The Great Unraveling: How Trump’s trade war crushed China’s digital invasion
When tariffs work, globalists weep and patriots cheer
The most satisfying sound in American politics is the crash of a rigged game that finally meets its match. It so happens that a crash thundered across the e-commerce landscape in May when Temu, the Chinese discount platform that built an empire on exploiting American trade loopholes, watched 58% of its daily U.S. users vanish into the ether.
The cause was simple: President Trump’s administration ended the “de minimis” provision that allowed Chinese companies to ship packages worth under $800 to American consumers without paying a dime in tariffs. The provision is a legal expression whereby “the law does not concern itself with trifling matters” (de minimus non curat lex).
The $800 threshold turned out to be more than a trifle to the White House.
For Temu, however, the elimination of such a provision wasn’t just a business setback—it was its long-overdue reckoning with economic reality. For years, Temu and its “fast-fashion” cousin, Shein, gorged themselves on legal loopholes which allowed them to undercut American retailers alongside Beijing’s countless other state-subsidized manufacturers flooding American markets with artificially cheap goods.
The de minimis exemption, originally crafted in 1938 to ease administrative burdens on small shipments, had been perverted into a superhighway for Chinese economic warfare.
The numbers tell a story that every red-blooded American should celebrate. Temu’s first-quarter revenue “only” grew 10% year-over-year to $13.18 billion, but it missed analyst estimates by nearly a billion dollars. Operating profit plummeted 36% to $2.52 billion, with margins collapsing from 32.9% to 19.1%.
When the Trump administration slammed the door on tariff-dodging schemes, imposing 90% duties or $75 per item on Chinese imports, entire business models of such discount platforms imploded.
Nonetheless, the chorus of free traders still wail about free markets and consumer choice, but their theology crumbles when confronted with the harsh reality of economic warfare.
China doesn’t play by free market rules. They play by Communist Party rules.
For years, China’s state-controlled enterprises dumped products into American markets at prices no honest competitor could match, not through efficiency or innovation, but through massive government subsidies.
In the fantasy world of economic ideologues, this is somehow referred to as free trade.
However, when American companies follow the laws of their nation while Chinese firms exploit various loopholes, that is not “free trade.” One could better describe it as economic suicide dressed up in Adam Smith’s clothing.
Economic patriots have long understood this. For decades, practicians of economic patriotism warned that free trade with mercantilist powers would hollow out America’s industrial base. Such warnings came to pass.
Long derided as “protectionists” during China’s long build-up, economic patriots from generations past have now been proven as prophets.
Meanwhile, the scores of free trade ideologues—who sermonized the American public about market purity—stood silent while Chinese e-commerce giants built their empires on regulatory arbitrage and subsidized labor. As they preached free trade and unfettered markets, American manufacturers shuttered factories and laid off workers who couldn’t compete with Beijing’s economic hit squads.
The genius of Trump’s latest tactic lies not in broad-brush protectionism, but in surgical strikes against specific abuses. The de minimis loophole wasn’t sacred free market doctrine in the first place. It was a bureaucratic convenience, but one that Chinese companies later came to weaponize against American interests.
By eliminating this exemption for Chinese and Hong Kong imports but maintaining it for other countries, Trump demonstrated that America can be both pro-trade and pro-American.
Consider the historical parallel: In the 1930s, as America faced economic devastation, some of our leaders had the wisdom to protect domestic industry through targeted tariffs. A 1938 amendment to The Tariff Act of 1930—aka “Smoot-Hawley” —which included the original de minimis provision, was designed to balance trade facilitation with revenue generation and domestic protection.
The framers of that legislation never envisioned Chinese Communist Party operatives exploiting their administrative convenience to gut American manufacturing. In losing its unfair advantage, Temu’s response reveals the hollowness of the arguments proffered by free trade fundamentalists.
What, then, did Temu do?
It slashed U.S. advertising spending and shifted order fulfillment to American warehouses rather than shipping directly from China. If truly competitive, why couldn’t they maintain their market position while playing by the same rules as American companies?
The answer is obvious: Their entire model depends on regulatory arbitrage, not genuine economic efficiency.
The broader implications stretch far beyond the troubles of one Chinese platform. Over 1 billion packages entered America annually under the de minimis exemption, representing more than $800 billion in trade that escaped proper scrutiny.
This massive flow included not just discount consumer goods, but potentially dangerous products that bypassed safety inspections, counterfeit merchandise that violated intellectual property rights, and items produced with forced labor that mocked American values.
The libertarian or “free trade” objection—that tariffs raise consumer prices—misses the forest for the trees. Indeed, when Chinese companies can’t subsidize their way to market dominance, some goods may cost the end consumer more money. That’s a given.
But what price do we place on American jobs, industrial capacity, and economic independence?
When Ohio steel mills close because Chinese state enterprises dump their subsidized metal stateside, the true cost isn’t just measured in unemployment benefits. Costs must be measured in the death of communities, the collapse of the middle class, and the surrender of our economic sovereignty to foreign powers that view trade as warfare by other means.
The struggles of Chinese discount retail also exposed the myth that global e-commerce platforms are unstoppable forces of nature. When governments have the will to defend the interests of their citizens, even the most sophisticated corporate machines can be brought to heel.
Temu’s daily user base didn’t gradually decline. It collapsed by 58% in a single month. This demonstrates that political will, not market forces, ultimately determines the terms of international commerce.
The contrast with Shein illustrates why targeted action works better than blanket ideology. While both platforms faced the same tariff environment, Shein managed to increase average customer spending as Temu floundered.
This suggests that some business models can adapt to fair competition while others cannot. Temu’s vulnerability stemmed from its extreme dependence on the de minimis loophole. When that artificial advantage disappeared, so did its ability to compete at the same level.
As New England Patriots head coach Mike Vrabel warns, “Keep your [flipping] head on a swivel.”
Critics argue that tariffs represent government interference in free markets, but this criticism ignores the reality that no market is truly free when one participant enjoys massive state subsidies while others operate under normal commercial constraints.
Chinese e-commerce platforms didn’t succeed through superior efficiency. They succeeded through superior government support. While tariffs may distort truly free markets, that deals in economic theory.
Reality, on the other hand, suggests that tariffs do accomplish something more concrete. When designed and executed properly, tariffs level the playing fields that were previously distorted by foreign government interventions.
The “revenue” argument for tariffs also deserves particular attention in our current fiscal environment. With America carrying $37 trillion in debt and adding another trillion every 100 days, the idea that the general government should forego tariff revenue to subsidize Chinese importers borders on the absurd.
Every dollar of tariff revenue collected from Chinese platforms is a dollar that doesn’t need to be extracted from American taxpayers through income taxes or borrowed from foreign creditors.
Temu’s international performance provides another lesson in economic realism. While the platform hemorrhaged American users, it continued growing in other markets, with non-U.S. users representing 90% of its 405 million global monthly active users.
While it now appears that a dominant market position cannot be achieved outside regulatory arbitrage, does this scenario also not prove Chinese companies can indeed compete globally—but perhaps not dominate—when they follow standard agreed-upon rules?
America’s willingness to defend its economic interests does not and will not doom Chinese companies. It now forces them to compete honestly.
The merchants caught in Temu’s transformation face real hardship as they adapt to new customs procedures and tariff obligations. But this temporary disruption pales beside the permanent damage inflicted on American manufacturers who spent decades competing against subsidized foreign rivals.
Justice, after all, often requires short-term pain to prevent long-term devastation.
Can we expect other countries to follow America’s lead in closing related de minimis loopholes for Chinese imports?
The European Union and Canada maintain similar provisions that Chinese platforms exploit in identical ways. If America’s example spreads, Beijing’s e-commerce empire could face global constraints on its regulatory arbitrage strategy.
The Temu collapse sends a clear message to other foreign platforms that built their American strategies around exploiting regulatory gaps: The party is over.
Have American policymakers rediscovered the wisdom that free trade must be fair trade, and that fair trade requires equal rules for all participants?
When Chinese companies prove they can compete under the same constraints as American businesses, they’ll be welcome in U. S. markets. Until then, they’ll face the consequences of their government’s mercantilist policies.
President Trump’s surgical strike against the de minimis loophole demonstrates that America can defend its economic interests without abandoning global commerce. By targeting specific abuses rather than imposing blanket restrictions, the administration showed that economic nationalism and trade engagement can coexist.
The false choice between pure free trade and complete isolation crumbles when confronted with policies that are both targeted and effective.
The recent downfall of Temu marks more than one company’s setback—it signals America’s reawakening to economic reality. For too long, America has accepted the fiction that trade with mercantilist powers would somehow become free through magical thinking and good intentions.
Now understood is that freedom requires vigilance, that markets require rules, and that nations subsidizing their exports while protecting their imports cannot claim the moral authority of free trade.
The American retreat by Chinese e-commerce giants proves that when America chooses to defend its workers and industries, no foreign platform is too big to fail. In a global economy where economic power determines geopolitical influence, Temu’s apparent collapse represents not just a commercial victory, but a reassertion of American sovereignty over its own markets.
The forgotten Americans who watched their jobs migrate to China while Beijing’s digital platforms conquered American commerce are finally witnessing what it looks like for their government to fight for their interests rather than apologizing for their existence.