The US Postal Service has suspended incoming packages from China and Hong Kong, affecting major online retailers such as Shein and PDD’s Temu. This decision does not impact letters and flat mail. The suspension may aim to enforce tariffs and close loopholes that allowed small-value shipments to enter the US without duties. This move follows Trump's revocation of a "de minimis" rule that exempted packages under $800 from tariffs, which is part of a new 10% tariff implemented on goods from these regions.
This crackdown targets loopholes used by companies like Temu and Shein that enable them to ship many small packages, giving them an advantage over competitors like Amazon. Critics argue that the influx of parcels from China can be hard to monitor and may include illegal or harmful items.
Data indicates a significant increase in de minimis shipments, with 1. 4 billion packages entering the US in fiscal year 2024, double the number from 2022, largely due to discount online retailers. The impact of the USPS's suspension may be limited compared to past years, as other postal services have stepped in to manage lightweight e-commerce packages from China.
US officials suggest that shipments from China may be used to smuggle drugs like fentanyl. The new tariff order started just as tariffs for goods from Mexico and Canada were paused. Trump has suggested a possible upcoming conversation with Chinese leaders, although no details or confirmations exist regarding potential pauses on the tariffs that could affect the Postal Service's actions.
Shares for Alibaba and JD.com dropped significantly in Hong Kong following these developments. A Goldman Sachs report examined how the removal of the de minimis exemption will impact Chinese e-commerce companies, noting that the US market is significant for Temu, which accounts for about 40% of its sales. It also highlighted that Temu currently poses a financial burden on its parent company, PDD.
Despite new regulations, Goldman projects that Chinese e-commerce platforms will maintain a cost advantage over US retailers. Temu is diversifying its market presence, now seeing only 15% of its users from the US, down from 100% when it launched. The business model of Temu is evolving from reliance on air freight and de minimis exemptions to a more complex system involving sea freight and local merchants.
Looking forward, the focus will be on additional tariffs for cross-border e-commerce goods and potential regulations that could affect Temu's operations in the US. The ongoing geographical diversification and shifts in its business model are key to Temu’s future, especially if similar sanctions are adopted by other countries.
https://www.zerohedge.com/markets/us-postal-service-suspends-shipments-parcels-china-hong-kong
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