US tariffs on Chinese imports expected to raise prices on electronics, clothing, and toys

A new U.S. tariff on products made in China is poised to increase prices for American consumers across a wide range of goods, including affordable apparel, toys, and electronic devices such as laptops and smartphones. The additional 10% tariff took effect on Tuesday, accompanied by a decision from the U.S. Postal Service to halt incoming parcels from China and Hong Kong until further notice.

On Monday, former President Donald Trump postponed imposing tariffs on Mexico and Canada for 30 days following negotiations regarding illegal immigration and drug trafficking concerns. However, China did not receive a similar reprieve, prompting retaliatory tariffs on select U.S. goods set to take effect next week.

The U.S. imported approximately $427 billion worth of goods from China in 2023, according to the U.S. Census Bureau. Consumer electronics constitute the largest import category, with China producing 78% of U.S. smartphone imports and 79% of laptop and tablet imports, as reported by the Consumer Technology Association.

In addition to electronics, the tariffs may impact prices for clothing, footwear, kitchenware, appliances, furniture, and auto parts. Jay Salaytah, an auto repair shop owner in Detroit, proactively purchased equipment before the tariff took effect, anticipating price hikes.

Trump's executive order also suspends a trade exemption that previously allowed goods valued under $800 to enter the U.S. duty-free. This "de minimis" rule had enabled Chinese online retailers such as Shein, Temu, and AliExpress to avoid customs taxes. Though the exemption may still apply to other countries, imports from China are now subject to both existing duties and the new 10% tariff.

Shein and Temu have gained global popularity by offering low-cost, frequently updated fashion and accessories. Seattle-based Amazon has attempted to compete with their model by offering inexpensive Chinese-made goods through its platform. Chinese exports of low-value packages skyrocketed to $66 billion in 2023 from $5.3 billion in 2018, according to a Congressional Research Service report.

Experts believe the tariff change will slightly raise prices on platforms like Shein and Temu, though affordability will remain their key selling point. However, deliveries may be delayed as packages must now clear customs. Amazon third-party sellers who import goods from China will also be affected, with some absorbing costs and others passing increases onto consumers.

Temu, owned by China’s PDD Holdings, has claimed its business model does not depend on the de minimis policy. The company has been recruiting Chinese merchants to store inventory in the U.S., potentially mitigating exposure to trade regulation changes. Meanwhile, China has introduced tax incentives to help cross-border e-commerce businesses establish overseas warehouses.

Retailers like PacSun, which sources 35% to 40% of its garments from China, have been preparing for these tariffs. CEO Brieane Olson recently visited Hong Kong to strategize with manufacturers. However, the 10% tariff was lower than expected, so the company does not currently plan to increase prices or shift production.

Toys are another major category dependent on Chinese imports. Greg Ahearn, president and CEO of The Toy Association, predicts that toy companies will initially absorb the additional costs but will eventually pass them on to consumers.

The long-term impact of these tariffs will depend on the duration of the trade dispute and whether businesses can find alternative sourcing options. For now, American consumers should prepare for potential price hikes on a variety of everyday goods.