Mark Cuban, the billionaire entrepreneur and investor, recently sparked an interesting discussion about tariffs and their unexpected effects on e-commerce platforms like Amazon and Walmart. In a post on BlueSky, Cuban noted that tariffs "could really help" Chinese sellers operating on these platforms.
His take is that Chinese companies have lower costs of goods sold (COGS), so they’ll pay less in tariffs than their competitors. This means that, even with tariffs factored in, these companies could maintain – or even increase – their price advantage. Cuban summed it up simply: "Gonna be interesting."
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But why would tariffs, which are usually designed to protect domestic industries, end up favoring overseas sellers?
One of the main reasons this happens is a trade rule called the "de minimis" rule. This rule says that items costing less than $800 can be imported into the U.S. without paying tariffs or going through inspections. Companies like Shein and Temu use this rule to ship their products directly to U.S. customers. This helps them avoid costs that U.S.-based companies have to pay, letting them keep their prices low.
This strategy has drawn criticism from lawmakers and businesses alike. The Biden administration is talking about changing the rule to make things fairer for American businesses. But for now, Chinese companies still benefit from it.
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Interestingly, some American retailers like Amazon and Walmart have started adopting similar tactics. They can also use the de minimis rule to export straight from Chinese manufacturing to American consumers, which helps them keep prices low. However, if the government changes the rule, this workaround will no longer work.
The future of tariffs and their impact on global trade remains uncertain. With potential policy changes, the competitive dynamics between U.S. and Chinese sellers could shift dramatically. For instance, Chinese sellers may lose some pricing advantages if the U.S. government tightens regulations. These sellers may, however, continue to control a portion of the market if tariffs rise and gaps persist.
The Biden administration imposed new tariff increases on Chinese imports in September to safeguard important American sectors. These tariffs included a 100% duty on Chinese electric vehicles (EVs), 50% on solar cells and 25% on steel, aluminum, EV batteries and critical minerals. Chinese semiconductors used in solar panels, such as silicon wafers and polysilicon, will be subject to a 50% tariff starting next year. In 2026, more tariffs, such as those on smartphones and laptops, are also scheduled to go into effect.
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The administration also increased tariffs on medical supplies, such as face masks and surgical gloves, to 50% and 100%, respectively. Some exemptions were made, like a temporary exclusion for syringes used to feed infants. Additionally, certain industrial machinery categories, not equipment used to produce complete solar modules, will be excluded.
Mark Cuban's comment shows how complicated global trade can be. Tariffs, which are supposed to protect American businesses, sometimes have unexpected effects. In this case, they might help Chinese companies compete even more strongly against U.S. sellers.
As Cuban said, "gonna be interesting" to see how this plays out.
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