Rows of white concrete buildings near the Pearl River in southern China house one of the world’s fastest-growing industries: Gritty workshops are churning out inexpensive clothing that is exported straight to homes and small businesses around the world. No tariffs are paid, and no customs inspections are conducted.
The laborers who make these goods earn as little as $5 an hour, including overtime, for workdays that can last 10 hours or more. They pay $130 a month to sleep on bunk beds in tiny rooms above factories packed with sewing machines and mounds of cloth.
“It’s hard work,” said Wu Hua, who sews pants, seven days a week, at a factory in Guangzhou, a vast metropolis that straddles the Pearl River.
E-commerce giants have forged close links from international markets to workers like Mr. Wu, shaking retailing and economies around the globe.
The number of duty-free shipments to the United States has risen more than tenfold since 2016, to four million parcels per day last year. Similar shipments to the European Union have climbed even faster, reaching 12 million parcels a day last year. Duty-free shipments to developing countries like Thailand and South Africa have also surged.
Now a global backlash is underway. President Trump ordered a halt on Feb. 4 to the duty-free entry, without inspection, of parcels with goods worth up to $800. Mr. Trump temporarily suspended his order to give officials time to devise a plan for dealing with the mounds of parcels that immediately started piling up at airports for inspection.
Since taking office less than a month ago, Mr. Trump has launched a fusillade of trade actions, including an order on Thursday for his advisers to come up with new tariff levels that take into account a range of trade barriers. But a lasting halt on duty-free shipments could be one of the most far-reaching moves. These shipments have skirted until now not only his new tariffs, including a 10 percent tax on all goods from China, but also many other tariffs that have accumulated over the years.
The U.S. action on so-called de minimis shipments — low-value parcels that customs services don’t bother inspecting or calculating tariffs on — was one of many. Last summer, South Africa imposed 45 percent tariffs on even the smallest imports of clothing. Thailand ended its exemption of low-value imported parcels from sales taxes, although it continues to allow tariff-free entry of parcels up to 1,500 Thai baht ($44). And the European Commission, the executive arm of the European Union, proposed this month to end the 27-nation bloc’s duty-free treatment of packages worth up to 150 euros ($156).
Countries have cited different reasons for their restrictions. Mr. Trump contended that by skirting customs inspections, the duty-free parcels had become a conduit for fentanyl and related materials to enter the United States. The European Commission cited a need to ensure product safety in imports, stop counterfeit goods and prevent unfair competition. South Africa and Thailand acted to protect local shop owners.
“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.
This corner of southern China near Hong Kong has been a hub of low-cost manufacturing for export since the 1980s, especially apparel. But the rise of e-commerce sellers around the world has created ever-growing demand of such shipments.
Guangzhou has emerged as the global hub of de minimis shipments. Across many square miles of the city, fast fashion garments are made in concrete buildings with sewing shops, and sometimes living quarters above them.
Shein and Temu, competing Chinese e-commerce giants that together hold at least a third of the de minimis industry, coordinate much of their supply chains from large offices in Guangzhou. Amazon has introduced its own de minimis business, Haul, for shipments from China.
China’s de minimis industry is not confined to Guangzhou. Nor is it limited to the industry’s mainstay, clothing.
Yiwu, a city 600 miles northeast of Guangzhou with a vast wholesale market, has become another hub. It coordinates de minimis exports of toys, hats and other small items from towns scattered across the Yangtze River delta.
Shein, in particular, has presented itself as a new business concept, connecting far-flung customers with factories ready to cut and sew almost anything. Collaborating with 5,000 workshops and small factories across China, Shein’s approach almost completely eliminates the need for store inventory, or even for stores and retail staff.
“At Shein, we have reimagined the supply chain by empowering thousands of small and medium-sized businesses, giving them full insight into what our customers want and need,” the company says on its website.
But workshop owners in Guangzhou complain that Shein is too demanding.
Li Zhi’s workshop produced garments for a Shein contractor four years ago, but the arrangement lasted only a year. “Shein demands high quality but offers low prices,” she said while sorting lace fabric on a table.
She now sells instead to wholesalers for China’s domestic market, who offer her higher prices. But business remains difficult, she said, as a shortage of blue-collar workers has sent the going rate for a day’s labor to almost $70, from $48 four years ago.
In China today, almost two-thirds of 18-year-olds enroll in a college or university, up from 10 percent in 2000. That has left few young Chinese willing to do factory work.
“Business is deteriorating every year,” Ms. Li said. “There are fewer and fewer workers now — mostly those born in the ’70s and ’80s.”
If Mr. Trump permanently ends the de minimis rule, imported apparel that is now duty-free would be subject to basic tariffs of 3 to 30 percent, plus a 7.5 percent tariff imposed during his first term, plus a 10 percent tariff on all imports from China that the president imposed on Feb. 4. On top of that, there would be customs processing fees of $5 to $20 per parcel.
Shein said its suppliers paid their workers twice as much as local minimum wages. Temu said nearly 60 percent of its sales in the United States were now from American warehouses with shipments that go through customs, with tariffs paid.
The competitive advantages of the de minimis export industry in China go beyond avoiding tariffs and skirting customs inspections. More than 90 percent of China’s cotton is grown in Xinjiang, a region in China’s far northwest. Many Western governments have begun restricting or banning imports with any content from Xinjiang after mass arrests there by China’s security agencies and evidence of forced labor among the region’s predominantly Muslim ethnic groups, particularly the Uyghurs.
Households and small businesses that buy de minimis parcels from China bear legal responsibility for making sure their parcels have no cotton or other content from Xinjiang. But regulators in the West have been reluctant to bring charges.
Big retailers, by contrast, generally comply with Xinjiang-related legislation when they import large shipping containers of clothing for their stores.
Workshop owners in Guangzhou said they did not know where their fabric suppliers obtained their cotton.
Yun Congping, a Guangzhou sewing shop owner who supplies the Thai market, said he and other merchants needed exports.
“If we don’t accept the deals” to supply low-priced exports, he said, “there’s nothing else to do.”
Jordyn Holman contributed reporting from New York. Li You contributed research.