( NewsNation ) — President Donald Trump is closing a trade loophole that lets discount stores such as Shein and Temu dodge 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 a tariff set at either 30% of their worth or $25 for each product. according to a White House fact sheet . The dollar amount is set to increase to $50 after June 1.
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 United States via the duty-free channel, which is over twice as many as the 636 million documented in 2020. as per the 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 the smuggling of narcotics 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 levels of examination and supervision compared to bigger deliveries.
The White House stated that President Trump is addressing misleading shipping tactics employed by Chinese-based companies. These entities 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 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 the 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 lawmakers took action. 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 group, commended President Trump for his efforts. move Thursday , describing it as "well past due."
Will the prices of Temu and Shein items increase?
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 goods, and various 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 new rules, consumers can still purchase items from Shein and Temu, though these products might come with higher prices.
The Cato Institute, a libertarian-leaning think tank, argues that ending the exemption will “have far-reaching negative effects for Americans, particularly poorer consumers.”
The think tank cited research papers indicating that the lowest-income zip codes in America get more trivial-value deliveries, especially from China, as opposed to the highest-income zip codes.
In addition, one must account for administrative expenses. Earlier this year, 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. 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 said restricting it would result in a tax hike on American families. According to the council, reducing de minimis would double the cost of a $50 package.
A further issue is that stores might determine continuing air freight for inexpensive items to the U.S. isn’t financially viable 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 alteration in policy.
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 smaller parcels sent from different nations be impacted?
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 arriving from nations such as Canada or Mexico may continue to be imported into the U.S. without duties.
Nevertheless, parcels coming from the rest of the globe might lose their exemption shortly. Another point to consider is: executive order Issued on Wednesday stated that the de minimis exemption will be eliminated when a system 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 particularly adverse impact on low-income and minority families.
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