( 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 customers shopping at 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 U.S. market.
Beginning May 2nd, low-value goods coming from China will be subject to a tariff set at either 30% of their worth or $25 for each item. as per 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 previous year, approximately 1.4 billion packages arrived in 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 this exemption facilitates drug smuggling 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 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 is addressing misleading shipping methods employed by Chinese-based companies. These entities often conceal illegal materials, 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 line of thinking.
"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 lawmakers called on Biden to utilize his executive power to amend 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 the prices of Temu and Shein items increase?
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 arriving in the U.S. via the de minimis threshold exception.
Under the new 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 libertarian ideologies, argues that Ending the exemption will "lead to significantly adverse impacts on Americans, especially impoverished consumers."
The think tank cited research papers demonstrating 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 briefly eliminated the duty-free status for inexpensive Chinese imports; 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 the de minimis threshold would result in this outcome. double the cost of a $50 package.
A further issue is that retailers might determine continuing air freight for inexpensive items to the U.S. is not financially viable, opting instead for shipping containers, which would result in extended delivery periods.
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 measures to expand their presence within the U.S., potentially mitigating the impact.
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 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 a value of $800 or lower from nations such as Canada or Mexico can continue to be imported into the U.S. without duties.
Nevertheless, parcels originating from elsewhere globally might lose their exemption shortly. 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 could lead to expenses ranging from $11 billion to $13 billion for American consumers, with a particularly significant impact on low-income and minority families.
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