The business model of Chinese e-commerce platforms Temu and Shain has been shattered, and the flow of their cheap goods into the United States has been stifled, after US President Donald Trump closed loopholes in the duty-free regime.
In 2024, 1,36 billion shipments entered the US under the so-called de minimis rule, which exempts goods worth less than $800 (€704) from import duties. That's nine times more than in 2015, when there were 153 million such shipments.
Goods purchased from Temu and Shane, which accounted for 30 percent of low-value US packages every day last year, will now be subject to a 30 percent tariff or flat fees of up to $50, on top of the 145 percent tariff on imports from China that Trump imposed last month.
With prices for American consumers more than doubling, these retailers' profit margins are being squeezed. It also means that Temu and Shane are likely to double down on pressure on Europe to maintain their low-cost business model, exploiting a loophole in the European Union's minimum value law.
The EU also plans to close the loophole in the law
Although lower than the one in force in the US, the EU's €150 ($170) exemption has not slowed down the explosive growth of Temu and Shane. In 2024, 4,6 billion low-value parcels flooded the EU market – double the number in 2023 and triple the number in 2022. 91 percent of these shipments came from China.
Every day, 12,6 million packages are delivered without customs clearance, putting EU retailers at risk by higher labor, supply chain and compliance costs. Unlike their Chinese rivals, EU businesses also do not benefit from favorable international postal rates.
Although the European Commission proposed to abolish the de minimus rule two years ago, the plan is still awaiting approval from the 27 EU member states and the European Parliament. According to Bloomberg news agency, it is expected to be abolished in 2027 at the earliest.
The delay threatens EU companies that already face fierce Chinese competition – from e-commerce to solar panels to electric vehicles – goods that are now increasingly being redirected to Europe due to Trump's tariffs.
Many EU traders fear that Temu and Shane will now push even more cheap products onto European markets, which would drive them into bankruptcy.
Chinese goods often fail safety tests
In addition to the threat of reduced profitability and increased layoffs in EU companies, the influx of cheap Chinese goods is raising even greater concerns about product safety.
Agustin Reyna, director general of BEUC, a lobby group for European consumer organisations in Brussels, says organisations like his have gathered “extensive evidence” that Chinese goods – from toxic make-up and clothing to faulty toys and appliances – do not meet European Union safety standards.
"We need additional tools to address the influx of unsafe products entering Europe via small packages, which are often purchased on platforms like Temu," Reyna told DW. "Consumers are unknowingly putting their health and safety at risk."
In January, the European Commission promised new, stricter controls on Chinese retail platforms to prevent "unsafe, counterfeit or even dangerous" products from entering the EU. Trade Commissioner Maroš Šefčovič called on EU lawmakers to introduce a handling fee for Chinese parcels to cover rising costs.
Many policymakers would like to see online platforms held directly accountable for the sale of dangerous and counterfeit products. Currently, platforms like Temu are merely intermediaries, not sellers, and thus avoid direct liability. This creates huge problems for customs authorities and regulators.
"With over 12 million parcels entering the [EU] single market every day, it is simply unrealistic to expect customs to act as a last line of defence," Reyna stressed. "It is therefore essential to make online retailers responsible for the safety and compliance of the products they sell to European consumers."
The growing problem of VAT fraud
There is also growing evidence of other illegal practices by Chinese sellers – for example, undervaluing goods to avoid sales tax or value-added tax (VAT), which, depending on the EU country, ranges from 20 to 27 percent.
"There are many cases where importers misreport the value of their shipments in order to make them fall below the threshold and avoid customs formalities. This is fraud," Momcil Antov, a Bulgarian economist and customs expert at the DA Cenov Academy of Economics, told DW.
Last month, the EU's anti-fraud office (OLAF) and Polish authorities uncovered a sophisticated VAT fraud scheme on Chinese goods imported into the EU. To avoid taxes and duties, the fraudsters claimed that the goods were destined for other EU countries, while in reality they mostly remained in Poland.
In another example, Chinese exporters have been using Belgium's Liège airport since 2023 to evade €303 million in taxes using a complex system involving private customs agencies and shell companies in other EU countries.
Although the European Commission's plan to lift the exemption for shipments up to 150 euros remains blocked, some EU countries have accepted Šefčovič's proposal. The French government announced last week that it would step up inspections of low-value goods entering the country.
Product safety, labeling standards and environmental standards will be controlled, and Paris will charge a flat “management fee” for each shipment.
In any case, policymakers in the European Union will need to crack down on fraud and ensure compliance, but at the same time promote fair competition, without restricting consumers' access to bargain goods from Chinese traders.
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