( NewsNation ) — President Donald Trump Eliminating 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 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—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 tariff of either 30% of their worth or $25 for each product. as per a factual document 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 stated by U.S. Customs and Border Protection .
Lawmakers on both sides of the political spectrum In recent years, they have advocated 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 among these shipments. according to Reuters .
Why is Trump terminating the exception?
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.
That’s because imports that enter the country through the de minimis exemption generally face less scrutiny and oversight than larger shipments.
The White House stated that President Trump is addressing misleading shipping tactics employed by China-based senders 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-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 imported from China. At that time, Democratic representatives employed a comparable logic for their argumentation.
“The drastic increase in de minimis shipments has made it increasingly difficult to target and block illegal or unsafe shipments coming into the U.S. through this pathway,” Biden deputy national security adviser Daleep Singh said back in September .
After the House failed to bring a bill that would narrow the de minimis exemption, Democratic lawmakers called on Biden to utilize his presidential powers 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 past due."
Will Temu and Shein items cost more?
Ending the de minimis exemption on goods from China could have a major impact on bargain sites like Shein and Temu, known for their ultra-low prices on clothes, home goods and other items.
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 at a higher cost.
The Cato Institute, which has a lean towards libertarian ideologies, argues that Ending the exemption will "result in significantly adverse impacts for Americans, especially those with lower incomes."
The think tank cited research papers indicating that the most impoverished ZIP codes in the U.S. receive a higher volume of small-value packages, especially from China, when compared to 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 when shipments began accumulating at U.S. borders.
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 result in this outcome. double the cost of a $50 package.
A further issue is that stores might determine continuing air freight for inexpensive items to the United States isn’t financially viable anymore and opt to transport them 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 modification of this 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 toward "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 tiny international shipments 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 sourced from nations such as Canada or Mexico may still be imported into the U.S. without duties.
Nevertheless, parcels coming from the rest of the globe 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 U.S. consumers, with a significant negative impact on low-income and minority families.
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