G7 countries to impose tariffs on Chinese products!

On May 20 local time, the G7 Finance Ministers’ Meeting officially opened in Banff, Alberta, Canada. At the opening press conference, Canadian Finance Minister François-Philippe Champagne revealed that G7 countries have begun discussions on imposing tariffs on low-value Chinese goods. The move aims to curb the oversupply of Chinese products and coordinate efforts among member nations to address excess production capacity and non-market practices. If a consensus is reached, this development could have a profound impact on China’s cross-border e-commerce and manufacturing sectors.

In recent years, some Western countries have targeted Chinese online retail platforms such as Temu and Shein, accusing them of flooding their domestic markets with low-value goods. The United States, being the largest market for Chinese small parcels, has already seen former President Trump eliminate the “de minimis” tariff exemption for low-value Chinese packages, with tariff rates reduced from as high as 120% to 54%. This measure has led some Chinese exporters to redirect packages originally destined for the U.S. to other markets, undermining the competitiveness of local producers and retailers. In response to this trend, several countries have taken action—six out of the seven G7 nations have already imposed or are considering imposing consumption taxes or tariffs on low-value Chinese goods.

United States
United States President Trump revoked the “de minimis” tariff exemption for low-value Chinese parcels, with tariff rates reaching as high as 120%, later reduced to 54%. According to U.S. Customs and Border Protection, in 2024 the U.S. cleared 1.36 billion postal parcels, valued at nearly $65 billion—around 2% of the country’s total imports. Nearly 60% of these tax-exempt parcels, worth approximately $39 billion, originated from China.

France and the European Union
France plans to impose a fixed “handling fee” on all low-value tax-exempt parcels entering Europe starting in 2026. This will target platforms like Shein, Temu, and Alibaba. The measure will be submitted to the EU Council for review in June as a transitional step before the EU fully abolishes the small-parcel tax exemption in 2028. France aims to coordinate with neighboring countries such as Germany and the Netherlands to implement this fee across Europe, charging several euros per parcel. In 2024, over 800 million low-cost imported parcels flowed into France—”91% of which came from China.” Many of these products fail to meet safety standards, and some are suspected of being counterfeit, posing triple risks to consumers, brand owners, and national finances.

United Kingdom
UK Chancellor Rachel Reeves announced a review of the low-value consignment relief (LVCR) policy, which currently exempts goods valued under £135 from customs duties. Starting in May, the government will consult stakeholders to assess the policy’s impact on consumers and businesses. The initiative has gained support from domestic retailers, who argue that current rules allow platforms like Temu and Shein to undercut local businesses with ultra-low prices. In 2023, the UK imported $16.5 billion worth of low-value Chinese goods under this policy. If the new policy is implemented, the cost of direct-to-consumer shipments from China could increase by 10%–15%.

Japan
Japan is considering revising its tax exemption policy for parcels valued under 10,000 yen, in a move seen as targeting Chinese platforms Shein and Temu. Currently, such small parcels are exempt from import duties and consumption tax. If the policy is changed, parcels purchased from these platforms and shipped to Japan may be subject to a 10% sales tax.

Canada
Following the U.S. decision to revoke the de minimis exemption for Chinese small parcels, cross-border e-commerce between the U.S. and Canada has been disrupted. To address the issue, Canada is considering imposing taxes on small parcels originating from China.

Impact on China

If the G7 countries ultimately reach a consensus to impose tariffs on low-value Chinese goods, it would have a significant impact on China’s e-commerce and manufacturing sectors—especially small and medium-sized manufacturers.

Rising Export Costs:
Tariffs will increase the cost of exporting low-value Chinese products to G7 countries, weakening their price competitiveness. This could lead to a decline in export volumes, particularly in low-margin industries such as apparel, electronics, and miscellaneous consumer goods.

Profit Margin Compression:
Many Chinese factories, especially small and medium-sized ones, operate on a high-volume, low-margin business model. Tariffs would further compress their already thin profit margins, potentially forcing some to shut down or prompting them to invest in production upgrades, cost reduction, or price increases to survive.

Supply Chain Shifts:
To mitigate the impact of tariffs, some businesses may seek to relocate production to countries with lower trade barriers, such as Vietnam or India. However, such moves require time and capital investment, which could limit production capacity in the short term.

Increased Pressure on the Domestic Market:
With low-value exports hindered, excess production capacity may be redirected to the domestic market, intensifying competition, saturating supply, and triggering price wars. This would place further pressure on small and medium-sized enterprises.

Weakened Platform Competitiveness:
Platforms like Temu and Shein rely heavily on low prices and duty-free small-parcel shipments. New tariffs would raise product prices, reducing their appeal in G7 markets and potentially causing a drop in order volumes. Additionally, cross-border e-commerce platforms would face higher logistics and operational costs.

Rising Risk of Global Supply Chain Restructuring:
If the G7 maintains these trade barriers over the long term, Chinese manufacturing may accelerate its relocation to Belt and Road Initiative (BRI) countries. Meanwhile, the West’s push for “friend-shoring” would further squeeze China’s share of the global low-end manufacturing market.

China’s Strategic Response:
To mitigate the effects of G7 trade measures, China must take proactive steps. These include optimizing its industrial structure, increasing product value, and diversifying export markets. Such efforts will be critical in reducing the impact of trade friction and promoting the sustainable development of China’s manufacturing sector.

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