Small packages ignite big inflation: 145% tariffs force retailers to return, and the “monster of inflation” is about to once again sweep through the US

The Zhitong Finance App learned that as the US officially lifted the tariff exemption for low-priced small packages on Friday local time, some retailers with e-commerce business covering the world have stopped shipping and selling any products to customers in the US market. Other retailers are hoping that Sino-US trade negotiations will begin soon to push for a drastic reduction in the tariff rate between China and the US. They are temporarily seeking alternatives through price increases and other means.

More importantly, for American consumers facing years of heavy inflation and tight pockets, the “inflation beast” may make a comeback as essential consumer goods retailers and popular apparel retailers flee the US one after another, leading to a further escalation of the severe cost of living pressure they face. Ultimately, it is very likely to cause the US labor market to collapse and the US economy to enter a recession.

E-commerce products from China, the largest trading country for daily necessities and essential consumer goods in the US, generally face tariffs of up to 145%, and the US tariff exemption for low-value Chinese goods ended on Friday. Some online retailers, especially those focusing on daily necessities, essential consumer goods, and popular apparel products, stopped providing services to the US market due to tariff issues.

Wall Street bank Goldman Sachs recently raised the core PCE inflation index by 0.5% percentage points to 3.5% by the end of 2025, and is expected to rise to 4%, stressing that even the core PCE will be difficult to return to the 2% target anchored by the Federal Reserve. In March of this year, the core PCE index increased 2.6% year over year. Core PCE has long been the most popular measure of inflation for Federal Reserve officials such as Federal Reserve Chairman Powell.

According to the latest tracking and statistics compiled by the media based on e-commerce platforms such as Amazon, as the Trump administration began taxing small packages, more and more retailers chose to abandon the US market.

According to the latest financial data released by Amazon (AMZN.US), the world's largest e-commerce giant, on Friday, since all types of products on the Amazon platform, especially essential consumer goods, come mainly from China, Amazon management directly mentioned that tariffs and trade may have a significant negative impact on performance for the first time when issuing performance outlook guidelines, so the operating profit outlook provided by Amazon is far lower than Wall Street analysts' expectations. The overall operating profit guidance range was lower than analysts' expectations. Among them, the upper end of the guidance range was about 1.8% lower than analysts' expectations, and the lower end of the range was even 27% lower than analysts' expectations.

After the “e-commerce package tax exemption under $800” (de minimis) tariff exemption policy is lifted, products from the Chinese market will face general tariffs of up to 145% — a decision announced by US President Donald Trump last month. This trade policy can be described as disrupting global trade and triggering retaliatory tariffs or potential retaliation measures from trade partners such as China and the European Union.

According to information, the British beauty retailer Space NK, which sells its own nursing products on the Amazon e-commerce platform, said in an announcement on Wednesday local time that the company has suspended e-commerce orders and e-commerce goods delivery to the US market in order to avoid errors or additional huge additional costs due to customer orders.

Space NK is no exception. Understance, a brand headquartered in Vancouver, Canada, that manufactures and produces underwear and other apparel in China, told customers on the social media platform Instagram that it will no longer ship to the US due to tariffs and will resume shipping when the situation is clear.

“The unprecedented rise in tariffs from 0% to 145% is unbearable for businesses and consumers alike. ” Cindy Allen, CEO of global trade consulting firm Trade Force Multiplier, said in an interview. “As a result, I have seen many small and medium-sized daily necessities sales companies simply temporarily withdraw from the US market.”

Specific import costs may vary depending on the mode of transport. According to the US Customs and Border Protection guidance, e-commerce packages processed through customs clearance by the US Postal Service will be subject to customs duties equivalent to at least 120% of the value, or at least $100 per item, and will jump to $200 from June.

A new major wave of price increases in the US is about to begin in full

For retail companies that still want to continue entering the US market, they are being forced to drastically raise sales prices to deal with the Trump administration's unprecedented aggressive trade policy of imposing tariffs on the world.

Although the Trump administration announced a 90-day moratorium on some of the harshest “equal tariffs” soon after “Liberation Day,” due to the continued sharp decline in the three US equity and foreign exchange markets. During this period, the benchmark tariff for most countries other than China was adjusted to 10%, according to the Bloomberg Economic Research team, the “effective tariff rate” of the US is currently close to 23% — the highest level in more than a century. This has had a severe impact on American consumer and business confidence.

The Trump administration decided to levy an astonishing 145% tariff on China (one of America's top three trading partners) and at least 10% tariffs on most other countries. As a result, many forecasters warned that the global economy would slow sharply in the future, and some even predicted that the US would experience a deep recession this year. This is partly due to the fact that since the high inflation period in 2022, demand for American households, which continue to face heavy inflationary pressure, is likely to decline sharply. Some of these households can be described as under-saving, while household demand or household consumption accounts for about two-thirds of the US GDP.

British clothing retailer Oh Polly's product prices in the US market are 20% higher than in other markets, and they may be forced to raise prices further due to higher tariffs, the company's managing director Mike Britney said in an interview.

Singapore-based fast fashion giant Shein posted on its Instagram account in the US market on Thursday to reassure consumers: “Prices for some products may vary, but most of our collections are still as affordable as ever.” According to information, Shein's clothing products are mainly produced in China, and the US is its largest market.

E-commerce platforms such as Amazon and Shein will eventually run out of large-scale imported inventory before the small-package tariffs come into effect on May 2. Merchants on platforms such as Shein and Amazon have even drastically cut digital advertising spending in the US in recent weeks to prepare for this trade policy change that could seriously slow down sales.

According to information, Snap Inc (SNAP.US), a social networking platform that focuses on the “read and burn” instant and private theme, recently stated that because its online advertising business is facing rare macroeconomic “headwinds” brought about by Trump's tariff policy, management declined to provide revenue forecasts for the current quarter in the performance report. The company's chief financial officer Derrick Anderson said during this week's investor performance conference call that some advertisers are drastically tightening ad business spending as the Trump administration plans to amend the “low-value tariff exemption” rule — which currently exempts any Chinese imports worth less than $800 from tariffs.

The so-called “de minimis rule” — the tax exemption for e-commerce packages under $800, was initially intended to facilitate online shopping for American consumers and promote international trade, but was harshly criticized by many Republicans because of Trump's long-standing accusation of promoting the smuggling of fentanyl raw materials and damaging the market share of domestic products imported on a large scale through e-commerce platforms such as Shein and Amazon's Haul.

de minimis has also become a channel for counterfeit goods. In 2024, 97% of the goods seized by the US Customs and Border Protection due to intellectual property infringement were de minimis goods.

After the exemption is lifted, sellers importing products made in China must provide more detailed information on the origin of each component of their products to the US Customs to determine whether they are in line with the US-Canada-Mexico Free Trade Agreement. Not only is the burden of administrative costs increasing, but the huge tariff costs are discouraging small retailers around the world. However, the key essential consumer goods and popular apparel products provided by these small retailers are on the long-term shopping list for most American consumers, and will soon lead to a sharp rise in the prices of key essential consumer goods, which in turn will drive up US inflation.

United Parcel Service (UPS.US) CEO Carol Tome said on Tuesday that 100% of the company's small to medium retail customers come from China.

The US online auction market Etsy (ETSY.US) said in a seller notice earlier this month that it would be easier for sellers to indicate the country of origin of the product because tariffs are levied based on where the product was manufactured rather than the place of delivery. For e-commerce companies, this policy is extremely disruptive at the demand and supply levels, but it may be a big benefit for retailers that do not rely on e-commerce business or are made in China.

Fast fashion retailer Primark from the UK only sells offline through stores all over the US and does not do cheap online e-commerce sales. The company may benefit greatly from Trump's tariff policy. George Weston, CEO of its parent company Associated British Foods, told the media on Tuesday: “As the price of such products may rise sharply, I think some American consumers may return to shopping malls to find actual value.”

Amazon, the world's largest e-commerce platform, has warned of the impact of tariffs

In the context of the new round of global trade wars that continue to be dominated by the Trump administration, the social media platform Snap, which focuses on “read and burn” apps, is only one of many companies warning that it will become more difficult to operate. Prior to that, many retail leaders such as Colgate, P&G, Unilever, and Nestle all warned that tariffs would cause huge costs. Snap's temporary withdrawal of performance guidelines showed that the negative effects of Trump's tariff policy had penetrated into e-commerce and advertising. For online Amazon, Facebook's parent company Meta, and E-commerce such as Pinterest and social media platforms in a broad sense will undoubtedly cause significant disruptions in performance expectations.

According to the earnings data released by Amazon on Friday, Amazon's revenue growth rate in the first quarter was the slowest since the fourth quarter of 2020, and earnings per share (EPS) growth both slowed sharply from the previous quarter.

Since all types of products on the Amazon platform, especially essential consumer goods, come mainly from China, Amazon management directly warned that the Trump administration's tariff policy and a new round of global trade battles may have a significant negative impact on the e-commerce giant's performance when issuing performance outlook guidelines, so the operating profit outlook provided by Amazon is far lower than Wall Street analysts' expectations.

Amazon's performance outlook shows that the overall operating profit guidance range is lower than analysts' expectations. Among them, the high end of the guidance range is about 1.8% lower than analysts' expectations, and the low end of the range is even 27% lower than analysts' expectations. This means that in the worst operating profit situation predicted by Amazon management to be impacted by the tariff policy, operating profit for the second quarter may be 27% lower than the average level expected by analysts.

Notably, when announcing the performance outlook guidelines, Amazon management hinted that the guidance provided this time did not include the impact of any potential tariff policy implementation after April. In other words, if the incremental tariff policy implemented by the Trump administration in May causes consumers to cut spending, it may further damage Amazon's performance, and the current Amazon guidelines may even be too high.