Chinese small packages face 90% U.S. tariff under new trade crackdown

Washington’s de minimis rule change hits Hong Kong exporters as companies scramble to shift markets.

Watches on display at the Eoniq showroom, a Hong Kong-made brand owned by Quinn Lai, in Hong Kong, China, on April 30, 2025. Photo by Tyrone Siu/Reuters

By Anna Fadiah and Hayu Andini

The U.S. government’s recent move to impose a 90% tariff on small packages from China and Hong Kong has triggered alarm among exporters, especially small businesses relying heavily on e-commerce. One of the most affected is DIY Watch Club, a Hong Kong-based company that sells do-it-yourself watchmaking kits primarily to customers in the United States.

The new tariff, coupled with the elimination of the de minimis exemption that once allowed low-value goods to enter duty-free, came into effect on May 2. These measures mark a significant escalation in the U.S.-China trade war and have already disrupted supply chains, e-commerce platforms, and international shipping routes.

The key focus of these trade measures—small packages from China—has made companies like DIY Watch Club particularly vulnerable. Founder Quinn Lai, who started the business with a niche focus on personalized watch kits, said the impact was immediate and severe.

“When the new tariffs were announced, it felt like game over,” Lai told Reuters. “If the situation didn’t improve, we were looking at either shrinking the company or, in the worst-case scenario, shutting down altogether.”

U.S. tariffs on Chinese goods choke off e-commerce channels

The 90% tariff on packages that used to benefit from the de minimis rule—previously allowing goods under $800 to enter the U.S. duty-free—has been widely criticized by business owners and trade experts. The policy change is part of Washington’s broader effort to reduce Chinese imports and bring manufacturing back to the U.S., but small and medium-sized businesses have borne the brunt.

For Lai’s company, which had been sending more than 80% of its shipments to the United States, the revenue loss from the new U.S. tariffs on Chinese goods is estimated at 20% to 30%. The implications are not limited to one company; the policy shift could shake the entire structure of cross-border e-commerce, especially for brands operating out of Hong Kong.

DIY Watch Club pivots to Europe to survive U.S. trade squeeze

Faced with this existential threat, Lai quickly adjusted his strategy. Instead of retreating, the company ramped up its marketing efforts and set its sights on Europe, hoping to reduce dependency on the volatile U.S. market. Lai said Europe offered a more viable alternative than Southeast Asia due to its higher e-commerce activity and more predictable regulatory environment.

“To solve this problem, it was basically an hourly effort testing out different countries in Europe,” Lai explained. “We boosted our ad spend on social platforms and partnered with influencers to raise awareness.”

The pivot has already shown promise. Before the tariffs, Europe made up only about 6% of DIY Watch Club’s sales. Now, that share has jumped to roughly 30%. Though the U.S. still accounts for half of the company’s revenue, it’s no longer the sole pillar holding up the business.

Hong Kong’s e-commerce ecosystem under strain

The ripple effects of the U.S. crackdown are being felt across Hong Kong’s e-commerce and export industries. Kennedy Wong, honorary president of the Hong Kong Chinese Importers' and Exporters' Association, emphasized the gravity of the situation.

“Cross-border e-commerce has been seriously impacted,” Wong said. “Many of these products are sold via small packages, and no single market can fully replace the U.S.”

Hongkong Post has already suspended mail services for goods destined for the U.S., and private couriers now demand that import tariffs be prepaid before accepting small packages. This creates additional logistical hurdles and cash flow issues for exporters, especially small businesses with tight margins.

Long-term strategy: diversify or die

The collapse of the de minimis exemption has forced businesses to confront an uncomfortable reality: dependency on the U.S. market is a strategic liability. For Lai and others like him, diversification isn’t just a growth strategy—it’s a lifeline.

The company is now eyeing Japan and other untapped markets to widen its international footprint. Lai said that continuing to reduce reliance on any single country will be key to surviving future disruptions.

“We’re not just trying to survive the current tariffs,” Lai noted. “We’re working toward a more balanced global presence so that one policy shift doesn’t put us back to square one.”

DIY Watch Club’s story is just one among many, but it exemplifies how trade policy decisions in Washington reverberate globally, reshaping business models and forcing innovation under pressure.

Political drivers behind the crackdown on Chinese goods

The removal of the de minimis exemption is not just an economic measure; it's also politically driven. In recent months, Washington has toughened its stance on China as bipartisan support grows for reducing dependency on Chinese manufacturing. Both parties have framed the move as a way to safeguard American industry and cut down on the flood of cheap imports, especially in sectors like electronics, textiles, and consumer goods.

This development follows earlier tariff hikes under President Donald Trump, many of which were kept in place and expanded by the Biden administration. The Biden administration’s strategy now appears to be a recalibration—targeting specific pain points like e-commerce while also encouraging domestic production.

However, critics argue that this approach has the unintended consequence of punishing small businesses in both countries, without necessarily boosting U.S. manufacturing in the short term.

E-commerce logistics transformed by tariff rule change

The logistics industry is undergoing rapid adaptation as well. With Hongkong Post halting U.S.-bound deliveries and private couriers demanding upfront tariff payments, the flow of goods has been severely disrupted.

According to shipping firms and trade analysts, many exporters are now rerouting packages through intermediary countries or consolidating shipments to reduce costs. However, these workarounds are not sustainable in the long run and carry additional risks, including legal scrutiny and longer delivery times.

“The complexity and cost of sending a single package to a U.S. customer has more than doubled,” said a shipping consultant familiar with cross-border logistics.

The future of Hong Kong’s export economy

The U.S. tariffs on Chinese goods, especially on small packages, may signify a turning point for Hong Kong’s export economy. Once a hub for global trade, Hong Kong is increasingly finding itself squeezed between geopolitical battles and shifting global supply chains.

For entrepreneurs like Lai, the response has been agility and innovation. But for many others, especially businesses that lack the flexibility or capital to pivot quickly, the new rules may lead to consolidation—or closure.

As the trade war continues to escalate, more small businesses may be forced to ask the same question Lai did: adapt or fold?