n February 7 that puts a pause on his closing of the de minimis trade exemption. Understanding de minimis The de minimis rule is at the centre of the turmoil. It is a little-known provision that has played a crucial role in the explosion of cross-border e-commerce. Under the existing rule, individual shipments valued at less than US$800 are allowed to enter the US duty-free, with minimal inspections. This exemption has become a cornerstone for companies like Shein, Temu and Amazon Haul, enabling them to ship vast quantities of inexpensive goods directly to American consumers. US Customs and Border Protection (CBP) estimates that from FY18-FY21, 67.4 per cent (US$228.3 billion) of US de minimis imports were from China, with US$149 billion from mainland China and US$79.3 billion from Hong Kong. CBP estimates that in 2023 alone, US de minimis imports were 1 billion parcels valued at about US$54.5 billion. Impact on e-commerce giants The regulatory changes have sent ripples through the e-commerce industry, particularly affecting major players who have built their business models around direct-to-consumer shipments from China. The immediate impacts are already becoming apparent, with several companies facing operational challenges and strategic uncertainties. Shein’s planned IPO listing on the London Stock Exchange, expected in the first half of this year, will probably be delayed, Financial Times reported. “This certainly doesn’t spell the end of Shein,” Neil Saunders, managing director and retail analyst at GlobalData said. “However, it’s not great for the IPO. With any IPO, investors like a degree of certainty because they base their valuations on past performance and forecast future performance. “The problem with the current environment is that there are a lot of unknowns. And there are rapid changes occurring to policies and processes that could directly affect Shein’s business and its trading. That all clouds the picture for investors, and it looks like it will suppress the valuation.” Retail analysts predict that companies like Temu and Amazon Haul will also face challenges. The removal of duty-free access means that each low-value package will now be subject to tariffs and customs processing, leading to increased costs and potential delays. Industry experts said retailers that have benefited from de minimis now face a critical choice: pass on the additional costs to consumers, potentially eroding their competitive pricing and market share, or absorb the costs internally, hurting their net profitability. Shein and Temu’s countermeasures In response to the policy upheaval, both Temu and Shein have been exploring alternative strategies to mitigate the impact of US tariffs. Shein has been actively diversifying its supply chain by adding suppliers outside of China, including in Brazil and Turkey. Additionally, the company is offering its Chinese manufacturers incentives such as up to a 30 per cent increase in procurement prices and larger order guarantees to relocate some of their production to Vietnam. Meanwhile, both companies have been ramping up their presence in the US by opening warehouses and onboarding more American sellers to shorten delivery times and lower tariff exposure to help them maintain competitive pricing despite the end of de minimis benefits. A repeat of 2018? This isn’t the first time the US has aggressively targeted Chinese imports. In 2018, during Trump’s first term, his administration imposed tariffs on hundreds of billions of dollars’ worth of Chinese goods as part of a broader trade war. Those tariffs, which led to retaliatory measures from Beijing, disrupted global trade and affected American businesses reliant on Chinese manufacturing. With Trump now intensifying trade restrictions once again, industry leaders worry that history could repeat itself, potentially triggering countermeasures from China that could further complicate international trade. “Broad-based tariffs could hurt more US consumer products and retail companies this time around than in 2018, which was more manageable,” said Bea Chiem, retail and consumer managing director, S&P Global Ratings.  “More than 24 per cent of retail credits and 19 per cent of consumer credits have negative outlooks, indicating an above-average negative bias and little headroom for additional macroeconomic pressures.”  S&P Global Ratings stated that price increases will be harder to pass along to the consumer this time around, because of the recent inflation cycle and already weak consumer environment. Businesses and consumers are now left navigating an uncertain landscape, one where the cost of fast fashion, cheap electronics, and everyday goods could soon rise substantially. Further reading: How companies accelerated US shipments ahead of tariff hikes