( NewsNation ) — President Donald Trump is closing a tax break that lets discount stores such as Shein and Temu dodge duties 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 U.S. market.
Beginning May 2nd, low-cost goods coming from China will be subject to a tariff set at either 30% of their worth or $25 for each product. as per a White House factsheet 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 arrived in the U.S. via the duty-free pathway, which is over twice as many as the 636 million documented back in 2020. as per 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 provision, 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 sealing off 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 consignments.
"President Trump is addressing misleading shipping methods employed by China-based shippers who often conceal illegal items, such as synthetic opioids, within small shipments to take advantage of the de minimis exemption," according to the White House statement.
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 plug the gap, they suggested altering regulations with a specific focus on inexpensive products originating from China. At that moment, Democratic representatives employed a comparable train of thought.
"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 House’s failure to introduce legislation aimed at reducing the de minimis exemption,Democratic lawmakers took action. called on Biden to utilize his executive power to amend the regulation.
The National Council of Textile Organizations, which represents American manufacturing companies as an industry group, commended 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 items, and various other goods.
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 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 ideology, argues that terminating the exemption will "lead to significantly adverse consequences 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 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 mentioned that limiting it would lead to higher taxes for American households. The council stated that decreasing de minimis 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 lucrative anymore and opt to transport these 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 setbacks.
Recently, Temu has begun directing customers toward "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 during the previous year.
Will smaller parcels coming from different nations 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 immunity shortly. Another 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 Completely removing this provision would lead to expenses ranging from $11 billion to $13 billion for U.S. consumers, with a greater negative impact on low-income and minority families.
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