China’s online shopping blitz is captivating the world with a flood of ultra-affordable products, described with terms like “assault” and “obliteration.” Pinduoduo, a Chinese e-commerce giant, has made waves with its mobile shopping app, Temu, which, thanks to its aggressive marketing and rock-bottom pricing, topped the download charts on Google Play and the App Store in the US within just six months of launch. Recent data shows Temu’s market share in the bargain goods sector has climbed to 14%, while US counterparts Dollar General and Dollar Tree have seen declines of 8% and 4% points, respectively, sparking fears that even Amazon could soon be challenged. This situation mirrors an interesting twist where China is leveraging the online globalization framework established by the US to make a counter-move.
Back in 1997, President Clinton announced the “Clinton Doctrine,” which proposed eliminating tariffs on e-commerce goods. The idea was to encourage governments worldwide not to regulate the internet, thus allowing free trade to flourish, essentially spreading an e-commerce order that favored the US across the globe.
At the time, the US, leading the digital economy, benefited immensely from this global paradigm of tax exemption and deregulation, paving the way for the globalization of the e-commerce market and establishing an international order that favored US platform companies.
The US successfully pushed for e-commerce tax exemptions at the World Customs Organization, with the WTO also endorsing this policy. As a result, a global paradigm where e-commerce trades below a certain amount could be tax-free was established. Under this policy, in the US, items below $800 can be imported tax-free, a system adopted by major countries worldwide.
Built on ultra-low pricing, Temu and AliExpress are targeting the global market, navigating through the global paradigm set by the US and remaining unaffected by the significant tariff increases resulting from the US-China power struggle. Their ultra-low pricing not only offers a compelling sales point abroad but also serves as an efficient distribution channel for China’s oversupplied manufacturing sector, finding new markets amid the US-China competition.
As Chinese low-cost products make their way into the US market, there’s a growing call within the US for the regulation of e-commerce trade. The US is already moving to increase international postal delivery fees, revising international agreements to lead a charge on rate hikes. Moreover, there are requests for the Department of Homeland Security and other agencies to include Temu on the “Uyghur Forced Labor Prevention Act (UFLPA) violators list,” showing the complexities of international trade and politics intertwining.
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