China sellers brace as EU preps US-style move to tighten rules on low-value parcels
News Summary
EU member states and the European Council have agreed to remove the €150 (US$174) customs duty relief threshold for low-value parcels, a move set to take effect next year. This mirrors a prior US decision to scrap duty-free treatment for small parcels, which has already impacted Chinese cross-border e-commerce sellers. A Shenzhen-based seller, whose business operates on an approximate 38% gross margin, anticipates significant margin pressure from an estimated 20% total tax increase. He noted that his sales on TikTok Shop in the US have already fallen about 40% year-on-year since July. The European Commission found that 91% of all e-commerce shipments valued under €150 in 2024 originated from China, with volumes more than doubling to 4.17 billion items between 2023 and 2024. Analysts expect China to be particularly hard hit due to its dominance as the source of these shipments.
Background
Cross-border e-commerce has experienced rapid growth in recent years, particularly for low-value parcels originating from China, often benefiting from various countries' customs duty relief thresholds. The United States previously removed duty-free treatment for small parcels. This policy change, enacted under the Trump administration, aimed to level the playing field for domestic retailers and address concerns about unfair competition and import volumes. The EU's current move, mirroring the US, signals a broader trend among major global economies to reassess and revise trade rules that have historically favored such shipments.
In-Depth AI Insights
What are the true drivers behind this move, beyond mere tariff revenue? - Beyond the obvious reasons of increasing fiscal revenue and protecting local businesses, the deeper motivation for both the EU and US in these actions is to reshape global trade flows and supply chain resilience. - This is a strategic maneuver designed to reduce over-reliance on a single source of imports and encourage localized production or sourcing from closer, more reliable trade partners. - Furthermore, it reflects a growing concern over data transparency and a level playing field, as the sheer volume of low-value parcels makes tracking origins and ensuring compliance increasingly difficult. What are the long-term implications for China's cross-border e-commerce ecosystem and related investments? - In the long term, this will force structural adjustments within Chinese cross-border e-commerce, shifting from pure price competition to value chain upgrading. Businesses may need to invest in overseas warehousing, localized operations, and brand building to adapt to the new trade environment. - For platforms and logistics providers dependent on low-cost, high-volume models, profit margins will face immense pressure, potentially leading to industry consolidation and the accelerated elimination of companies unable to adapt. - Investors should focus on Chinese e-commerce related companies capable of deep localization, possessing strong brands, or unique technological advantages, rather than those solely relying on duty-free policy benefits. How should investors assess the risks of such policy changes amid rising global trade protectionism and supply chain reconfiguration? - Investors must recognize that these "US-style" trade barriers are not isolated incidents but part of a broader trend of geoeconomic fragmentation and spreading trade protectionism globally. Similar policies could be emulated in other regions, increasing global trade uncertainty. - When assessing corporate risk, focus on the resilience of their global supply chains, their dependence on single markets or policies, and the effectiveness of their diversification strategies. Companies with flexible supply chains and multi-market presence will be more resilient. - For businesses heavily reliant on cross-border logistics and low-value goods, their valuation models need to be re-evaluated to incorporate policy risk and compliance costs.