China's Temu and Shein: E-Commerce Giants and Their Impact on European Retail
As U.S. tariffs reshape trade dynamics, Chinese retailers Temu and Shein turn their focus towards Europe, raising concerns over competition and product safety.
In recent years, Chinese e-commerce platforms Temu and Shein have significantly affected global trade, particularly in the United States.
The implementation of U.S. tariffs in 2024 has reshaped their business model, following the elimination of a duty-free loophole known as the de minimis rule.
This rule previously allowed goods valued under $800 to enter the U.S. without incurring import tariffs.
Shipments entering the U.S. under this category surged to 1.36 billion in 2024, a striking increase from 153 million in 2015. With the introduction of tariffs of 30% or flat fees of up to $50, along with a 145% tariff specifically on imports from China, the retail prices for consumers in the U.S. have more than doubled, shrinking profit margins for Temu and Shein.
In response to these challenges, the two companies are likely to expand their operations in Europe, leveraging the European Union's current de minimis exemption of €150 ($170) to maintain their low-cost business strategy.
In 2024, the EU market experienced an influx of 4.6 billion low-value parcels, a doubling from the previous year and a tripling since 2022, with approximately 91% of these items originating from China.
This results in a competitive disadvantage for European retailers, who are not only bound by higher production and compliance costs but also do not benefit from similar postal rate advantages.
While discussions on removing the EU's de minimis exemption started two years ago, any definitive policy change is not anticipated before 2027, according to recent reports.
This delay intensifies the pressure on European merchants already contending with the adverse effects of competition from Chinese firms.
Concerns are emerging not only regarding economic competitiveness but also around the safety of products entering the European market.
Agustin Reyna, the director general at a Brussels-based consumer protection organization, reported that numerous Chinese goods frequently fail to meet EU safety standards, citing incidents involving toxic materials in cosmetics and defective toys.
Reyna emphasized that this influx of potentially unsafe products purchased from platforms like Temu poses significant risks to consumer health and safety.
In response to these safety concerns, the European Commission has committed to implementing stricter controls on Chinese retail platforms to prevent hazardous or counterfeit products from entering the market.
Calls have been made for online platforms to be held accountable for the products they sell, recognizing the current model allows them to avoid direct liability.
Furthermore, a growing issue of value-added tax (VAT) fraud has been reported among some Chinese sellers, with incidences of underdeclaring goods' values to evade tax obligations, which can range from 20% to 27% depending on the EU member state.
Recent investigations by the EU's anti-fraud office and Polish authorities unveiled a sophisticated VAT fraud scheme involving misdeclared goods entering Poland while falsely claiming to be destined for other EU countries.
Amidst these challenges, some EU nations, including France, are beginning to take action.
France plans to enhance inspection measures for low-value goods entering the country, assessing them for compliance with safety and labeling standards.
A flat-rate management fee per parcel is also under consideration to help offset increasing administrative costs related to customs and safety checks.
As the European Union and its member states look to navigate the complexities of international trade and product safety, policymakers face the task of balancing efforts to mitigate fraud and ensure compliance while maintaining accessibility to affordable goods from platforms like Temu and Shein.
The implementation of U.S. tariffs in 2024 has reshaped their business model, following the elimination of a duty-free loophole known as the de minimis rule.
This rule previously allowed goods valued under $800 to enter the U.S. without incurring import tariffs.
Shipments entering the U.S. under this category surged to 1.36 billion in 2024, a striking increase from 153 million in 2015. With the introduction of tariffs of 30% or flat fees of up to $50, along with a 145% tariff specifically on imports from China, the retail prices for consumers in the U.S. have more than doubled, shrinking profit margins for Temu and Shein.
In response to these challenges, the two companies are likely to expand their operations in Europe, leveraging the European Union's current de minimis exemption of €150 ($170) to maintain their low-cost business strategy.
In 2024, the EU market experienced an influx of 4.6 billion low-value parcels, a doubling from the previous year and a tripling since 2022, with approximately 91% of these items originating from China.
This results in a competitive disadvantage for European retailers, who are not only bound by higher production and compliance costs but also do not benefit from similar postal rate advantages.
While discussions on removing the EU's de minimis exemption started two years ago, any definitive policy change is not anticipated before 2027, according to recent reports.
This delay intensifies the pressure on European merchants already contending with the adverse effects of competition from Chinese firms.
Concerns are emerging not only regarding economic competitiveness but also around the safety of products entering the European market.
Agustin Reyna, the director general at a Brussels-based consumer protection organization, reported that numerous Chinese goods frequently fail to meet EU safety standards, citing incidents involving toxic materials in cosmetics and defective toys.
Reyna emphasized that this influx of potentially unsafe products purchased from platforms like Temu poses significant risks to consumer health and safety.
In response to these safety concerns, the European Commission has committed to implementing stricter controls on Chinese retail platforms to prevent hazardous or counterfeit products from entering the market.
Calls have been made for online platforms to be held accountable for the products they sell, recognizing the current model allows them to avoid direct liability.
Furthermore, a growing issue of value-added tax (VAT) fraud has been reported among some Chinese sellers, with incidences of underdeclaring goods' values to evade tax obligations, which can range from 20% to 27% depending on the EU member state.
Recent investigations by the EU's anti-fraud office and Polish authorities unveiled a sophisticated VAT fraud scheme involving misdeclared goods entering Poland while falsely claiming to be destined for other EU countries.
Amidst these challenges, some EU nations, including France, are beginning to take action.
France plans to enhance inspection measures for low-value goods entering the country, assessing them for compliance with safety and labeling standards.
A flat-rate management fee per parcel is also under consideration to help offset increasing administrative costs related to customs and safety checks.
As the European Union and its member states look to navigate the complexities of international trade and product safety, policymakers face the task of balancing efforts to mitigate fraud and ensure compliance while maintaining accessibility to affordable goods from platforms like Temu and Shein.
