As globalisation has advanced over the last decade, cross-border retail e-commerce has flourished, with worldwide cross-border e-commerce sales growing five-fold in the space of under a decade, hitting USD521 billion in 2024. As the two largest markets in the world by retail sales, the US and China have been the primary drivers of this growth, accounting for 51% of all cross-border retail e-commerce sales globally. US tariffs aimed at diminishing the China-US trade deficit will have a varied effect on online players, dependent on their supply chains and ability to absorb or restructure costs.
Marketplace operators with strong links to China are hit hardest
The retail sectors of both the US and China have been increasingly intertwined, thanks to the rise of online marketplaces. These platforms give third party sellers based in one country a conduit by which their wares can be easily sold to consumers in the other. Today, as many as 50% of the third party merchants that sell into the US currently operating on e-commerce leviathan Amazon’s marketplace platform are located in China.
Additionally, the three fastest growing online marketplaces operating in the US today – Temu, Shein and TikTok Shop – are either based in or originated in China. All three either source the majority of the products they sell from China or rely heavily on third party merchants based in China. Leveraging the de minimis tariff exemption for goods imported to the US under a value of USD800 has been a core component of the business model of these marketplace operators, so its closing by the Trump administration on 2 May will translate into higher costs for US consumers.
Shein has been reshoring distribution facilities and manufacturing facilities outside of China: the US in the case of distribution and Brazil and Mexico for manufacturing, giving it more geographic flexibility. For its part, Temu is likewise attempting to transition to a US-based fulfilment model by bulk shipping orders to warehouses within the US and using “locally based sellers” for all orders, instead of its previous model of selling goods imported from China directly to customers in the US.
This overhaul of supply chain strategies, including distribution as well as manufacturing centres, alongside revised pricing strategies and potentially reduced inventory for players such as Shein and Temu, may help mitigate tariff exposure, but these efforts will take time. In the meantime, these platforms’ customers in the US will necessarily be faced with higher prices.
For Amazon – the world’s leading online retailer – third party merchant sales on its platform make up 66% of its online value sales in the US. Since many of the platforms’ third party sellers are based in China, Amazon is also set for a supply rebalance. Whilst most Chinese sellers will look at shifting orders through countries such as Vietnam, India, Brazil or Mexico – or towards building or expanding their own US warehousing capacity – some players may find profit margins so squeezed that they are forced to quit the US as a marketplace entirely.
The irony is that it is potentially US resellers of Chinese goods on online marketplaces such as Amazon which will be squeezed the most, given they will need to pass on the original Chinese-origin tariff cost in addition to their own margin to the end consumer. For those able to absorb costs, however, this is the kind of scenario that could afford a short-term opportunity to seize market share.
Opportunities for grocery category as consumers seek affordability online
There is also an opportunity for those with US-based manufacturing to seize share in categories which are expected to grow in the online channel. While FMCG products, such as grocery items (packaged food, beauty, etc), make up a relatively small share of Amazon’s sales (with over 80% of Amazon’s US sales GMV accounted for by discretionary categories, such as consumer electronics and apparel) they remain strategically important, due to their high purchase frequency and the potential shift in consumer spend to online channels, as consumers look for lower prices and postpone purchases of discretionary goods during the tariff turbulence.
Procter & Gamble, Nestlé, L’Oréal Group, Unilever and Mars are the largest FMCG companies on Amazon in the US, and each face differing opportunities or challenges, based on the location of their manufacturing bases and supply chains. For example, US-based players Procter & Gamble and Mars manufacture the majority of their products sold in the US domestically, with some European FMCG players also having longstanding production bases in the country. For example, Switzerland-based Nestlé, leader in US online consumer health and pet care sales, locally manufactures nearly 95% of the products it sells in the US. In light of the new tariffs, these companies are in a strong position to continue their growth in US e-commerce, with minimal direct impact on prices and risk of customer churn.
However, manufacturing bases for specific products vary and will impact US brand performance at category levels in a higher tariff scenario. For example, Procter & Gamble and Unilever both compete in the beauty and personal care category in the US e-commerce landscape, but whilst Procter & Gamble remains rooted in the US, only 60% of UK-based Unilever products sold in the US are manufactured domestically. As a result, a 10% tariff on goods imported from the UK or EU could make a significant difference to Unilever in terms of maintaining its lead in categories such as hair care, skin care, deodorants, and bath and shower – categories where Unilever currently leads over Procter & Gamble on Amazon in the US.
While diversification of supply chains, expansion of US-based manufacturing capabilities, and review of pricing architecture provide strategic challenges for both FMCG giants and China-affiliated players facing tariffs in differing measures, there is much to play for. E-commerce’s share of total US retail value sales is predicted to rise to 35% by 2029, compared to 29% in 2024.
Read our report How Trump’s Economic Policies Affect Industries and Consumer Markets for more analysis on the impact of tariffs on global markets.
