The Rise of Southern China as a Global Manufacturing Hub
In the bustling metropolis of Guangzhou, located near the Pearl River in southern China, a thriving yet often overlooked industry has emerged as a cornerstone of the global economy. This region is home to countless gritty workshops that produce inexpensive clothing, which is then exported directly to households and small businesses worldwide. These exports, often referred to as "de minimis shipments," bypass tariffs and customs inspections, making them a lucrative yet controversial part of international trade. The laborers who toil in these factories earn as little as $5 per hour, including overtime, and work long hours—often exceeding 10 hours a day. They pay $130 a month to live in cramped dormitories above the factories, where sewing machines hum and piles of fabric dominate the space. Wu Hua, a seamstress who works seven days a week in Guangzhou, sums it up: "It’s hard work."
These small, low-cost shipments have revolutionized the way goods are traded globally. E-commerce giants have forged direct links between international markets and workers like Mr. Wu, reshaping retail and economic systems worldwide. Since 2016, the number of duty-free shipments to the U.S. has skyrocketed more than tenfold, reaching four million parcels per day in 2023. Similarly, shipments to the European Union have surged even faster, hitting 12 million parcels daily. Developing nations like Thailand and South Africa have also seen a dramatic rise in these imports, reflecting the growing demand for affordable goods.
A Global Backlash Against Duty-Free Shipments
However, this booming industry is now facing a growing wave of resistance. In February 2024, former U.S. President Donald Trump ordered a halt to the duty-free entry of parcels worth up to $800, citing concerns that these shipments were being used to smuggle fentanyl and other illicit materials into the country. Although Trump temporarily suspended the order to give officials time to address the sudden backlog of parcels at airports, the move marked a significant shift in the global trade landscape. The U.S. is not alone in its crackdown. South Africa has imposed 45% tariffs on even the smallest clothing imports, while Thailand has ended its exemption of low-value parcels from sales taxes. The European Union has also proposed ending its duty-free treatment of packages worth up to 150 euros ($156).
These countries have cited various reasons for their restrictions. Trump and other U.S. officials argue that the lack of customs inspections in de minimis shipments creates a loophole for illegal drugs and other contraband. The European Commission, on the other hand, emphasizes the need to ensure product safety, combat counterfeit goods, and prevent unfair competition. In South Africa and Thailand, the primary motivation is to protect local businesses from being undercut by cheap imports. "We have a duty to ensure that goods entering our market are safe and that all traders respect consumers’ rights," said Michael McGrath, a European commissioner.
The Role of Southern China in the Global Supply Chain
Southern China, particularly the region near Hong Kong, has been a hub of low-cost manufacturing for export since the 1980s. Apparel production has been a cornerstone of this industry, driven by the rise of fast fashion and the demand for affordable clothing worldwide. Guangzhou has emerged as the global epicenter of de minimis shipments, with its concrete buildings housing countless sewing workshops and living quarters for workers. The city’s vast network of factories and suppliers is coordinated by e-commerce giants like Shein and Temu, which together dominate at least a third of the de minimis industry. Even Amazon has entered the fray with its own de minimis business, Haul, which specializes in shipments from China.
Shein, in particular, has revolutionized the industry by connecting far-flung customers directly with factories. Collaborating with over 5,000 workshops and small factories across China, Shein has almost eliminated the need for traditional store inventory and retail staff. The company prides itself on empowering small and medium-sized businesses, giving them real-time insights into customer demand. However, not everyone is happy with Shein’s business model. Workshop owners in Guangzhou complain that the company demands high-quality products at rock-bottom prices, making it difficult to sustain their operations.
Challenges Facing China’s De Minimis Industry
Despite its success, the de minimis industry in China faces significant challenges. Labor costs, for instance, have risen sharply in recent years due to a shrinking workforce. Nearly two-thirds of Chinese 18-year-olds now enroll in college or university, up from just 10% in 2000. This has left few young people willing to take on factory work, forcing workshop owners to rely on older workers born in the 1970s and 1980s. "Business is deteriorating every year," said Li Zhi, a Guangzhou workshop owner. "There are fewer and fewer workers now."
Moreover, the industry is grappling with the ethical and legal implications of sourcing materials from Xinjiang, a region in northwest China where many Western governments have accused the Chinese government of forcibly detaining and exploiting predominantly Muslim ethnic groups, including the Uyghurs. While big retailers generally comply with laws restricting imports from Xinjiang, smaller workshops like those in Guangzhou often have little knowledge of where their fabric suppliers source their cotton. Yun Congping, a sewing shop owner who supplies the Thai market, admitted that he and other merchants are desperate to secure exports. "If we don’t accept the deals," he said, "there’s nothing else to do."
The Future of De Minimis Shipments and Global Trade
The long-term impact of the global backlash against de minimis shipments remains uncertain. If Trump were to permanently end the duty-free rule, imported apparel that is currently exempt from tariffs would be subject to a range of new taxes, including basic tariffs of 3 to 30%, a 7.5% tariff imposed during Trump’s first term, and a 10% tariff on all imports from China. Customs processing fees of $5 to $20 per parcel would add further costs. Shein and Temu have already taken steps to adapt to these changes, with Temu noting that nearly 60% of its U.S. sales now come from American warehouses that comply with customs regulations and pay tariffs.
For now, the de minimis industry continues to play a critical role in China’s economy and the global supply chain. Cities like Guangzhou and Yiwu remain hubs of low-cost manufacturing, coordinating exports of everything from clothing to toys. However, as labor costs rise and international trade policies tighten, the industry’s competitive advantages may begin to erode. Workshop owners like Li Zhi are already feeling the strain, forced to navigate a complex and challenging landscape where low prices meet high demands. Despite these obstacles, the de minimis industry remains a testament to China’s enduring role as a global manufacturing powerhouse.
The Human Cost of Fast Fashion
Behind the headlines about tariffs and trade policies, there are real people whose lives are deeply impacted by the de minimis industry. Workers like Wu Hua and Li Zhi toil long hours in challenging conditions, earning wages that barely cover their living expenses. Many of these workers have few other options, as the decline of traditional manufacturing jobs and the rise of automation leave them with limited opportunities. "It’s hard work," Wu Hua said, but for many, it’s the only work available.
The rise of e-commerce giants like Shein and Temu has brought unprecedented connectivity between factories and consumers, but it has also created new pressures for workers. The demand for high-quality products at low prices has squeezed margins for workshop owners, making it difficult to pay workers a decent wage. Meanwhile, the ethical concerns surrounding materials sourced from Xinjiang add another layer of complexity to an already fraught industry. As the world grapples with the implications of fast fashion and de minimis shipments, the stories of these workers remind us of the human cost behind the clothes we wear.
