( NewsNation ) — President Donald Trump is closing a trade loophole that enables discount stores such as Shein and Temu to 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 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 US market.
Beginning May 2nd, low-cost items coming from China will be subject to taxes at a rate 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 rise to $50 starting 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. based on information from 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 provision, expressing concerns that this exemption facilitates the smuggling of narcotics into the nation.
Over 90% of all packages entering the U.S. currently arrive through de minimis provisions, 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 due to the fact that imports entering the country via the de minimis exemption typically undergo lesser scrutiny and oversight compared to bigger consignments.
"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," stated the White House.
On a typical day, CBP handles more than 4 million low-duty or duty-free 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 amending regulations with a specific focus on inexpensive products imported from China. At that time, Democratic officials 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 under President Biden. said back in September .
Following the House’s failure 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 firms, commended President 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 retailers such as Shein and Temu, which specialize in offering extremely low-cost apparel, household goods, 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 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, argues that terminating the exception will "result in significantly 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 packages, especially from China, than the highest-income ZIP codes do.
Additionally, one must account for administrative expenses. In February, Trump initially eliminated the duty-free status for inexpensive goods coming from China but changed his stance once 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 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. isn’t financially viable and opt for transporting 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 strategies to expand their presence within the U.S., potentially mitigating the impact of any challenges they face.
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 during the previous year.
Will smaller international parcels 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 can continue entering 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 Eliminating the provision entirely could lead to expenses ranging from $11 billion to $13 billion for American consumers, with a more significant impact on low-income and minority families.
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