As the US-China trade war escalates in 2025, South Korea’s retail and small manufacturing sectors are bracing for a potential flood of low-cost Chinese goods that could destabilise domestic markets.
Industry concerns have mounted following a series of aggressive tariff measures by former US President Donald Trump. On April 9, Trump imposed a sweeping 104 per cent retaliatory tariff on Chinese imports.
More recently, he scrapped the longstanding de minimis exemption, which previously allowed duty-free entry for imports valued under US$800. Beginning May 2, even low-cost parcels headed to the US will face tariffs of up to 120 per cent.
The policy shift is expected to severely impact Chinese e-commerce giants Temu and Shein, which have leveraged ultra-low pricing to gain a dominant foothold in the American market. Together, these platforms accounted for 60 per cent of the US$1.4 billion tariff-exempt Chinese parcels processed by US customs last year.
In response, both Temu and Shein have begun notifying American customers of imminent price hikes and reduced advertising spending, but analysts warn that a steep drop in sales is inevitable.
South Korean industry leaders are closely watching where China’s diverted surplus will land next – and fear that Korea’s open, price-sensitive, and digitally mature consumer market could become the next target. With the world’s fifth-largest e-commerce market and close geographic proximity, Korea offers an attractive alternative for Chinese manufacturers looking to offload inventory. Analysts expect platforms like AliExpress, Temu, and Shein – collectively referred to as “Al-Te-Shi” in Korea – to serve as conduits for any incoming wave of discounted goods.
Data from WiseApp-Retail shows that as of March 2025, AliExpress had 9.13 million monthly active users in Korea, second only to local giant Coupang. Temu ranked fourth with 8.31 million.
“There’s a strong possibility that China will push clearance inventory through aggressive discount campaigns via Al-Te-Shi,” said one retail industry official.
The groundwork for such an influx is already visible. In Q1 2025, South Korean direct purchases from China surged 11.5 per cent year-over-year to $786 million, even as the country’s total cross-border e-commerce volume shrank 4.4 per cent. Chinese products now account for 57.9 per cent of Korea’s direct purchase market—a record-high quarterly share. The prospect of a broader price war worries domestic e-commerce firms and small manufacturers, many of whom are still recovering from sluggish consumer spending. Industry experts warn that sustained dumping of cheap imports could erode local competitiveness and push long-term costs back onto consumers.
There is also growing concern over illegal origin labeling. Industry insiders warn that some Chinese exporters may reroute products through South Korea and falsely label them as “Made in Korea” to circumvent US tariffs – an illegal practice known locally as taekgari (tag-switching).
In response, South Korea’s customs authorities are preparing to tighten origin inspections on incoming Chinese goods to prevent trade circumvention and protect local industry.
“If Chinese goods flood the market unchecked, it will weaken Korea’s domestic manufacturing and retail ecosystem,” one retail executive said. “We need preemptive measures from both government and industry to prevent a market disruption that ultimately burdens consumers.”
This story was originally published by Ashley Song, via Korea Bizwire.
