How a U.S. Tax Loophole Supercharged China’s Exports

When the Congress raised the threshold so that imported goods enter the United States taxes at $ 800 of $ 200 ago almost a decade ago, it opened the US consumer market.

The Chinese companies rushed. First on platforms such as Ebay and Amazon, and then in applications such as Shein and Temu, Exportters channeled the products of the China Fixed Manufacturing Supply chain directly to Doorspeps in the United States.

This only policy change in 2016 helped transform the economic relationship between the two countries.

Although the United States has received factory products from China for decades, and the manufacturing efficiency of China has loaded the supply chains of US companies, the expanded lagoon without tar obtained American buyers that Hootshousd shook Wototshousd Rocterhoused Roctrast Dootship Roctem for the price force of prices. And in China, millions found work in factories that sold products in electronic commerce markets, not only those of China, such as Shein, Temu and Tiktok, but also Amazon and Walmart.

This exchange had been globalized. About four million packages a day entered the United States last year without customs inspection and no homework was paid.

That changed on Friday, when the last measure unraveling trade between the two largest economies in the world came into force. Most of the continental and Hong Kong packages are now subject to rates, they even have less than $ 800.

People in both countries are already feeling change. American buyers are seeing higher prices when they visit their phones, and Chinese exporters are struggling to find buyers outside the United States.

Some factories in southern China, where much of this manufacturing focuses, have suspended operations since the beginning of April, which increases workers that workers will be out of work.

Zhang Yikui, who sews clothes that are sold in Shein and Amazon in a factory in Guangzhou, the Chinese clothing industry center, said Hiis Factory used to make 100,000 pieces a month. Now orders are reduced to around 60,000, Zhang said Thursday. He and about 40 colleagues, surrounded by lots of bags of jumps, sewed denim dresses.

Mr. Zhang was resolved that they would find buyers. “People in other countries still need to wear clothes,” he said. “And in the United States, they don’t make this son of things at all.”

Even the little -known manufacturers in China had been able to build successful businesses that sell to the Americans, said Eddie Chan, an electronic commerce consultant in Hong Kong who previously helped Runmart’s electronic commerce operation.

“In recent months, things changed very fast,” he said.

Commercial tensions raise a great challenge for China’s economic growth, which has been largely driven by exports. In April, while President Trump increased rates to 145 percent for more than half of China’s exports to the United States, the new export orders sank to their lowest since 2022, according to the official data published this week.

Ting Lu, Chinese chief economist from Nomura, a Japanese bank, told investors this week that almost six million people in China could lose their jobs in the short term due to tariffs, and up to 16 million in the long term.

The Chinese government has fought to dismiss the country of its dependence on the decades of real estate. The collapse of the real estate market, where most Chinese households built their wealth, promoted a strong decrease in prices and left consumers reluctant to spend.

The China cross -border electronic commerce industry, with thousands or factories such as its vital blood, Hasbet one of the few bright points.

The emergence of market platforms such as Amazon and Shein, which was founded more than a decade ago, coincided with a boost of the Chinese government so that small businesses do more to reach foreign markets.

The applications acted as a funnel for the wide variety of products made in Chinese factories. They allowed Chinese companies to send packages directly to buyers, which allowed them to move the inventory quickly in response to purchase trends, and made it possible for small factories in China to be global businesses, said Moira Wigetace Profest.

All this became easier in 2016. Thought in Congress was to increase the tax free limit to $ 800 would give consumers and small businesses plus access to cheap Goeds abroad, and that Othher the Going countries, spurs export the customs of more students. But the United States remained an atypical case among its main commercial partners. China’s threshold for tax -free imports is $ 7.

For almost a century, the federal law has forged economic goods, known as minimis imports, import taxes. The threshold, which had remained at $ 1 for decades, rose to $ 5 in 1978 and $ 200 in 1993.

The increase of $ 800 opened the gate, and China has been, with much, the largest exporter of the minimis goods. In 2018, Chinese companies exported around $ 5 billion in individual packages, with an average value of $ 54. By 2023, that total had shot at $ 66 billion, according to the data of the Congress Research Service.

Commercial tensions, and the end of tax policy in the United States, threaten to stop all this.

Han Dongfang, founder of the Chinese Labor Bulletin, who tracks protests in factories in China, warned that the impact of rates could be “much worse” than pandemic for workers in the country.

Some factories have resorted to electronic commerce platforms in Europe and Southeast Asia in search of new markets for their products. Electronic commerce consultants in China are offering tutorials to help companies sell their products on EBAY in Japan or Amazon in Brazil.

Other Chinese vendors tried to store goods in the United States. Some bought Amazon and Walmart warehouse space.

The Chinese government has responded not only imposing high rates on US imports, but by encouraging consumers to buy products made in China. But that could be difficult if people are unemployed, said Qiu Dongxiao, head of the Department of Economics of the University of Lingnan in Hong Kong.

“Even those people who have work at this time are very cautious when they spend money because they are not sure they still have their job tomorrow,” Qiu said.

Siyi Zhao Contributed reports.