In response to the surge in cheap goods from China exported through e-commerce platforms, countries in Central and South America have been eliminating import duty-free policies or raising tariffs. With the rapid growth of e-commerce users, the domestic retail sector, particularly, is strongly demanding stricter regulations.
However, e-commerce platforms are responding by increasing local production, and their sales momentum has not weakened.
On August 15th, the Mexican government raised import tariffs to 33.5% on small-value goods valued at less than $50 shipped from China and other countries, targeting Chinese cross-border e-commerce platforms like Temu and Shein. In January, Mexico abolished its duty-free system for small-value imports and imposed a 19% tariff on goods from countries without trade agreements.
Chile will abolish its duty-free policy for goods under $41 and impose a 19% tariff starting in October. Ecuador imposes a flat fee of $20 on small-value goods, and Uruguay is also considering imposing a tax on low-priced goods purchased from overseas e-commerce websites, excluding the United States, beyond a certain number of purchases.
In Central and South America, the number of users of Chinese e-commerce platforms is rapidly increasing. Data from the US research firm Sensor Tower shows that Temu’s monthly active users (MAUs) increased by 80% by January compared to a year ago across the eight South American countries and Mexico for which relevant data is available. SHEIN, which already has a large customer base, also saw a 20% increase.
Temu’s MAUs increased by 2.5 times in Brazil and 43 times in Argentina, both experiencing dramatic growth. The influx of already low-priced Chinese products, enjoying duty-free or reduced tariffs, has exceeded expectations, leading to growing discontent in various countries regarding the impact on domestic industries.
This move is also intended to align with the Trump administration’s tough stance on China. In May, Trump eliminated duty-free restrictions on Chinese imports under $800. The number of packages imported duty-free into the US is believed to reach approximately 1.3 billion annually.
Since Trump’s victory in the presidential election in November 2024, Mexico has conducted large-scale crackdowns on suspected illegal imports of counterfeit brands made in China and other parts of Asia, and has presented the results to Trump.
Mexico announced an increase in tariffs on small imports on July 28, shortly before Trump announced a 30% tariff increase on Mexico on August 1. Following Mexico’s announcement, Trump postponed the 30% tariff increase for 90 days.
Six South American countries have more trade with China than with the United States.
On the other hand, many countries in Central and South America have rapidly strengthened their economic ties with China. In the past 25 years, trade between South America and China has expanded 40-fold. By 2023, six of the 12 South American countries had more trade with China than with the United States.
The effectiveness of these increased tariff measures remains unclear. In August 2024, Brazil became the first country in Central and South America to abolish its tax-free system. SHEIN is responding by increasing its domestic partner factories and expanding its e-commerce platform, which connects local businesses with consumers.
Sensor Tower data shows that even after the tax-free policy was lifted, SHEIN and Temu’s user base in Brazil continued to grow. The Financial Times (FT) reported on August 26 that Temu, which had suspended exports and sales from China to the US due to the May tax-free policy, resumed sales in July.