Ryan Knudson

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

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.

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

I just got all this stuff for literally $0.

And Americans love this stuff.

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 going to 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.

A lot of American companies complain that De Minimis gave foreign manufacturers, companies like Sheen and Timu, unfair advantages.

The second thing, of course, was tariffs, which reached such high numbers with China last year that it made it much less profitable for some Chinese companies to do business in the U.S.,

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.

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

Timu and Sheehan also pulled back their advertising in the U.S.

significantly.

Gone were those omnipresent Timu ads that advertised air fryers and doormats and cleaning supplies.

But that ad budget wasn't left unspent.

Both Timu and Sheehan started spending it elsewhere.

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

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.