Summary of Damage to U.S. E-commerce from Unfair Chinese Trade
Unfair trade of Chinese products is causing severe losses to the U.S. e-commerce sector, with impacts ranging from intellectual property theft to market share loss and the closure of small businesses.

by Armando Avila

Intellectual Property Theft
Copying Designs
China copies designs, products, and technologies from U.S. companies.
Billion-Dollar Losses
This costs between $225 billion and $600 billion annually.
Vulnerability
U.S. companies see their competitive advantage based on innovation compromised.
Dumping and Subsidies
Artificially Low Prices
Chinese platforms like Shein and Temu sell below actual cost thanks to subsidies.
These companies can maintain extremely low prices due to the government support they receive, creating unfair competition.
Impact on U.S. Businesses
U.S. companies cannot compete on price without sacrificing profitability.
To remain competitive, local businesses must reduce their margins, which affects their ability to hire, invest, and innovate.
Exploitation of the De Minimis Rule

Massive Volume
More than 1,000 million low-value packages entered duty-free in 2022.
Tax Evasion
This allows avoiding taxes and regulations that local businesses comply with.
Uneven Competition
It creates an uneven playing field for U.S. merchants.
Loss of Market Share
Shein already has 40% of the fast fashion market in the U.S. (2023).
Amazon fell from 34% to 30% in online fashion (2020-2023).
Closure of Small Businesses
Impact on Independent Sellers
Sellers on Etsy and Shopify are closing down as they cannot compete with the low prices from China.
Domino Effect
The closure of small businesses affects entire communities, reducing local employment and economic vitality.
Quality vs. Price
American artisans and manufacturers cannot compete when consumers prioritize price over quality.
Fiscal Impact and Security
Loss of Tax Revenue
Billions of dollars in tariffs are lost.
Tariff evasion through the de minimis rule represents between $2B and $4B annually in uncollected tax revenue.
Risks to Consumers
Products enter without quality or safety assurance.
Many imported products do not meet US safety standards, putting consumers at risk.
Weakening of the Supply Chain
Excessive reliance on Chinese products makes the US supply chain vulnerable to global disruptions.
Key Damage Figures
Specific Problem: Direct Losses
$20-40B
Sales Losses
In electronics, fashion and toys sales alone, they reach values between 20 and 40 billion USD
$12B
Profitability Losses
Losses due to hiring, innovation and investment, as a result of margin reduction
0.1%
USA Products in Chinese e-commerce
Chinese e-commerce sells 0.1% of USA products
30%
American Products in USA
American e-commerce sells 30% of American products in USA
Trade Imbalance

Ideal Balance
Fair and reciprocal trade
American E-commerce
80% Chinese products in China
Chinese E-commerce
Only 0.1% USA products
There is a marked imbalance in trade exchange: while American e-commerce sells 80% of Chinese products in China and 30% of American products in the USA, Chinese e-commerce barely sells 0.1% of US products.
Context: Total E-commerce Sales
For the year 2023, total e-commerce sales in the U.S. are estimated to be $1,000 billion (1 trillion USD).
Approximately 40% of these sales (i.e., $400 billion) correspond to categories where unfair competition is more noticeable (electronics, fashion, toys, etc.).
Sales Impact: Scenarios
Sensitive Categories
$400 billion in sales
Estimated Loss
Between 5% and 10% of sales
3
Conservative Scenario
$400 billion × 0.05 = $20 billion
Aggressive Scenario
$400 billion × 0.10 = $40 billion
Based on market studies, it is assumed that in these categories there has been a loss in sales attributable to unfair competition of between 5% and 10%.
Profitability Losses

Original Margin
Businesses operated with an 8% margin

Forced Reduction
Competition forces reduction to 5%

Relative Loss
3 percentage points on $400 billion USD

Total Impact
$12 billion USD in lost profitability
If a business operated with an 8% margin and competition forces it to be reduced to 5%, on a sales volume of $400 billion USD, the loss in profitability (without considering other fixed and variable costs) can represent a considerable additional loss.
Conclusion: E-commerce Transformation
Displacement of Domestic Businesses
Chinese unfair trade is transforming e-commerce in the US, displacing domestic businesses.
Impact on Employment and Revenues
It is affecting employment, reducing tax revenues, and compromising innovation.
Need for Corrective Actions
Without urgent corrective actions, the sector could face severe and sustained decline.
Impact on Innovation
Reduction in R&D Investment
Pressure on margins reduces the ability of US companies to invest in research and development.
Disincentive to Creativity
Theft of intellectual property discourages the creation of new products and technologies.
Abandonment of Projects
Many startups and innovative projects are abandoned as they cannot compete with artificially low prices.
Supply Chain Effects

Excessive Dependence
Vulnerability to global disruptions

Logistical Fragility
Concentration of suppliers in one region

Quality Risks
Difficulty in controlling standards

Cost Pressures
Margin reduction across the chain
The excessive dependence on Chinese products makes the US supply chain vulnerable, creating significant risks in the face of any global disruption, as evidenced during the COVID-19 pandemic.
Impact on Employment
The loss of market share and business closures have a direct impact on employment, affecting hundreds of thousands of American workers across various sectors related to e-commerce.
Consumer Risks
Unsafe Products
Many imported products under the de minimis rule do not undergo proper safety checks, exposing consumers to risks.
Counterfeits
Proliferation of counterfeit products that can be dangerous or ineffective, especially in categories like electronics, toys, and cosmetics.
Difficulty with Claims
Consumers face significant obstacles to filing claims or returns when buying from foreign sellers without a legal presence in the US.
Data Exposure
Privacy and data security risks when using foreign platforms with different protection standards.
Impact on Different Product Categories

Fashion
40% market share loss
  • Fast fashion dominated by Shein
  • Extreme pricing pressure

Electronics
25% market share loss
  • Low-cost accessories and gadgets
  • Safety and quality issues

Toys
35% market share loss
  • Safety concerns
  • Copies of popular designs

Home
20% market share loss
  • Decor and small accessories
  • Variable quality
Case Study: Shein vs. US Retailers
1
2017
Shein begins to gain popularity in the US with extremely low prices.
2
2019
US retailers begin to notice declines in youth fashion sales.
3
2021
Shein surpasses Amazon as the most downloaded shopping app in the US.
4
2023
Shein reaches 40% of the fast fashion market, causing physical store closures.
Case Study: Temu and Its Impact
Aggressive Pricing Strategy
Temu has entered the US market with an extremely aggressive pricing strategy, offering products at prices that defy all economic logic.
Impact on Small Businesses
Sellers on platforms like Etsy and Amazon Handmade have reported dramatic drops in sales since Temu's entry into the market.
Massive Marketing
The platform has invested enormous amounts in advertising, including Super Bowl ads, to quickly capture market share.
Price Comparison: Similar Products
Impact on the Perception of Value

Distortion of price expectations
Consumers develop unrealistic expectations about what products should cost
Devaluation of quality
The acceptance of low-quality and short-lived products becomes normalized
Culture of disposability
A fast and disposable consumption is promoted, with a negative environmental impact
Unfair competition not only affects companies, but also distorts the perception of value among consumers, creating a vicious circle that prioritizes price over quality, sustainability, and fair labor conditions.
Environmental Impact
Carbon Footprint
Transporting millions of individual packages from China generates a significantly larger carbon footprint than traditional bulk distribution.
Disposable Products
Low-quality products have shorter life cycles, generating more waste and contributing to the landfill crisis.
Environmental Regulations
Many products manufactured in China do not meet US environmental standards for materials and manufacturing processes.
Excessive Packaging
Direct-to-consumer individual shipments generate disproportionate amounts of packaging material compared to traditional distribution.
Conclusion
Need
These losses demonstrate the need to review and, if necessary, adjust trade and competition policies to balance the market, as well as to encourage measures that allow local companies to differentiate themselves.
Innovation and added value
Protecting domestic e-commerce companies with innovation and added value opens up an underserved niche that we will fill with affiliate marketing, mostly with our own PPS platform.