Washington’s planned crackdown on duty-free imports of Chinese goods will place further pressure on consumer goods experts, from Alibaba Group Holding Ltd. to Temu, who’re already fighting the buyer crisis of their home country.
Alibaba and smaller rival JD.com Inc. fell about 2% in Hong Kong on Monday as investors analyzed the potential impact of U.S. plans to tax packages valued under $800, effectively closing a legal loophole that PDD Holdings Inc.’s Temu and fashion-focused rival Shein have used for years to ship tons of of hundreds of thousands of packages to the U.S. annually, capturing a market on the expense of Amazon.com Inc. PDD lost 2.4% on Friday.
The move threatens to reshape parts of the U.S. retail industry and dampen the passion that has accompanied the meteoric rise of bargain marketplaces corresponding to Temu, Shein and Alibaba’s AliExpress. It also hit shares of other U.S. retailers corresponding to Australian fashion retailer Cettire Ltd. on Monday.
However, analysts expect that Shein and Temu will bear the brunt of the measures – depending on the extent and extent of the tariffs imposed.
“Although the market has been anticipating that the U.S. government may announce action to amend/reform the de minimis exemption, this was still viewed as a negative development,” Citigroup Inc. analyst Alicia Yap wrote in a research note. “The lack of transparency regarding the timing of implementation and potential impact will continue to weigh on the stock’s performance in the near term.”
White House officials announced Friday they’d propose rules that might limit the usage of the so-called de minimis exemption, which allows products valued at lower than $800 to go on to consumers without customs declarations or tariffs. The measures are geared toward reducing tariff evasion and stopping shipments laced with fentanyl.
Investors have been bracing for this move for a while. The European Commission has had the ultra-fast fashion industry in its sights since at the least 2021, when President Ursula von der Leyen described it as “Poison“Because of the environmental impact of disposable clothing. U.S. authorities are also concerned concerning the prospect of other illegal items – corresponding to drugs – entering the country.
In separate statements, Temu and Shein stressed that their growth just isn’t depending on the tax exemption policy. The two China-linked corporations said they’d concentrate on the efficiency of their business and consumer satisfaction.
“Our success is anchored in our unique on-demand business model,” Shein said in its statement, adding that it “called for de minimis reform to create a level, transparent playing field – where the rules are applied evenly and equally.”
Investors are currently waiting, however the impact is prone to be far-reaching. Amazon, for instance, has come under pressure from Temu and Shein – a lot in order that it has Discount Marketplace on its platform for Chinese merchants to ship on to the USA.
“The clear benefit is the potential reduction in competitive pressure from Chinese exporters, which will impact marketing costs and demand,” wrote Morgan Stanley analysts led by Nathan Feather, outlining how U.S. retailers corresponding to eBay Inc. and Etsy may gain advantage. Still, they said, “both companies have a Chinese seller base.”
Shein, which focuses on an IPO The company, which could value the Chinese apparel giant at over $60 billion, pioneered the model of targeting price-conscious Americans with $2 blouses and $10 shirts in the course of the Covid period. Temu entered the market around 2022 with its slogan “Shop Like a Billionaire” and quickly became one in every of PDD’s biggest growth drivers globally.
Analysts estimate that Temu only accounts for a low double-digit percentage of PDD’s total business – although a big portion of it comes from the US. Temu is prone to have handled gross merchandise volume of about $20 billion in the primary half of 2024, with about 40% of that coming from the Americas, estimates Jefferies analyst Thomas Chong. And the explosive growth that made PDD the darling of the market is already showing signs of fade awayhit hard by the continuing decline in consumption in China.
As for Shein, it cannot afford any uncertainty ahead of its IPO, and each corporations are coming under increasing scrutiny within the US as relations with China come into focus ahead of the November election.
“Geopolitical risks have long been a concern for investors, particularly the tariff issue related to cross-border e-commerce,” Chong wrote. “Compared to foreign competitors, we expect Temu to maintain its pricing advantage as Temu does not charge commissions and operates on a low-cost model.”
