( 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—platforms that have utilized this exception to offer extremely affordable items and swiftly grow their presence in the American 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 product. as stated in a fact sheet 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 previous year, approximately 1.4 billion packages were imported into the U.S. 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 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 provisions, 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 due to the fact that imports entering the nation via the de minimis exception usually undergo lesser inspection and supervision compared to bigger deliveries.
"President Trump is addressing misleading shipping tactics employed by China-based senders who often conceal illegal items, such as synthetic opioids, within small parcels to take advantage of the de minimis exemption," according to The White House.
On a typical day, CBP handles more than 4 million low-duty shipments entering the U.S., a massive quantity 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 the time, Democratic representatives employed a comparable rationale for their actions.
"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 advisor to President Biden. 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, 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 are renowned for 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 revised rules, consumers can continue purchasing items from Shein and Temu, though these products might come at a higher cost.
The Cato Institute, which has a lean towards libertarian ideologies, argues that terminating the exemption will "lead to widespread adverse impacts for Americans, especially those with lower incomes."
The think tank cited research papers indicating that the lowest-income zip codes in America get more minor-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. border checkpoints.
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 result in this outcome. 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, opting instead for slower transport via container ships, which would result 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 setbacks.
Temu has lately begun directing customers towards "local" merchandise — products that can be dispatched 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 smaller 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 lower imported from nations such as Canada or Mexico can continue to be admitted into the U.S. without duties.
Nevertheless, parcels coming from the rest of the globe might lose their exemption 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 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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