The European Union is set to introduce new tariffs that will significantly alter the operations of Chinese e-commerce giants like Shein and Temu. Ursula von der Leyen, the president of the European Commission, is preparing to align with the Digital Services Act and to tighten customs exemption rules in her newly bolstered position.
The EU is implementing new tariffs on online purchases
Under the current regulations, products imported into the EU and purchased online that cost less than 150 euros are exempt from duty. This exemption has allowed Shein and Temu to attract customers with their low prices. However, the upcoming regulations will eliminate this duty-free status, potentially leading to a significant price increase for consumers.
For instance, the price of an all-purpose drill currently priced at HUF 6,000-7,000 or a floral top that costs HUF 3,000 could rise considerably. While this may be unfortunate for consumers seeking bargains, it is relatively positive news for the environment and air traffic. Additionally, Amazon may also benefit from this change as it will remain competitive against its Asian counterparts that offer ultra-low-priced products.
Environmental impacts and air traffic
The new regulation is likely to have beneficial effects on the environment. Recently, Yemeni rebels in the Red Sea have sunk several container ships, resulting in shipping route changes and extended shipping times. This has led to an increased demand for air transport, which, while quicker, is twenty to thirty times more polluting than shipping via cargo vessels.
According to the Wall Street Journal, between June 2023 and June 2024, the air freight cost per kilogram from Southeast China to the United States or Europe rose from $5 to $18. This price increase coincided with a rise in air freight bookings from China by Shein, Temu, Aliexpress, and TikTok Shop, with the number of such flights soaring from zero to nearly 30% of total traffic within a few years.
The growth of Chinese e-commerce
Data from Cargo Facts Consulting indicates that Temu already ships 4,000 tons of products daily, while Shein, which focuses on clothing, delivers 5,000 tons each day. Alibaba comes in slightly behind with 1,000 tons, and TikTok follows with 800 tons, although both are experiencing notable growth.
These e-commerce platforms draw customers in with a combination of low prices and rapid delivery. Yet, with the ending of duty-free rules in the EU, these platforms may face challenges.
Amazon’s strategy
Meanwhile, reports from the American media suggest that Amazon is also preparing to counter the challenge posed by Chinese e-commerce giants. This fall, the company plans to launch a low-cost retail service that will streamline logistics directly from warehouses in China. Amazon Air is also expanding its fleet to maintain competitiveness.
EU actions against Chinese e-commerce
The European Commission has officially requested information from Temu and Shein regarding their compliance with the Digital Services Act. European users should not be subjected to practices such as dark patterns, where personal data and card numbers are requested without ensuring the data protection and security measures mandated by EU regulations.
This information request might signal the onset of a genuine investigation by EU authorities. The exact timing of the new tariffs’ implementation is still uncertain, but many anticipate that the changes will take effect before Christmas, coinciding with the busiest period for air and sea freight.
The European Union is preparing new tariffs that will drastically change the way Chinese e-commerce giants like Shein and Temu operate. Ursula von der Leyen, the president of the European Commission, is preparing to comply with the Digital Services Act and to tighten the customs exemption rules in her newly strengthened position.
The EU is Introducing New Tariffs on Online Purchases
Currently, products imported into the EU and bought online for less than 150 euros are duty-free. This pricing strategy has enabled e-commerce platforms like Shein and Temu to attract customers with their low-cost offerings. However, a proposed regulation will abolish this duty-free status, leading to significant price increases for consumers across Europe.
Expected Price Increases
For example, essential products such as an all-purpose drill currently priced between HUF 6,000-7,000 or a floral top for around HUF 3,000 may see substantial price hikes. While this news is troubling for budget-conscious consumers, it could spell good news for the environment by reducing reliance on air transport.
Environmental Effects and Air Traffic
The new tariff regulation could yield positive environmental impacts. Recent global events—including attacks on shipping routes by Yemeni rebels, which led to the sinking of container ships—have altered trading practices. Consequently, businesses have turned to air freight, which, although faster, is approximately 20 to 30 times more carbon-intensive than traditional sea transport.
Air Freight Trends
Data from the Wall Street Journal indicates that between June 2023 and June 2024, the cost of shipping one kilogram of product via air from Southeast Asia to Western markets surged from $5 to $18. During this same period, e-commerce platforms like Shein and Temu have increased their air freight accounting for almost 30% of total traffic due to heightened demand.
The Rise of Chinese E-Commerce
According to Cargo Facts Consulting, Temu ships around 4,000 tons of products daily, while Shein delivers about 5,000 tons. In comparison, Alibaba and TikTok Shop are also expanding, with 1,000 and 800 tons, respectively. These e-commerce giants have successfully lured customers with their combination of low prices and rapid delivery options. However, the anticipated end of duty-free rules may disrupt this model significantly.
Amazon’s Response to Increased Competition
In light of these developments, Amazon is preparing to counter the challenges posed by their Chinese counterparts. Reports suggest that the retailer will soon launch a low-cost retail service targeting logistics directly from Chinese warehouses. Additionally, Amazon Air is expanding its fleet to enhance its logistical capabilities and maintain competitiveness.
EU Steps Against Chinese E-Commerce Giants
The European Commission has formally requested information from Temu and Shein regarding their compliance with the Digital Services Act. This inquiry includes concerns about “dark patterns”—practices that may compromise user data security and violate EU regulations.
The inquiry may precede a more exhaustive investigation by EU authorities, highlighting the Union’s commitment to enforcing robust consumer protections in the digital marketplace.
Potential Impacts on Consumers
The new tariffs will likely affect various consumer segments:
- Budget Shoppers: Many may turn to local retailers who can offer competitive prices without the additional tariffs.
- Fashion Enthusiasts: Clothing enthusiasts relying on platforms like Shein could face higher prices, necessitating a reevaluation of their shopping sources.
- Eco-Conscious Consumers: The positive environmental impact may appeal to consumers who prioritize sustainability in their purchasing habits.
Benefits of the New Tariffs
While the introduction of tariffs poses challenges, there are various advantages:
- Encouragement of Local Brands: Increased air travel costs can bolster local businesses and encourage consumers to shop locally.
- Environmental Benefits: Reduced air freight reliance may lead to decreased carbon emissions and a smaller environmental footprint.
- Enhanced Consumer Protections: Stricter regulations can provide better support in protecting consumer data and rights.
Looking Ahead: What to Expect
Many analysts predict that the new tariffs may take effect before the busy holiday season, posing both challenges and opportunities for various e-commerce platforms. This uncertain landscape will likely force companies to re-evaluate their logistics and pricing strategies to maintain market share amidst evolving regulations.
Practical Tips for Consumers
As these changes come into effect, consumers should consider the following tips:
- Monitor Local Retailers: Keep an eye on local businesses to find competitive pricing and alternatives to online purchases.
- Plan Ahead: Begin purchasing seasonal gifts early to avoid potential price increases during busy shopping periods.
- Stay Informed: Follow updates regarding changes in e-commerce regulations to make educated purchasing decisions.
