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The Chinese e-commerce app Temu, which has been topping the US Apple Store’s download rankings for the second year in a row, may lose its competitive advantage due to stricter customs regulations. The attention of the US and European governments to Chinese platforms such as Temu and Shein is causing serious concerns in Beijing, CNBC reports.
Rapid growth under the umbrella of customs exemption
The de minimis rule introduced in the US, which allows parcels under $800 to avoid customs duties, has been a key factor in Temu’s success. Thanks to this provision, Chinese companies were able to offer cheap goods, effectively bypassing customs tariffs. However, the administration of President Joe Biden has already submitted a proposal to Congress to abolish this loophole.
If this rule is cancelled, prices for goods could rise significantly, and the position of Chinese platforms in the US market will weaken.
The scale of the problem for China
According to Nomura, the de minimis rule provides China with $240 billion worth of exports annually, which is about 7% of the country’s total exports. The cancellation of the exemption in the US could reduce the growth rate of Chinese exports by 1.3% and GDP by 0.2%.
The consequences will be even more significant if similar measures are introduced by the European Union or Southeast Asia.
Reactions from Europe and Asia
The EU has already announced plans to abolish the duty exemption for parcels worth less than €150. In addition, the European Commission has launched a review of Temu’s compliance with the Digital Services Act (DSA), particularly in the areas of selling illegal goods and data collection.
In Southeast Asia, some countries, such as Vietnam and Indonesia, have already imposed anti-dumping duties, and Thailand has stepped up import monitoring. Vietnam has even banned Temu from operating in the country entirely.
The new Trump administration as a threat to Temu
US President-elect Donald Trump, who has made reducing imports from China one of the main points of his campaign, promises to significantly increase duties – up to 60-100%. These measures could further complicate the operations of Temu and other Chinese platforms in the US.
The end of the honeymoon period?
Temu’s success in the US market has been an example of China’s skill in exploiting favourable international trade conditions. However, as control over such platforms tightens, their honeymoon period with Western consumers may soon come to an end.
Such changes will pose serious challenges for small Chinese manufacturers, while consumers in the US and EU are likely to face higher prices for popular goods from China.
