What is the gimmick behind free shipping of $5 items to the USA from
China?

I think that the Chinese government subsidizes their post. In Germany we can receive imported purchases of up to like ‚¬20 ($25) without paying duty. Probably something similar in the USA. It's pretty cool. There is quite a lot of useful stuff I get from China for under 25 bucks. Of course about a fifth of it never actually arrives, and some that does is worthless, but overall I feel like I'm benefiting.