From tax-free to tariffed: US policy change puts Chinese e-commerce boom at risk

Proceeding from a new article, The New York Times explores that a decade ago, a simple policy change in the US opened the floodgates for Chinese goods to flood the American market — tax-free. Fast forward to today, and millions of packages are entering the US daily, bypassing tariffs and customs. 

A policy change in 2016 that raised the threshold for imported goods entering the US tax-free from $200 to $800 sparked a surge in cross-border trade, particularly benefiting Chinese exporters. The new regulation, which allowed Chinese companies to sell goods directly to American consumers via platforms like Amazon, eBay, Shein, and Temu, transformed the economic relationship between the US and China. With this policy, millions of Americans enjoyed bargain-priced products, while millions of Chinese workers found jobs in factories producing goods sold across the globe.

By 2023, around four million packages from China were entering the US daily without customs inspection or duty payments. However, this changed on Friday when a new measure went into effect, now requiring tariffs on most packages from China and Hong Kong, even those under $800 in value.

The shift is already being felt in both countries. American shoppers are seeing higher prices at checkout, while Chinese exporters are scrambling to find new markets outside the US Factories in southern China, particularly in Guangzhou—the hub of China’s garment industry—have seen significant cuts in orders. Zhang Yikui, a factory worker who sews clothing for Shein and Amazon, noted that his factory’s production has dropped from 100,000 pieces a month to around 60,000. Despite the downturn, he remains optimistic, saying, “People in other countries still need to wear clothes. And in the United States, they don’t make this kind of thing at all.”

The sudden change in trade dynamics is causing widespread concern. Eddie Chan, an e-commerce consultant, stated, “Over the last couple of months, things changed so fast.” As export orders from China decline and tariffs increase, analysts predict millions of Chinese workers could lose their jobs in the coming months. The Chinese government has responded by encouraging domestic consumers to buy more Chinese-made goods, but experts warn that rising unemployment could make this strategy difficult to implement effectively.

This shift highlights the far-reaching impacts of trade policy and the increasingly fragile economic relationship between the world’s two largest economies.

By Naila Huseynova