China's Cheap Goods Are Europe's Problem Now

Summary

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Podcast Summary: The Journal – "China's Cheap Goods Are Europe's Problem Now"

Date: January 7, 2026
Hosts: Ryan Knudsen & Jessica Mendoza (The Wall Street Journal & Spotify Studios)
Guest/Reporter: Chelsea Delaney

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Overview

This episode explores how, after the imposition of new tariffs and regulatory hurdles by the US, Chinese exporters—most notably e-commerce giants Shein and Temu—have rapidly shifted their focus to Europe. The hosts and reporter Chelsea Delaney detail the economic, logistical, and social impacts of this pivot, highlighting both opportunities and controversies sparked by the influx of low-cost Chinese goods.

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Key Discussion Points & Insights

1. Shein’s Arrival in Paris: Market Chaos and Local Backlash

• Opening Scene: Shein’s first permanent retail store in Europe opened in Paris in late 2025, causing both consumer frenzy and local outrage.
  • Chelsea Delaney (00:31): "Chaos, Absolute chaos."
  • Huge crowds contrasted sharply with angry protests and even a day-long strike by local retail staff.
  • Chelsea Delaney (00:45): “A lot of French retailers and politicians were very upset... Some department store workers held a strike or held a protest.”

2. Regulatory Shifts: US Crackdown Pushes China Toward Europe

• US Tariffs and De Minimis Loophole Closed
  • Trump administration ends the 'de minimis' rule allowing duty-free import of packages under $800 and imposes aggressive tariffs (up to 145%).
  • Ryan Knudsen (03:57): “De minimis is a big deal. It’s a big scam going on against our country, against really small businesses. And we've ended, we put an end to it.”
  • Chelsea Delaney (05:23): “The tariffs were huge... like if you think back to April, some of the tariff levels were like 145%. Just absolutely devastating...”
• Immediate Impact:
  • Chinese e-commerce exports to the US collapsed almost overnight with companies like Shein and Temu drastically reducing US-bound shipments and redirecting advertising budgets.
  • Chelsea Delaney (05:49): “At first this business kind of ground to a halt in the US... Exports from China of these low value packages just completely collapsed...”
  • Ryan Knudsen (06:19): “TEMU and Shein also pulled back their advertising in the US significantly. But that ad budget wasn’t left unspent... they started spending it elsewhere.”

3. Europe: The New Frontier for Chinese Goods

• Europe Was Previously Undervalued
  • Known for its bureaucracy and the complexity of cross-country regulations, Europe was until recently less attractive for Chinese e-commerce.
  • Chelsea Delaney (06:52): “Europe is underdeveloped for a lot of Chinese manufacturers... It’s bureaucratic and difficult to operate in. I think they hadn’t put a ton of resources into it until Trump's trade tensions started...”
• Sharp Increase in Chinese Exports to Europe
  • Chinese exports to the US fell 20% in 2025, but overall global exports hit a record high thanks to booming sales in Europe and Southeast Asia.
  • Chelsea Delaney (07:29): “It’s been a huge shock how effectively Chinese companies have found new places to sell... they have more than made up for that by selling to other places like Southeast Asia and in particular Europe.”

4. Establishing a New Silk Road: Logistics and Supply Chain Adaptation

• Building New Trade Networks
  • Air cargo capacity shifted from US routes to Europe.
  • New logistics ventures, such as Uzbekistan’s My Freighter, saw explosive growth.
  • Chelsea Delaney (09:37): “It’s based in Tashkent, Uzbekistan. And they've just seen this explosion in business... flying basically almost 9,000 tons of cargo every month from China to Europe.”
• Family Warehousing: A New Cottage Industry
  • Individuals across Europe are renting rooms, sheds, even dorms to warehouse goods for Chinese companies—some earning thousands each month.
  • Chelsea Delaney (10:29): “One woman we spoke to in London actually built a shed in her backyard over the summer... she can earn somewhere between three and five thousand pounds a month by doing this.”

5. Economic Opportunity and Growing Controversy

• Opportunities for Entrepreneurs, but Risk for European Brands
  • The scale of imports sparks concern among local retailers and governments about unfair competition and threats to Europe’s legacy of quality manufacturing.
  • Chelsea Delaney (12:28): “Europe also has this history of like high quality production... I think this has also very much ruffled the feathers of some of the people who think that Europe should be standing for, you know, high quality and sustainability...”
• Compliance and Scandals
  • Shein embroiled in controversies: Sales of illegal goods including a sex doll resembling a child and banned weapons like brass knuckles.
  • Chelsea Delaney (13:00): “They found illegal products on Shein’s website... they had found a sex doll that looked like a little girl.”
  • French authorities threatened to suspend Shein’s site; subsequent investigation led Shein to remove the products and ban sex dolls.
  • Reports of non-compliant products: choking hazards, toxic metals, faulty electronics.

6. Regulatory Response: Europe’s De Minimis Debate

• Slow Policy, Now Accelerating
  • EU’s original plan was to close the de minimis loophole by 2028; recent scandals and pressure sped up enforcement to begin in July 2026 (levying a €3 fee per package, then full closure).
  • Chelsea Delaney (15:07): “Europe... was moving very slowly on it... they finally said... we have to do something now.”
• Will It Change Much?
  • Chelsea notes the new logistics network is entrenched; as of now, no tariffs on these imports, just customs fees, so the business model remains attractive.
  • Chelsea Delaney (16:14): “It seems unlikely that it'll go fully away... the warehouse network these e-commerce companies are building is enormous... it still could be more advantageous to sell into Europe because Europe does not currently have tariffs...”

7. European Consumers: Demand Remains Strong

• Despite Scandals, Shoppers Love Cheap Variety
  • Social media hauls of Shein, Temu, and TikTok Shop products abound.
  • Chelsea Delaney (17:37): “People obviously want this stuff... they know a lot of the stuff is not good quality, but... you cannot find anything comparable with that price, with that variety, with that ease anywhere else. So they still love to buy it.”

8. The Ultimate Question: Did the US-China Trade War Weaken China?

• Adaptability and Resilience of China’s Export Machine
  • Despite losing market share in the US, China’s exports soared globally, and Europe is absorbing much of what the US no longer imports.
  • Chelsea Delaney (18:46): “This just goes to show, like, how adaptable the Chinese economy is... this sort of Chinese export machine has not been hurt by the trade war in the way that people thought it would be... It’s been very resilient and very adaptable.”

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Notable Quotes & Memorable Moments

• "Chaos, Absolute chaos." — Chelsea Delaney on Shein’s Paris store opening (00:31)
• "A lot of French retailers and politicians were very upset about it... They went on strike for a day." — Chelsea Delaney (00:45)
• “De minimis. It’s a big deal. It’s a big scam going on against our country, against really small businesses. And we've ended, we put an end to it.” — Ryan Knudsen quoting U.S. rationale for closing the loophole (03:57)
• "Exports from China of these low value packages just completely collapsed to the U.S.... It was very, very chaotic." — Chelsea Delaney (05:49)
• “Europe is underdeveloped for a lot of Chinese manufacturers... Europe is famously bureaucratic and it’s a bit complicated because of all the different countries.” — Chelsea Delaney (06:52)
• "We're seeing this trend of what's called family warehousing... She can earn somewhere between three and five thousand pounds a month by doing this." — Chelsea Delaney (10:29)
• "They found illegal products on Shein’s website and they had found a sex doll that looked like a little girl. Yeah, that's when things really, really escalated." — Chelsea Delaney (13:00)
• "Europe, being the rules based organization that it is, was moving very slowly on it... And then we did see a breakthrough in November." — Chelsea Delaney (15:07)
• “This just goes to show, like, how adaptable the Chinese economy is... this sort of Chinese export machine has not been hurt by the trade war in the way that people thought it would be.” — Chelsea Delaney (18:46)

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Timestamps for Important Segments

• Shein opening in Paris: 00:05–01:05
• US closes de minimis loophole, imposes tariffs: 03:57–05:23
• Collapse and redirection of Chinese exports: 05:49–07:29
• Pivot to Europe and logistics innovations: 07:49–11:17
• Controversy and regulatory action in France: 12:28–14:20
• Discussion on de minimis reform in Europe: 15:07–16:14
• Consumer attitudes and resilience of Chinese exports: 17:14–18:46

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Tone & Language

The episode maintains a straightforward yet engaging analysis, blending narrative reporting with pointed commentary and relatable anecdotes about both the logistical marvel and community tensions arising from the rise of Chinese e-commerce in Europe. Chelsea Delaney brings an on-the-ground perspective, detailing both the benefits and challenges of the new trade flows for European locals and businesses.

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Summary for Non-Listeners

This episode provides a deep dive into how geopolitical trade shifts—spurred by US protectionism—are transforming the European consumer landscape. It highlights the agility of Chinese exporters, the swift build-out of pan-European logistics, and the tensions between opportunity (for small businesses and consumers) and controversy (for regulators and local industries). In true Journal style, it's a narrative at the intersection of money, business, and power, painting a complex picture of globalization in flux.

Transcript

[Ryan Knudsen]

Over the past year, there's been a huge influx of Chinese goods into the European market. One of the biggest companies selling these goods is Shein, the company famous for fast fashion at low prices. In November, Shein opened its first permanent store in Europe in a popular department store in Paris. Tell me about what happened when Shein opened a store in Paris.

[Chelsea Delaney]

Chaos, Absolute chaos.

[Ryan Knudsen]

That's our colleague Chelsea Delaney. It was chaotic because there were tons of people lining up eager to shop, and right next to them, angry Parisians who wanted Sheehan out of their city.

[Chelsea Delaney]

It was intense. You know, a lot of French retailers and politicians were very upset about it. Some department store workers held a strike or held a protest. They went on strike for a day.

[Ryan Knudsen]

Melt up, melt up.

[Chelsea Delaney]

So even just the announcement that this was coming had caused a huge stir in Paris and in France.

[Ryan Knudsen]

The flood of cheap Chinese goods into Europe has been swift. And there is one very specific reason these companies are suddenly so focused there.

[Chelsea Delaney]

After the tariffs went into effect into the US China needed new places to sell all that stuff. It was no longer selling to the US And Europe looked like the perfect place.

[Ryan Knudsen]

Welcome to the Journal, our show about money, business and power. I'm Ryan knudsen. It's Wednesday, January 7th. Coming up on the show, how Europe replaced the US As China's new favorite customer.

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[Ryan Knudsen]

For decades, China has been the world's manufacturing floor and America was its biggest customer.

[Chelsea Delaney]

They make everything. They make clothes, they make vehicles, they make phones, they make laptops. There's very little in our lives that we interact with that does not have a Chinese component to it.

[Ryan Knudsen]

And increasingly, one of the biggest product categories that China makes is known as low value packages, which is basically anything that's less than a few hundred bucks.

[Chelsea Delaney]

I think it's underappreciated how big a part of China's export sector has become these low value packages. So in 2024 and also 2025, they've exp about 100 billion of these low value packages. So it has become really enormous.

[Ryan Knudsen]

Companies like Shein have sold clothes to Americans for low, low prices.

[Chelsea Delaney]

I don't think I'VE ever had a.

[Ryan Knudsen]

Shein haul this big before. I just got all this stuff for literally $0. And Americans love this stuff.

[Chelsea Delaney]

This is like the biggest package I've ever gotten from them. Before I ordered a bunch of random things from Shein. I honestly don't even remember what I ordered. And it was only like 60 bucks, which, which is pretty good. Cause I got, I wanna say 20 things.

[Ryan Knudsen]

But the Trump administration did two things last year that really rocked the boat for the Chinese e commerce industry. First, Trump announced he was gonna close something called de minimis. De minimis is a regulatory loophole that allowed packages under $800 to be exempt from customs duties and certain taxes.

[Chelsea Delaney]

It just made it very easy to ship small packages from a place like China into the US because you avoided all of the hassle and the bureaucra that comes with bigger shipments. So that's what a lot of the Chinese e commerce companies did. So instead of sending a bulk shipment through it with a container full of, you know, a thousand shirts, they'd send a small package through the mail and then they wouldn't have to do all of the customs declarations and pay the taxes.

[Ryan Knudsen]

A lot of American companies complain that de minimis gave foreign manufacturers companies like Shein and Temu unfair advantages. De minimis. It's a big deal. It's a big scam going on against our country, against really small businesses. And we've ended, we put an end to it. The second thing of course, was tariffs, which reached such high numbers of China last year that it made it much less profitable for some Chinese companies to do business in the US the end of de minimis and the application of high tariffs on China signaled a major obstacle for Chinese companies who thrived by selling low value packages.

[Chelsea Delaney]

People thought it would be really bad for Chinese manufacturers. The US Is the most important market for a lot of these Chinese exporters. And the tariffs were huge. Like if you think back to April, some of the tariff levels were like 145%. Just absolutely devastating for a lot of these companies.

[Ryan Knudsen]

How did China's businesses that rely on these kinds of shipments, how did they respond at first?

[Chelsea Delaney]

At first this business kind of ground to a halt in the US So you can see it through the trade data. Exports from China of these low value packages just completely collapsed to the U.S. some of the companies weren't even shipping to the U.S. because the Customs rules and the tariffs were so onerous and they didn't even know if they were going to get stuff in. So it was very, very Chaotic. In the initial weeks, TEMU and Shein.

[Ryan Knudsen]

Also pulled back their advertising in the US Significantly. Gone were those omnipresent TEMU ads that advertised air fryers and doormats and cleaning supplies. But that ad budget wasn't left unspent. Both TEMU and Shein started spending it elsewhere.

[Chelsea Delaney]

One thing you see very clearly through the data is there was a huge surge around the same time of these low value packages coming into Europe.

[Ryan Knudsen]

So what was it about Europe, the European market that was attractive to Chinese businesses?

[Chelsea Delaney]

Europe is underdeveloped for a lot of Chinese manufacturers. Like Europe is famously bureaucratic and it's a bit complicated because of all the different countries. And so, you know, a lot of Chinese e commerce companies had just kind of focused on the US because it's easier to sell there, it's bigger, it's wealthier, and you know, Europe is bureaucratic and difficult to operate in. So I think they hadn't put a ton of resources into it until Trump's trade tensions started to make them question.

[Ryan Knudsen]

The U.S. so even though the U.S. closed its doors to Chinese goods, or at least made it really difficult to sell here, it sounds like China was able to quickly pivot to the European market.

[Chelsea Delaney]

Yeah, I mean, I think it's been a huge shock how effectively Chinese companies have found new places to sell all of the stuff they make. Their Exports to the US are down about 20% in 2025, but they have more than made up for that by selling to other places like Southeast Asia and in particular Europe.

[Ryan Knudsen]

In a year when China's biggest customer, the US put up massive tariffs, China exported more to the world than ever before. And its trade surplus passed a trillion dollars for the first time. For Chinese e commerce companies, Europe offered a lot of the same things the US Used to consumers with money to spend and its own de minimis regulation that allowed Chinese companies to import low priced goods largely free of customs fees. But accessing the Chinese market meant a huge shift in these companies supply chains. Chinese businesses have had to prop up a whole new logistics network practically overnight. Along these new trade routes, all kinds of small businesses are cashing in. It's such a vast trade network spanning China to Europe that it's even being described as a new Silk road. So these Chinese companies see Europe as a very attractive market to sell their goods. How do they go about actually setting up the logistics to make this happen?

[Chelsea Delaney]

Yeah, so I guess the first thing you have to do if you want to sell in Europe on an e commerce platform is you have to get the goods to Europe. So after the tariffs went into effect, what we saw was a big shift in the air cargo market. So all of these air freighters that carry goods all around the world, they started moving their capacity to Europe. So there has been this huge explosion in air cargo moving from Europe as the US route has kind of declined. And along those routes, we've seen these new cargo carriers popping up along the new Silk Road.

[Ryan Knudsen]

There are businesses that have taken advantage of this pivot to Europe. One that's been quite successful is called My Freighter.

[Chelsea Delaney]

It's based in Tashkent, Uzbekistan. And they've just seen this explosion in business. And so they're flying basically almost 9,000 tons of cargo every month from China to Europe. They make a stop in Tashkent and then keep going on. And so we've seen a lot of that. Like a lot of. There's just been this huge explosion along that route. And for some of these entrepreneurs, like, it's been life changing. Like this company might go public on the London Stock Exchange. I think, yeah, for some of these people, this has been a real life changing opportunity.

[Ryan Knudsen]

Companies like My Freighter help get cheap Chinese goods to Europe once they actually get there. Shein and Temu have built up massive warehousing networks across the continent to stockpile their inventory. But demand for Chinese goods has risen so fast that there's been another kind of warehouse business popping up too.

[Chelsea Delaney]

Increasingly we're seeing this trend of what's called family warehousing. So these, these are really small warehouses. Often they're in people's homes. It could be in a spare room you have, it could be, you know, in a dorm room. One woman we spoke to in London actually built a shed in her backyard over the summer to store some of this stuff. She had just been looking on Chinese social media and she was just seeing all of these Chinese factories looking for places to store stuff in Europe. And she was like, what a, what a great business. And so she built this shed and now she spends, you know, a couple hours a day, like pack, packaging this stuff and sending it off. And some of these people are making really good money. Like she was saying she can earn somewhere between three and five thousand pounds a month by doing this. And outside of that, you know, she just takes care of her kid.

[Ryan Knudsen]

This has all been great for the Chinese e commerce giants and the businesses along their trade routes. But like with those protests outside Shein, there's also been controversy and there was even a scandal involving a sex doll. That's.

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[Ryan Knudsen]

As Chinese companies started flooding the European market with cheap goods, retailers who are some of the largest employers there, started to worry.

[Chelsea Delaney]

I think Europe also has this history of like high quality production and you know, made in Europe, made in Germany, made in Italy, made in France, like that's really important to Europe, like the quality. And I think this has also very much ruffled the feathers of some of the people who think that Europe should be standing for, you know, high quality and sustainability and things like that.

[Ryan Knudsen]

And as Shein was preparing to open its Paris store, the company was embroiled in another controversy in France.

[Chelsea Delaney]

This French consumer watchdog, they put out this statement. They found illegal products on Shein's website and they had found a sex doll that looked like a little girl. Yeah, that's when things really, really escalated. Clutching a teddy bear, this doll is around the same height as a one year old girl. It was being sold by the Chinese online retailer Shein is a sex doll.

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The country's consumer watchdog filed a complaint with the ultra fast fashion company prompting the product to be pulled from its site. Court here in Paris today is to consider the French government's request for a three month suspension here of the website of the Chinese online retailer Shein.

[Ryan Knudsen]

And government officials in France had strong reactions to it.

[Chelsea Delaney]

Pretty immediately France was threatening to ban Shein in France. So they were talking about banning their online platform, the website. And then it got even worse because they also found weapons, illegal weapons on the website. So things like brass knuckles, which are illegal in France. And so the Paris prosecutor's office started an investigation. They referred it to the police.

[Ryan Knudsen]

European consumer groups have flagged all kinds of other products sold on Shein that are not compliant with EU regulations, pointing to things like choking hazards, toxic metals and USB chargers that overheated. On the sex doll controversy, Shein said that it immediately took down the listings and has banned the sale of all sex dolls. On regarding those other products, Shein said they were all sold by third party vendors and that they've since been removed. It also commissioned its own tests and said it showed a higher rate of compliance for some items. A judge ruled in December that the Shein app did not have to be temporarily suspended and could remain online. Governments in Europe have also started reconsidering their own de minimis rules. The EU is already considering closing the loophole, but Chelsea says it's taken on new urgency in recent months.

[Chelsea Delaney]

Europe, being the rules based organization that it is, was moving very slowly on it. So they were saying, yeah, we're going to close the de minimis in 2028. We need to build this new data hub and we have to get the agreement of all 27 finance ministers, but we must follow the European rules, which will take three years. And then we did see a breakthroug in November. They finally said, you know, we recognize that three years is too long. We have to do something now. And so they are starting next July, going to be levying this three euro fee on the packages and then eventually they will close the de minimis entirely.

[Ryan Knudsen]

Will any of these changes, I mean, these changes to de minimis or these investigations into Sheehan and stuff, is any of that going to change the dynamics that have started to develop in the market where China's just selling tons and tons of stuff to Europeans?

[Chelsea Delaney]

It's a good question. I think that's the question on everyone's mind because this whole network has sprung up around it. A lot of people, airports, cargo, operators, stay at home, moms have sort of made a big bet on it continuing. And so it seems unlikely that it'll go fully away. Like the warehouse network these e commerce companies are building is enormous. So it does look like they're making a pretty long term bet on staying in Europe. And even with the de minimis gone, and even when Europe, the eu, the UK and the de minimis, you don't have the tariffs that the US has. So it still could be more advantageous to sell into Europe because Europe, Europe does not currently have tariffs on Chinese e commerce goods, even if you are having to pay a little bit more on customs duties.

[Ryan Knudsen]

Sheehan responded to a request for comment by saying it hasn't changed its strategy in Europe. The company said its competitive edge stems from its small batch manufacturing model and not the customs loophole. And there's another challenge that European regulators will face. For many European shoppers, they love all this cheap stuff. Remember that amid all those protesters outside Shein were tons of customers waiting to get in.

[Chelsea Delaney]

If you look at the sales data, people obviously want this stuff. And when I talk to People who are buying on Chinese e commerce platforms like Shein and Temu, and increasingly TikTok Shop is getting very popular here as well. They say, you know, they're quite measured about it. They know a lot of the stuff is not good quality, but. But they also say you cannot find anything comparable with that price, with that variety, with that ease anywhere else. So they still love to buy it. I was down a real TikTok rabbit hole on this and I mean, I saw people doing a haul every single day, buying like a hundred items every single day and getting these massive packages. So people like it, but.

[Ryan Knudsen]

So all of this kind of kicked off after Trump hit China with these tariffs, which is, you know, largely meant to help US manufacturers, but also in some ways designed to weaken China, but it really hasn't. So what does this story say about how China has fared in the trade war?

[Chelsea Delaney]

Yeah, I mean, this just goes to show, like, how adaptable the Chinese economy is. Like, yes, it is selling 20% less to the U.S. now, that is a blow. But Chinese factories move very quickly and they are very entrepreneurial and they have been very good at finding other places to sell stuff. And so, yeah, this sort of Chinese export machine has not been hurt by the trade war in the way that people thought it would be. It's been very resilient and very adaptable. Yes, the US and China are trading less, but the imbalances that China is running with the rest of the world are just getting even bigger.

[Ryan Knudsen]

That's all for today. Wednesday, January 7th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Rebecca Fung. Thanks for listening. See you tomorrow.