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Why Chinese e-commerce companies could be the first victims of Trump’s tariff hikes
Along with the 25% tariff Donald Trump has threatened on his supposed allies Canada and Mexico to retire them a few hour later, as well as the 10% slapped on Chinese imports, there is an additional provision with potentially important ramifications that has been largely overlooked amid the hullaballoo: the suspension of de minimis agreements, in force since the 1930s, which exempted shipments valued at less than $800 from taxes, and which have skyrocketed to more than 1.3 billion packages in recent years thanks to Chinese e-commerce companies such as Shein, Temu or AliExpress.
The problem with tax-exempt shipments is that, in addition to reinforcing the cost advantage Chinese companies already enjoy due to their lower unit labor costs (as well as savings made from ignoring environmental and health and safety legislation, among other factors), they also benefit from a very low inspection regime, which in many cases means potentially unsafe products are being exported. The European Union is considering measures that would make this Chinese companies, along with Amazon, responsible for any forbidden or dangerous products sold in their platforms.
Seen from this perspective, the biggest problem for these Chinese companies is not the 10% tariffs, but an end to the reduced inspection…