Chinese vendors, US buyers face cost shock in online market for cheaper goods

E-commerce giant Amazon found itself in the doghouse with the Trump administration after a Washington-based news organization reported it planned to display the cost of US import tariffs on the price lists of products sold on its Haul online site.

The White House called it a hostile act, forcing the Seattle-based company to backpedal with comments that it had considered such a price alert on certain China-made products but rejected the idea.

It was but another sign of how the once-booming world of cross-border e-commerce, fueled by the smooth flow of goods between China and the US, is caught in the middle of a tariff war initiated by President Donald Trump, with 145 percent tariffs imposed on imports from China.

Amazon's Haul discount site includes smaller Chinese vendors who rely on direct sales of small-parcel, lower-priced goods to US consumers.

Beginning on May 2, a new US policy on small parcels shipped from the Chinese mainland, Hong Kong and Macau will come into effect. Instead of duty-free entry for parcels valued at US$800 or less, a flat fee of US$75 per parcel will be levied and then doubled to US$150 starting next month.

Who will win and who will lose? Spoiler alert: E-commerce shippers from China may face a difficult period of readjustment, but the impact will most keenly be felt by US consumers used to buying smaller items from Chinese vendors through online channels.

Luke Yan from the city of Wuhan in Hubei Province has been running a shop on Amazon's US website for over a year. Called Taili, the shop sells made-in-China daily commodities like vacuum bags, holder hooks and bathtub grab bars.

"The business was doing well before, with revenue of about US$5 million a month," he told China Biz Buzz. "This month's sales have not been calculated yet, but I haven't noticed a drastic rise or fall in business. It's very hard to predict next month."

Yan has raised the prices of the merchandise on his shop about 3 percent, due to higher quotes from his upstream warehouse and logistic providers. But the prices are still lower than those in offline stores in the US, so for now, his shop is still competitive on profit margins.

Like most cross-border e-commerce dealers in China, Yan's company entrusts a third-party, overseas warehouse to cover all customs clearances for him. One of his providers has listed "tariff surcharges" of 13 yuan (US$1.78) per kilogram, based on the current 145 percent tariff, an extra 3 yuan per kilogram for electronic products and their parts, and an extra 6 yuan for auto parts, steel and aluminum products.

"Originally the tariff for products in a container of 70 cubic meters was about US$6,000, and now it is US$10,000," Yan said. "And eventually, it will be buyers in the US that bear the extra costs."

Major Chinese budget e-commerce platforms Temu and Shein, which rely on direct mail, small parcel sales, have both announced that their prices in the US are rising on the back of tariffs. The amount of the increases, however, has stunned some US consumers, who complained on social networking sites that prices have gone crazy.

"America is losing its mind," said Rachel Bitecofer on X (formerly Twitter), posting a Temu receipt that showed import charges were higher than the price of the merchandise itself.

Meanwhile, data compiled by Bloomberg News showed that the average price of the top 100 beauty and health products on the Shein platform soared 51 percent last week. Some items saw even steeper price hikes – a set of kitchen towels surged 377 percent, while eyebrow gel rose nearly 200 percent.

According to e-commerce analyst ECDB, the US is China's third-largest market for cross-border e-commerce.

US Customs and Border Protection data for 2023 showed the value of Chinese cross-border, e-commerce trade with the US at US$46.5 billion, of which US$36.7 billion related to shipments valued at US$800 or less.

That duty-free exemption for small parcels has been a significant support for Chinese cross-border, e-commerce platforms because it allowed mainland vendors to mail products directly to the US without extra logistics and storage costs. Utilizing that model, companies like Temu and Shein have rapidly expanded in the US market.

Many Chinese e-commerce sellers are planning to move out of the American market and refocus their targets to Europe and Southeast Asia.

Yan said that it's not possible to cover all the tariff costs through endless price rises. He said he has started to research European markets to prepare for the worst.

"It takes at least three months to find a new market," he said. "And I may have to abandon the present categories of merchandise because European consumers have different preferences. American shoppers tend to be pragmatic, while Europeans love to indulge themselves with a little luxury."

This month Temu linked up with a "smart" warehouse in Warsaw to facilitate orders from parts of Europe.

China Biz Buzz found that almost all the new vendors on Temu have chosen the European market at their target, and rest are looking at US alternatives.

"It is a difficult decision to give up the US market," said Chang Defeng from Guangdong Province, who runs a shop selling toys on Temu. "After the price rise, my sales volume has dropped by a third to half, and I have started to arrange a new shop in Europe. But after all, the US is a much bigger market."

Wang Jia, assistant research professor with the Institute of Economics at the Shanghai Academy of Social Sciences, told China Biz Buzz that smaller vendors will face more challenges because they rely more on small-parcel sales.

The imposition of duties on those parcels, she said, will amplify customs clearance red tape, extend delivery times and introduce potential extra fees.

"Such factors can negatively impact the customer experience and reduce the repeat purchase rate," she said, noting that Chinese sellers may be forced to restructure their logistics and supply chain frameworks.

"Sellers can try to diversify their market focus by expanding into high-growth economies, such as in Southeast Asia, the Middle East and Latin America, relying less on the US market," Wang added.

She noted that China has adopted new policies to support cross-border e-commerce sellers, including preferential tax treatment, simplified export documentation and improved customs clearance efficiency.