( NewsNation ) — President Donald Trump Eliminating a trade loophole that lets discount stores such as Shein and Temu dodge duties on inexpensive products from China.
Trump signed an executive order Wednesday To eliminate the so-called "de minimis" exemption for goods coming from China and Hong Kong. This provision permitted businesses to bypass import duties and specific customs documentation requirements for shipments valued at $800 or under.
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-cost items coming from China will be subject to a tariff set at either 30% of their worth or $25 for each product. as per a factual document 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 past year, approximately 1.4 billion packages were imported into the U.S. via the duty-free pathway, which is over twice as many as the 636 million documented in 2020. as per U.S. Customs and Border Protection .
Lawmakers on both sides of the political spectrum In recent years, they have urged for changes to the de minimis provision, expressing concerns that this exemption facilitates drug smuggling into the nation.
Over 90% of all packages entering the U.S. currently arrive through de minimis, with approximately 60% originating from China. according to Reuters .
Why is Trump ending the exemption?
The White House states that sealing off the trade loophole is essential for combating the influx of lethal substances such as fentanyl originating from China.
This occurs due to the fact that imports entering the country via the de minimis exemption typically undergo lesser scrutiny and oversight compared to bigger shipments.
"The White House stated that President Trump is addressing misleading shipping tactics employed by China-based companies, which often conceal illegal items such as synthetic opioids within small shipments to take advantage of the de minimis exemption," they explained.
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 that 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 adviser to President Biden. said back in September .
Following the failure of the House to introduce legislation aimed at reducing the de minimis exemption, Democratic lawmakers 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 association, commended Trump for his efforts. move Thursday , describing it as "well-deserved."
Will Temu and Shein items cost more?
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 merchandise.
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 to the U.S. utilizing the de minimis exemption.
Under the revised rules, consumers can still purchase items from Shein and Temu, though these products might come with higher prices.
The Cato Institute, which has a lean towards libertarianism, is a think tank. argues that Ending the exemption will "result in far-reaching adverse impacts for Americans, especially impoverished consumers."
The think tank cited research papers indicating that the lowest-income ZIP codes in the U.S. get more small-value deliveries, especially from China, than the highest-income ZIP codes do.
Additionally, one must account for administrative expenses. In February, Trump briefly eliminated the duty-free status for inexpensive Chinese goods; however, he changed his stance when shipments began accumulating at U.S. Customs.
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 families. The council stated that decreasing the de minimis threshold would double the cost of a $50 package.
A further issue could be that stores might determine continuing air freight for inexpensive items to the United States is not lucrative anymore and opt to transport these products via container ships, which would result in extended shipping durations.
Temu and Shein did not respond to NewsNation inquiries asking how shoppers in the U.S. could be affected by the rule change.
In recent years, both firms have implemented measures to expand their presence within the U.S., potentially mitigating the impact of any adverse effects.
Recently, Temu has begun directing customers towards "local" products—items that can be delivered from fulfillment centers within the U.S. CNBC reported The business news source reported that Shein established distribution facilities in states such as Illinois and California in 2022, along with setting up a supply chain center in Seattle earlier this year.
Will smaller parcels sent from different nations be impacted?
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 may still be imported into the U.S. without duties.
Nevertheless, shipments 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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