The introduction of the bipartisan ‘Fighting for America Act’ has put the global e-commerce industry in a quandary, particularlyChinese giants like Shein and Temu. The legislation aims to close a loophole that has allowed millions of low-value goods to enter the US duty-free, a practice that has significantly benefited these companies.

Experts point out the potential impact of this act on Chinese e-commerce is profound. "This is a game-changer," opines Steve Dennis, CEO,SageBerry Consulting, a renowned e-commerce analyst. "It directly challenges the business models of companies that have thrived on low prices and fast shipping."

The act, if passed, will eliminate de minimis exemptions for most textile and apparel imports, including those from China. This means that these products will now be subject to customs duties, significantly increasing their cost for US consumers. "This could force a radical shift in the strategy of Chinese e-commerce companies," explains Mary Ellen Proulx, President, Retail Globalization, Inc.

Chinese e-commerce imprint on US market

Chinese e-commerce platforms have rapidly gained market share in the US, leveraging low prices, fast shipping, and a vast product assortment. A report by Coresight Research highlights, the US market for fast fashion, dominated by Chinese players, is expected to reach $112 billion by 2025.

However, this rapid growth has raised concerns about labor practices, intellectual property theft, and unfair competition. A Peterson Institute for International Economics study found Chinese e-commerce has resulted in a trade deficit of $375 billion for the US in 2022.

While the full implications of the Fighting for America Act are yet to be determined, potential outcomes include:

• Price hikes: To offset increased costs, Chinese e-commerce platforms might be forced to raise prices, potentially impacting their competitive edge.

• Supply chain adjustments: Companies may explore sourcing products from countries with existing free trade agreements with the US or invest in domestic production to mitigate the impact of tariffs.

• Business model overhaul: Some companies might need to rethink their business models, focusing on higher-value products or niche markets to remain profitable.

• Increased competition for US retailers: With higher costs for Chinese imports, US retailers could see a surge in demand for domestically produced goods, levelling the playing field.

However, the Chinese e-commerce industry is known for its resilience and adaptability. "These companies have shown remarkable agility in the past," noted Neil Saunders, Managing Director of GlobalData Retail. "They might find innovative ways to navigate these challenges, perhaps by focusing on product differentiation or premiumization."

While the Act is still to be passed, the e-commerce industry is closely watching the legislative process. If enacted, it could mark a turning point in the global e-commerce landscape, with far-reaching consequences for both consumers and businesses.