( NewsNation ) — President Donald Trump Eliminating 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 U.S. 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 factsheet from the White House The monetary value will be raised to $50 starting from June 2.
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 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. based on information from U.S. Customs and Border Protection .
Lawmakers on both sides of the political spectrum In recent years, they have advocated for updating 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 scrutiny and oversight compared to bigger consignments.
The White House stated that President Trump is addressing misleading shipping tactics employed by Chinese-based shippers who often conceal illegal items, such as synthetic opioids, within small shipments to take advantage of the de minimis exemption.
On an average day, CBP processes over 4 million de minimis shipments into the U.S. — an enormous volume that criminals are exploiting to traffic in illegal drugs, the agency has warned .
The Biden administration also took steps to close the loophole, proposing a rule change specifically aimed at cheap goods coming from China. Democratic officials used a similar line of reasoning at the time.
“The drastic increase in de minimis shipments has made it increasingly difficult to target and block illegal or unsafe shipments coming into the U.S. through this pathway,” Biden deputy national security adviser Daleep Singh said back in September .
Following the failure of the House to introduce legislation aimed at reducing the de minimis exemption, Democratic lawmakers 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 as an industry association, commended President Trump for his efforts. move Thursday , describing it as "well past due."
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 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 threshold.
Under the revised rules, consumers can continue purchasing items from Shein and Temu; however, these products might come at a higher cost.
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 small-value deliveries, especially from China, as opposed to the highest-income ZIP codes.
Additionally, one must account for administrative expenses. 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. 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 families. The council stated that decreasing the de minimis threshold would double the cost of a $50 package.
A further issue could be that retailers might determine flying inexpensive items to the U.S. is no longer financially viable and opt for transporting them via container ships instead, 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 the rules.
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 toward "local" merchandise — products that can be dispatched from fulfillment centers within the U.S. CNBC reported The business news source mentioned 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 under arriving 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. A different 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 would 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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