( NewsNation ) — President Donald Trump Eliminating 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 affordable items and swiftly grow their presence in the US 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 stated in a fact sheet 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 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 the 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 the smuggling of drugs into the nation.
Over 90% of all packages entering the U.S. currently arrive through de minimis, with approximately 60% originating from China among them. according to Reuters .
Why is Trump terminating the exception?
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 less inspection and regulation compared to bigger deliveries.
"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," they explained.
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 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 representatives employed a comparable rationale for their proposal.
"The significant rise in de minimis shipments has made it progressively harder to identify and stop 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 House's inability 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 companies as an industry group, 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 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, which has a lean towards libertarianism, is a think tank. argues that terminating 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 small-value deliveries, especially from China, as opposed to the highest-income ZIP codes.
In addition, there are administrative expenses to take into account. Earlier this year, in February, Trump briefly eliminated the duty-free status for inexpensive goods coming from China. 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 families. The council stated that decreasing de minimis 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, 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 alteration in 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 towards "local" products—items that can be delivered from fulfillment centers within the U.S. CNBC reported The business news source mentioned that Shein established distribution facilities in states such as Illinois and California in 2022, along with setting up a supply chain center in Seattle previously year.
Will smaller parcels coming 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 values up to $800 from nations such as Canada or Mexico may still be imported into 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 when a mechanism for "swiftly processing and collecting" the tariffs is established.
Research has found Eliminating this provision entirely could lead to expenses between $11 billion and $13 billion for U.S. consumers, with a particularly adverse impact on low-income and minority families.
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