Since the United States imposed additional tariffs on Chinese goods and ended the “de minimis” exemption policy for small parcels from China over a month ago, “tariffs” and “trade war” remain key buzzwords in the cross-border e-commerce sector. A widespread sentiment across the industry is that the fully-managed model targeting the U.S. market is waning, while the overseas warehouse model struggles to transfer tariff costs through price increases. Despite the difficulty in abandoning the U.S. market, diversifying into multiple markets and platforms to mitigate risk has become an industry consensus.
Since President Donald Trump assumed office for a second term, the U.S. government has significantly revised its tariff policies, while also cancelling the tax-free treatment for small parcels from China. Currently, the U.S. imposes a 54% ad valorem tax on such parcels or a flat tariff of $100 per package, abruptly ending the preferential window that Chinese cross-border e-commerce players had long relied on.
“The fully-managed model has been crushed, because platforms simply cannot absorb these tariff costs,” said one cross-border e-commerce service provider at a recent industry expo. The person noted that Temu, in particular, has been heavily impacted, with its growth momentum clearly slowing. After the mutual tariff reductions between China and the U.S. on May 12, several Temu merchants told Alaric they had received notices in their merchant groups from Temu buyers indicating that the fully-managed model might return to the U.S. market. However, as of now, Temu’s fully-managed model has not resumed, and most of its products are still shipped via a semi-managed model using U.S.-based local warehouses.
According to the same service provider, Temu’s semi-managed model is unable to compete with Amazon, which has invested heavily over the years in its FBA logistics system, offering consumers a superior fulfillment experience that third-party warehouses cannot match. This results in a subpar user experience for Temu’s semi-managed offerings.
On the other hand, Alaric noted that the decline of the fully-managed model has eased pressure on air cargo capacity for direct-shipping businesses, leading to gradually declining freight rates and a return of growth opportunities for independent sellers using direct shipping. Previously, parcels benefiting from the duty-free “de minimis” treatment were cleared through the so-called T86 entry type, which required no duties. After T86 became unusable, some merchants turned to “parcel within parcel” strategies to clear customs via T01 (formal entry) or T11 (informal entry), with manageable cost increases, according to Alaric.
For sellers using the overseas warehouse model, cost increases mainly stem from the U.S.’s continued tariffs on China. Even after the May 12 joint tariff reduction declaration between China and the U.S., the U.S. still retained a 30% tariff on Chinese goods. Many sellers at the cross-border e-commerce expo said that although the U.S. remains an indispensable market, they have become more cautious. Prior to the mutual tariff reduction, some sellers continued shipping to the U.S. anyway—“because if shipments stop, long-established product listings will be lost.”
For white-label merchants, it is currently difficult to pass on the cost of tariffs through price increases. “Even a 1% price hike could lead to a 1.2% drop in sales,” a U.S.-focused seller told Alaric. However, Alaric believes tariff hikes require a transmission process, and the cost will typically be passed through to the retail end in 6–9 months. Prices are expected to rise significantly in September or October. He advises cross-border e-commerce sellers to adopt a conservative strategy in 2025, focus on cash flow, prepare for small losses or reduced profit margins, and hold their ground in the U.S. market while waiting for better opportunities.
Many in the cross-border e-commerce industry, including Alaric, believe that the new tariffs disproportionately impact offline retail, weakening its advantages over online channels.
Alaric explained that under the current trade war, U.S. retailers are under increasing cash pressure. For instance, in the first quarter of 2025, Home Depot and Target had cash flows of $1.369 billion and $2.887 billion respectively, while their liabilities reached $31.589 billion and $18.991 billion. At the same time, offline retail lags behind e-commerce in terms of sales per square foot, product variety, innovation speed, and cost efficiency. As offline retail declines, e-commerce still has room to grow over the next two years.
However, the shadow of tariffs and lingering concerns about unpredictable Trump policies have reinforced the industry’s consensus around diversifying markets and platforms to spread risk. According to a May 23 survey conducted by Payoneer, a cross-border payments service provider, of 219 cross-border sellers, 88% listed “developing new markets” as a key strategy. Among new markets, Europe stands out as the most attractive, thanks to its large market size, high purchasing power, stable e-commerce environment, and mature infrastructure.