As US slams door, can the rest of the world offer Chinese ecommerce a lifeline?

Lenin once wrote, “There are decades where nothing happens; and there are weeks where decades happen.” Right now, it feels very much like the latter, particularly in the context of the ever-escalating trade wars between China and the US. Each day brings fresh developments, and the ripple effects are far from over.

As someone who calls my product and services ‘the bigger picture’ because I believe you need to understand the interaction between the media and tech industries and the wider geopolitical and macroeconomic landscape, current events are proving the truth of that interaction.

That has become particularly obvious for the Chinese e-commerce players, not just the giants such as Shein and Temu but also the entire Chinese ecommerce sector. Exports to the United States have turbocharged its growth, selling Americans cheap products. While tariffs are an obvious threat, a greater (and less well-known) threat is the move to eliminate the “de minimis” exemption, which allowed goods of $800 or less to be imported from China and elsewhere duty-free. It was the change to the de minimis rules in 2016 (which raised the duty-free limit from $200 to $800) that allowed the Chinese e-commerce companies to explode in the US market. With the Trump Administration ending the exemption for goods from China and Hong Kong in early May, it now looks like the party is over. 

The impact is already being felt. Shein and Temu have warned US customers of price increases starting late April. Both companies have also slashed their US advertising spend. Temu halted Google Shopping ads from April 9 and cut ad budgets by 31% across Meta, X, and YouTube in the two weeks to April 13. Similarly, Shein reduced its average daily spend on TikTok, Meta, YouTube, and Pinterest by 19% month-on-month in the same period, with YouTube seeing particularly sharp declines. Year-on-year, Shein’s ad spend has nearly halved.

The problem for Chinese ecommerce players is that this is not a problem that will go away any time soon. Trump has made it clear that this is at the top of his agenda. There has been some commentary that pressure in the bond markets and/or the Republican party, if inflation rises, may force a change, but I think that is unlikely. The US can probably ride out any financial storm, and the US midterm elections are not until November 2026. Let’s suppose the administration were to secure trade deals with major countries such as Japan and the UK (rumoured to be close). In that case, this will be seen as a vindication of the US’s strategy even if there is a temporary hit to inflation.

Faced with these challenges, Chinese ecommerce players need a new strategy. But what will work?

One option is to relocate operations to cheaper countries like Vietnam. But this seems unlikely to succeed. The US has already imposed tariffs on imports from such countries to counter this tactic and would likely take further action if needed. Additionally, countries like Vietnam have their own national interests and would likely prioritise ties with the US over China. Vietnam, for instance, is reportedly pursuing a trade deal with the US.

Another option—selling more to the domestic Chinese market—is also insufficient. These companies already have a strong presence in China, and the only way to compensate for lost US sales is if Chinese consumers were to spend significantly more. However, that seems improbable given ongoing economic uncertainty, particularly the property sector crisis and its impact on consumer confidence.

This leaves international markets. While Asia and Latin America are potential targets, both come with challenges. Many Asian nations are cautious about allowing Chinese companies to undercut local businesses, and geopolitical tensions—such as India’s strained relationship with China—further complicate matters. Similarly, Latin America, while a key trade partner for China in sectors like minerals, may not be able to absorb the volume of goods needed.

Europe emerges as a potential solution. With nearly 450 million people in the EU and an additional 70 million in the UK, Europe is a wealthy region with strong trade ties to China, particularly in countries like Germany. The Chinese government has been working to strengthen its relationship with Europe, even attempting to align it against the US. Chinese industries, such as electric vehicles (EVs), have already made inroads into European markets.

Yet I doubt whether Europe can provide the offset needed. Despite recent tensions, both the European Union and the UK would almost certainly choose the US, as most other countries would, if forced to choose. The pro-Chinese faction within the German government has arguably weakened. In any event, the very successful business strategy of Chinese EV companies has led to calls for greater protectionism and trade barriers. If Chinese companies were to try to shift en masse goods from the US to European markets, similar calls would almost certainly emerge, and the EU/UK could adopt similar barrier policies. There are also practical logistical and shipping factors, as supply chain networks would have to be reoriented towards Europe. Most importantly, European consumers are already significant consumers of the companies’ products, so it is extremely unlikely they can absorb the extra volume.

Where things stand, and without a comprehensive trade deal between China and the US (which looks unlikely to say the least), it is difficult to see how the Chinese ecommerce sector will avoid taking a substantial hit. 

Ian Whittaker is the founder and managing director of Liberty Sky Advisors. He writes regularly for Campaign Asia-Pacific about the advertising landscape from a financial standpoint.