( 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—platforms that have utilized this exception to offer extremely low-priced items and swiftly grow their presence in the American market.
Beginning May 2nd, low-cost goods coming from China will be subject to a duty 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 starting from June 1st.
As online shopping and direct-to-consumer sales have increased, 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 pathway, 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 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. 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 lesser levels of examination and supervision compared to bigger deliveries.
"President Trump is addressing misleading shipping methods 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," 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 plug the gap, they suggested altering regulations with a specific focus on inexpensive products imported from China. At the 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 introduce legislation aimed at reducing the de minimis exemption, Democratic legislators took action. called on Biden to utilize his executive power to modify the regulation.
The National Council of Textile Organizations, which represents American manufacturing companies, commended Trump for his actions. 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 are renowned for 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 exemption.
Under the revised rules, consumers can still purchase items from Shein and Temu, though these products might come at a higher cost.
The Cato Institute, which has a lean towards libertarianism, is a think tank. argues that terminating the exemption will "lead to extensive adverse impacts for Americans, especially impoverished consumers."
The think tank cited research papers demonstrating that the most impoverished ZIP codes in the U.S. see higher volumes of de minimis shipments, especially from China, when contrasted with the wealthiest ZIP codes.
Additionally, one must account for administrative expenses. In February, Trump initially eliminated the duty-free status for inexpensive Chinese goods but 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 stated that limiting it would lead to higher taxes for American families. The council claims that decreasing the de minimis threshold would 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 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 challenges they face.
Recently, Temu has begun directing customers towards "local" merchandise—products that can be delivered from fulfillment centers within the U.S. CNBC reported The business news source reported that Shein established distribution facilities in states such as Illinois and California in 2022, along with setting up a supply chain center in Seattle during the previous year.
Will tiny international parcels also face impacts?
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 arriving from nations such as Canada or Mexico can continue to 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 system for "swiftly processing and collecting" the tariffs is established.
Research has found Completely removing this provision could lead to expenses between $11 billion and $13 billion for U.S. consumers, with a greater negative impact on low-income and minority families.
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