( NewsNation ) — President Donald Trump is closing a trade loophole that lets discount stores such as Shein and Temu bypass tariffs 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 shoppers who frequent discount platforms such as Shein and Temu—platforms that have utilized this exception to offer extremely low-priced items and swiftly grow their presence in the American market.
Beginning May 2nd, low-cost goods coming from China will be subject to a duty of either 30% of their worth or $25 for each product. as stated in a fact sheet from the White House The monetary value will be raised to $50 starting from June 2nd.
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 deliveries arrived in the U.S. via the duty-free pathway, which is over twice as many as the 636 million documented back in 2020. as per the U.S. Customs and Border Protection .
Lawmakers on both sides of the political spectrum have advocated for updating the de minimis provision in recent years, expressing concerns that the exemption facilitates the smuggling of narcotics 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 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 due to the fact that imports entering the country via the de minimis exception usually undergo lesser scrutiny and oversight compared to bigger deliveries.
"The White House stated that President Trump is addressing misleading shipping methods employed by China-based companies, as these entities often conceal illegal materials 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 that criminals are taking advantage of to smuggle illicit drugs. agency has warned .
The Biden administration also took steps To plug the gap, they suggested altering regulations with a specific focus on inexpensive products originating 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 proceeded with their efforts. called on Biden to utilize his executive power to modify the regulation.
The National Council of Textile Organizations, which represents American manufacturing firms, commended President Trump for his efforts. move Thursday , describing it as "well past due."
Will the items from Temu and Shein 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 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 libertarianism, is a think tank. argues that Ending the exemption will "result in significantly adverse impacts for Americans, especially those with lower incomes."
The think tank cited research papers demonstrating that the most impoverished ZIP codes in the U.S. see higher volumes of de minimis shipments, especially from China, when contrasted with the wealthiest ZIP codes.
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 once shipments began accumulating at U.S. borders.
The National Foreign Trade Council, which includes members such as FedEx, UPS, and DHL along with retail giants 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 de minimis 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. isn’t financially viable and opt for sending these products via container ships, which would result 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 strategies 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 centers in states such as Illinois and California in 2022, along with setting up a supply chain hub in Seattle previously year.
Will smaller parcels coming from different nations also face impacts?
The modification of the de minimis rule currently affects only inexpensive items originating from China and Hong Kong. This implies that products with values up to $800 from nations such as Canada or Mexico may continue entering the U.S. without duties.
Nevertheless, shipments originating from elsewhere globally might lose their exemption shortly. Another executive order Issued on Wednesday stated that the de minimis exemption will be eliminated as soon as a mechanism for "swiftly processing and collecting" the tariffs is established.
Research has found Eliminating the provision entirely would lead to expenses ranging from $11 billion to $13 billion for U.S. consumers, with a more significant impact on low-income and minority families.
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