February 1. By February 3, U.S. Customs and Border Protection (CBP) mandated formal customs clearance for all shipments from China. The U.S. Postal Service (USPS) briefly suspended deliveries from mainland China and Hong Kong on February 4 but reversed the decision within 24 hours.
From February 4, 2025, Chinese goods will no longer benefit from small-value duty exemptions, requiring companies to file formal customs declarations and pay applicable tariffs. The policy shift has already led SHEIN to suspend U.S. flights, while TEMU is adapting by expanding its semi-managed logistics model. The platform has introduced a "One-Click Transfer" feature to shift inventory from fully managed to semi-managed warehouses.
The effects are already being felt by Chinese e-commerce platforms and sellers.
We examine the potential consequences below.
Breakdown of Increased Cost
The new policy will increase costs for all "Made in China" goods by adding a 10% ad valorem tax and Section 301 duties on top of existing tariffs. According to CITIC Securities, this will lead to the following cost increases:
Tariffs:
For cross-border small packages (e.g., TEMU, SHEIN's main model)
Tariffs on low-value parcels from China could increase from 0% to 25%-30%. With U.S. duties on Chinese goods already averaging 20% and the extra 10% surcharge, 60%-70% of the product's retail price will be subject to tax, which could lead to price hikes of 15%-20%.
For overseas warehouse fulfillment (e.g., Amazon FBA)
Standard trade tariffs remain, but the new 10% surcharge will be added. With 30%-40% of the retail price subject to tax, the surcharge could increase prices by 3%-4%.
Customs Fees
As the T86 tax-exempt clearance has been discontinued and replaced with T11 or other customs procedures, increasing costs by $3-$5 per shipment, plus additional fees for clearance, taxes, pickup, and delivery.
Customs processing fees
Chinese imports no longer qualify for small-value exemptions and must go through formal customs procedures. The Merchandise Processing Fee starts at $2.62 per item for informal entries, with higher fees if manual handling is needed.
Fulfillment delays
With the end of low-value tariff exemptions, customs clearance for small parcels will be slower, leading to potential delays and uncertainty in delivery times.
Here's how the new tariffs will impact pricing:
While the increased costs reduce TEMU's price advantage, the overall impact is manageable, and the price shift may be less severe than expected.
Amazon Wins, SMEs Struggle
China's cross-border e-commerce sector is confronting a structural shift, as higher trade barriers and rising compliance costs threaten the business models of smaller firms. The elimination of small-value exemptions means that sellers who once thrived on low-cost, high-turnover strategies—particularly in clothing and textiles—now face 10%-20% higher operating costs.
Stricter customs procedures and disclosure rules are making it harder for small businesses to compete, while larger firms with overseas warehouse networks are adjusting more easily. Some sellers are attempting to transition to localized fulfillment, but the high capital investment required puts this approach out of reach for many SMEs.
Who Benefits?
Companies less reliant on direct shipping will emerge as the main beneficiaries. Amazon's Fulfillment by Amazon (FBA) model has given it significant resilience, with Chinese sellers now comprising 50% of its third-party marketplace. However, the new 10% tariff on Chinese imports is expected to raise Amazon’s prices by 3%-4%, slightly narrowing the price gap with low-cost platforms like TEMU.
A Boom for Logistics and Warehousing
While many sellers struggle, logistics providers and warehouse operators are thriving. TEMU has pivoted to ocean freight, slashing costs by 30%-60%, benefiting carriers like Matson and CMA CGM. The Los Angeles logistics hub, home to over 3,000 overseas warehouses, is also positioned for growth.
The Road Ahead
The market is consolidating, with larger, well-capitalized firms gaining dominance as overseas warehouse fulfillment now represents 44.6% of B2C supply chains. Smaller businesses face an increasingly hostile environment, but the sector is unlikely to disappear—it is simply evolving.
Tariffs Reshape SHEIN and TEMU's Strategy
The U.S. market is projected to account for 30%-40% of SHEIN and TEMU's total sales, making it a critical but increasingly complex battleground. Over the past year, both companies have experimented with pre-stocking inventory and onboarding local sellers to mitigate logistical risks, though cross-border small parcel fulfillment still dominates their business model.
To reduce costs and improve efficiency, TEMU has embraced sea freight fast vessels and local warehouse distribution. In November 2023, it partnered with logistics carriers like Matson, successfully cutting sea freight costs by 30%-60% compared to air freight while enabling the shipment of larger items.
In 2024, TEMU strengthened its semi-managed model, actively recruiting sellers with local warehouses and expanding its certified warehouse network in Europe and the U.S. Meanwhile, TEMU's U.S. market share has declined from 60% in early 2023 to 40%, with a strategic plan to further reduce it to 30% by 2025.
SHEIN, on the other hand, leverages its deep supply chain integration to mitigate tariff impacts.
By establishing U.S. distribution centers, integrating third-party local sellers, and transitioning to a platform-based model, it has shortened delivery times and strengthened its fulfillment capabilities.
Its localization efforts are paying off—in Brazil, SHEIN now partners with 330 local suppliers and aims to localize 85% of Latin American sales by 2026. Meanwhile, factories in Turkey and warehouses in Poland are ensuring a more efficient supply chain for Western European markets.
The elimination of the $800 de minimis exemption will likely put pressure on SHEIN's logistics and fulfillment operations, increasing costs and compliance burdens. However, this shift could also serve as a catalyst for the company's ongoing localization efforts and international expansion, reinforcing its ability to adapt to evolving global trade policies.