( NewsNation ) — President Donald Trump is closing a tax break that lets discount stores such as Shein and Temu evade duties on inexpensive products from China.
Trump signed an executive order Wednesday to end the so-called “de minimis” exemption on merchandise from China and Hong Kong. The rule allowed companies to avoid import taxes and certain customs paperwork on packages worth $800 or less.
This choice might result in increased expenses for customers shopping at discount platforms such as Shein and Temu—platforms that have utilized this exception to offer extremely low-priced items and swiftly broaden their presence in the U.S. market.
Beginning May 2nd, low-value goods coming from China will be subject to a tariff set at either 30% of their worth or $25 for each item. as per a fact sheet from the White House The monetary value will rise to $50 following June 1st.
As online shopping and direct-to-consumer sales have grown, so too has the utilization of the de minimis exemption. In the previous year, approximately 1.4 billion packages were imported into the U.S. via the duty-free channel, which is over twice as many as the 636 million documented in 2020. as stated by U.S. Customs and Border Protection .
Lawmakers on both sides of the political spectrum In recent years, they have advocated for updating the de minimis rule, expressing concerns that this exception facilitates drug smuggling across national borders.
Over 90% of all packages entering the U.S. currently arrive through de minimis, with approximately 60% originating from China among them. according to Reuters .
Why is Trump terminating the exception?
The White House states that shutting down the trade loophole is essential for combating the influx of lethal substances such as fentanyl originating from China.
This occurs because imports entering the country via the de minimis exemption usually undergo less inspection and regulation compared to bigger deliveries.
"President Trump is addressing misleading shipping tactics employed by China-based senders who often conceal illegal materials, such as synthetic opioids, within small shipments to take advantage of the de minimis exemption," according to a statement from the White House.
On a typical day, CBP handles more than 4 million low-value shipments entering the U.S.—a massive amount being exploited by criminals for smuggling illicit narcotics. agency has warned .
The Biden administration also took steps To address the issue, they suggested altering regulations with a specific focus on inexpensive products imported from China. At the time, Democratic representatives employed a comparable rationale for their proposal.
"The significant rise in de minimis shipments has made it progressively harder to identify and prevent illicit or hazardous deliveries entering the U.S. via this channel," said Daleep Singh, who serves as the deputy national security advisor to President Biden. said back in September .
Following the failure of the House to introduce legislation aimed at reducing the de minimis exemption, Democratic legislators took action. called on Biden to utilize his executive power to modify the regulation.
The National Council of Textile Organizations, which represents American manufacturing companies as an industry group, commended Trump for his efforts. move Thursday , describing it as "well past due."
Will the prices of Temu and Shein items increase?
Eliminating the de minimis threshold for products coming from China might significantly affect discount platforms such as Shein and Temu, which are renowned for offering extremely low-cost apparel, household items, and various other goods.
A 2023 report According to findings from the House Select Committee on China’s Communist Party, Shein and Temu account for over 30% of daily shipments arriving in the U.S. via the de minimis threshold exception.
Under the revised rules, consumers can continue purchasing items from Shein and Temu; however, these products might come with higher price tags.
The Cato Institute, which has a lean towards libertarian ideologies, argues that Ending the exemption will "lead to significant adverse impacts on Americans, especially poorer consumers."
The think tank cited research papers demonstrating that the lowest-income zip codes in the U.S. get more trivial-value deliveries, especially from China, as opposed to the highest-income zip codes.
Additionally, one must account for administrative expenses. In February, Trump briefly eliminated the duty-free status for inexpensive Chinese imports; however, he changed his stance when shipments began accumulating at U.S. border checkpoints.
The National Foreign Trade Council, which includes members such as FedEx, UPS, and DHL along with retailers like Amazon and Walmart, has defended the exemption And mentioned that limiting it would lead to higher taxes for American households. The council stated that decreasing the de minimis threshold would double the cost of a $50 package.
A further issue is that stores might determine continuing air shipments of inexpensive items to the U.S. is not financially viable and opt for transporting these products via container ships, resulting in extended shipping durations.
Temu and Shein did not reply to NewsNation’s queries regarding how customers in the U.S. might be impacted by the alteration in policy.
In recent years, both firms have implemented measures to expand their presence within the U.S., potentially mitigating the impact.
Temu has lately begun directing customers toward "domestic" goods—products that can be dispatched from fulfillment centers within the U.S. CNBC reported The business news source reported that Shein established distribution centers in states such as Illinois and California in 2022, along with setting up a supply chain hub in Seattle during the previous year.
Will smaller parcels coming from different nations also face impacts?
The modification of the de minimis rule currently affects only inexpensive products originating from China and Hong Kong. This implies that items with a value of $800 or lower arriving from nations such as Canada or Mexico can continue to be imported into the U.S. without duties.
Nevertheless, parcels originating from elsewhere globally might lose their exemption shortly. A different executive order Issued on Wednesday stated that the de minimis exemption will be eliminated when a mechanism for "swiftly processing and collecting" the tariffs is established.
Research has found Completely removing this provision could lead to expenses between $11 billion and $13 billion for U.S. consumers, with a particularly significant impact on low-income and minority families.
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