( NewsNation ) — President Donald Trump is closing a tax loophole that enables discount stores such as Shein and Temu to 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 US market.
Beginning May 2nd, low-cost items 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 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 deliveries came 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 urged for changes to the de minimis rule, expressing concerns that this exemption facilitates drug smuggling across national borders.
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 due to the fact that imports entering the nation via the de minimis exception usually encounter lesser examination and supervision compared to bigger deliveries.
"President Trump is addressing misleading shipping methods employed by Chinese-based companies, as these entities often conceal illegal items, such as synthetic opioids, within small shipments to take advantage of the de minimis exemption," according to a statement from the White House.
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 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 pass legislation aimed at reducing the de minimis exemption, Democratic lawmakers called on Biden to utilize his executive power to modify the regulation.
The National Council of Textile Organizations, which represents American manufacturing firms, commended Trump for his efforts. move Thursday , describing it as "well past due."
Will the prices of Temu and Shein items go up?
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 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 arriving in the U.S. via the de minimis 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, argues that Ending the exemption will "lead to widespread adverse impacts for Americans, especially those with lower incomes."
The think tank cited research papers demonstrating that the lowest-income ZIP codes in the U.S. get more minor-import shipments, 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 imports; however, he 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 result in this outcome. 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. is not financially viable and opt for transporting these products via container ships, resulting 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 rule.
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 previously 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 imported 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. A different executive order Issued on Wednesday stated that the de minimis exemption will be eliminated as soon as a mechanism for "quickly processing and collecting" the tariffs is established.
Research has found Eliminating this provision entirely could lead to expenses ranging from $11 billion to $13 billion for U.S. consumers, with a particularly significant impact on low-income and minority families.
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