How America's Trump Tariffs may spread Zara and H&M's 'China problem' to entire Europe

Less than a decade old, Chinese retail giant Shein has become the world’s No. 1 player in terms of market share and also the company that has gained the most market share over the past year, according to GlobalData. Zara owner Inditex and Swedish retail giant H&M, the global kings of the sector to date, are next two in line. Zara is the second-largest player in the market, followed by H&M. Shein has become the company with the largest and fastest-growing retailer across the world largely powered by jump in its marketshare in Europe. Now it seems Zara and H&M's this 'Chinese problem' is aggravating and spreading to entire Europe.

President Trump’s intensifying crackdown on Chinese imports seems to have redirected a "Tsunami" of low-cost goods away from the United States and into Europe, sparking a logistics gold rush that is minting new millionaires and overwhelming local regulators. According to a report in Wall Street Journal (WSJ), the shift represents one of the most dramatic rewirings of global trade since the onset of the US-China trade war. As Washington shuttered a key customs loophole known as the De Minimis rule in May, exports of low-value parcels to the US from China have plummeted by more than 40%.


In response, shipments to Europe have more than offset the nearly 20% contraction in US trade, pushing China’s global trade surplus past the $1 trillion mark for the first time this year. The front lines of this trade diversion are not just at massive ports, but in the backyards of European suburbs. The "shadow logistics" networks allow Chinese sellers to slash delivery times and under-price commercial warehouses, often charging as little as 70 cents per package.

Fueling this surge is a fleet of upstart cargo airlines forging what they call a "modern Silk Road." The volume has forced cargo carriers to seek secondary hubs. One Air, a British startup, recently moved its operations from London to the rural East Midlands Airport to avoid congestion. Over the summer, the airport redrew its parking layout to accommodate a surge in Chinese freighters.

Retailers across Europe worried

For the first time, the European Union has surpassed the U.S. as the top destination for China’s $100 billion "cheap package blitz." Retailers warn competition is threatening their industry. “We sell at a price point of around 15 euros a pair of underwear, where Shein and other Chinese platforms will sell five pairs of underwear for the same price,” told Guillaume Gibault, founder of French underwear brand Le Slip to WSJ. “It puts in the mind of the customer, the price doesn’t mean anything anymore.”

France threatens China with tariffs over trade surplus

French President Emmanuel Macron recently said that he had threatened Beijing with tariffs during his state visit to China if there was no action taken to reduce the country's ever-widening trade deficit with the European Union. During Macron's visit earlier in December, he reportedly urged China to boost cooperation on "unsustainable" global trade imbalances, geopolitics and the environment.

"I tried to explain to the Chinese that their trade surplus is unsustainable because they are killing their own customers, particularly by no longer importing much from us," Macron said in an interview published by French daily Les Echos.