When geopolitics hits the shopping cart – how trade disputes are changing retail

Chinese retailers target Europe

The USA is seeking to reduce dependencies, regain industrial capacity and curb China's economic power. Industrial policy, export controls and tariffs are being used as geopolitical instruments. Switzerland has been hit hard by these developments after the shock announcement that the USA intends to impose tariffs of 39 % from 7 August. The impact of this policy is being reflected in changes to trade flows: Chinese exports to the USA dropped by 35% in May 2025 alone - the sharpest decline since the pandemic. While tariffs have been cut since then, there has been no sign of a complete recovery in Chinese exports to the USA: in June, sea freight imports fell by 28.3% compared to the previous year.

At the same time, the presence of Chinese products in other markets is growing: China's trade surplus with the EU hit a record high of 90 billion US dollars in the first few months of 2025. EU imports of Chinese goods climbed by 8.2% in April and by a further 12% in May year-on-year. In Germany alone, imports were up by over 20% in May. The figures point to an increasing shift in exports in response to high US tariffs. This rerouting effect - away from the USA and towards Europe - highlights how geopolitical tensions can fundamentally shift local market conditions.

Old issues, new competition

This development is hitting the European retail sector during a phase of structural transformation. The sector has in fact been under great pressure to adapt for years: the donut effect' in city centres, digital sales models, the growing market power of international platforms and increasingly price-driven consumption - all of which has been exacerbated by great economic uncertainty over recent years - are putting the traditional retail model under pressure. In such an environment, geopolitical upheaval acts as a catalyst. New players and distribution models are increasingly changing the consumer landscape.

Platforms such as Temu and Shein are penetrating European markets on a large scale and increasing their sales activities significantly – with a business model based on low prices and high distribution speed. Temu now has over 94 million monthly users in the EU - a figure only surpassed by Shein which has over 130 million.

Like the shift in the flow of goods, the Chinese platform offensive is not a chance development. While Chinese providers were expanding even before the recent escalation in the trade dispute with the USA, geopolitical tensions have lent fresh momentum to their efforts. Many Chinese companies are finding the US market increasingly unpredictable. Tariffs and regulatory pressure are hampering business. In May 2025, Temu's sales in the USA plummeted by 36% year-on-year, while Shein's fell by 13%. Both companies are investing heavily in advertising in Europe.  

Another recent example of the expansion of Chinese providers is the takeover bid launched by the tech group JD.com for the consumer electronics retailers MediaMarkt and Saturn – the biggest electronics retail chain in Europe with over 1,000 stores. This clearly shows the activities of Chinese companies are not limited to online retail alone, but are focussing on the European consumer goods market as a whole - the goal may be to distribute significantly more Chinese goods via bricks-and-mortar sales channels in future.

System gaps and platform logic

Many Chinese retailers are not just taking advantage of regulatory leeway, but also shortcomings in the customs control system. Millions of orders are sent by air mail as individual parcels, making customs registration harder to govern. In Switzerland, around 100,000 parcels​ arrive at Zurich Airport every day from online retailers Temu and Shein alone. Customs authorities are increasingly being pushed to the limits of their capacity, as the huge influx of goods can only be checked on a random basis. Products often reach consumers without customs duty being paid, and compliance with product standards is often not met.

The economic foundation of these platforms also differs radically from traditional retail. Temu, for example, generates a significant share of its revenue from advertising - for example, from sellers who pay for prominent product placement. Local retailers are competing with a business model that relies heavily on market reach and remains viable despite operating on low margins thanks to additional revenue streams. These asymmetrical conditions mean the platforms enjoy major competitive advantages. However, the success of Temu and other platform providers isn't simply down to inexpensive goods and exploiting gaps in the system. They are also achieving it through innovation in terms of app design and marketing and by successfully meeting digital consumer needs.

Call for regulation

At the same time, there are growing calls for tougher regulation in Brussels and Bern. The EU is working on the definition of new customs regulations, exploring stricter product labelling requirements and negotiating the introduction of digital customs clearance rules. Switzerland introduced platform taxation for imports in 2025. Yet it remains to be seen how effective these measures will ultimately prove to be.

While European governments are trying to ensure competitiveness through regulatory measures, Chinese platforms are already expanding into new areas. In Germany and Switzerland, Temu is extending its model to the food retail sector and is specifically seeking partnerships with local suppliers. The reach gained is being leveraged to establish a foothold in other markets too. This enables a permanent presence to be achieved - even if the environment for inexpensive Chinese imports were to deteriorate.

Given the regulatory pressure owing to past violations of product safety and consumer rights, professionalisation is by no means unlikely in the medium term. The example of Shein illustrates how a platform can develop from a provider of questionable fast fashion to a largely compliant player - with CE labelling and more transparent retail structures. Other providers could take similar steps to adapt: Platforms have pledged to take action against products that fail to meet basic standards and to comply with regulatory requirements in the field of platform transparency and retailer traceability; Temu has announced its intention to increasingly fulfil orders via warehouses in Europe. This means local retailers cannot rely on tougher regulation. Even if current competitive advantages erode in the long term, the platforms may already have achieved their goal of securing a lasting foothold.

Geopolitics as a driver of new market logics

Trade developments reveal just how closely geopolitical tensions, economic conditions and market behaviour are entwined. The protectionist policy being pursued by the USA is not only piling pressure on individual export-led sectors. Open economies, such as the EU and Switzerland, face twin challenges: there is mounting pressure to keep global trade relations open, but they are increasingly being targeted by competitors from the Far East. Rising costs, faltering growth and a decline in purchasing power are intensifying this effect. The greater financial pressure on households, the more attractive low-cost platforms seem - even if they are based on business models that undermine local trade or consumer protection.

Don't want to get left behind in this challenging market environment? Then register now for the International Retail Summit being held on 10 and 11 September at the GDI for the opportunity to discuss matters with retail professionals, such as China analyst Markus Hermann Chen as well as many other ​ visionaries and pioneers from the retail sector.