( NewsNation ) — President Donald Trump is closing a tax loophole that lets discount stores such as Shein and Temu dodge 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—both of which have utilized this exception to offer extremely low-priced items and swiftly grow their presence in the U.S. 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 effective from 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 channel, 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 have advocated for updating the de minimis provision in recent years, expressing concerns that the 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 terminating the waiver?
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 typically undergo lesser scrutiny and oversight compared to bigger consignments.
The White House stated that "President Trump aims to address misleading shipping tactics employed by Chinese-based companies who often conceal illegal items, such as synthetic opioids, within small shipments to take advantage of the de minimis exemption."
On a typical day, CBP handles more than 4 million low-duty or duty-free shipments entering the U.S.—a massive number being exploited by criminals for smuggling illicit narcotics. agency has warned .
The Biden administration also took steps To address the issue, they suggested modifying 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 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 companies as an industry group, commended 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 specialize in 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.
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, argues that Ending the exemption will "result in far-reaching adverse impacts for Americans, especially poorer consumers."
The think tank cited research papers demonstrating that the most impoverished ZIP codes in the U.S. receive a higher volume of small-value packages, especially from China, as opposed to the wealthiest ZIP codes.
In addition, one must account for administrative expenses. Earlier this year, in February, Trump briefly eliminated the duty-free status for inexpensive goods coming from China. However, he changed his stance when 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 stated that limiting it would lead to higher taxes for American households. The council claims that decreasing the de minimis threshold would double the cost of a $50 package.
A further issue could be that retailers might determine continuing air freight for inexpensive items to the U.S. is not cost-effective anymore, opting instead for shipping containers which would result in extended delivery periods.
Temu and Shein did not reply to NewsNation’s queries regarding how customers in the U.S. might be impacted by the modification of this rule.
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 tiny international shipments 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, 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 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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