( NewsNation ) — President Donald Trump is closing a tax loophole that enables discount stores such as Shein and Temu to 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 American market.
Beginning May 2nd, low-value goods coming from China will be subject to a tariff of either 30% of their worth or $25 for each item. as stated in 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 increased, so too has the utilization of the de minimis exemption. In the previous 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. 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 changing the de minimis rule, expressing concerns that this exception 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 usually undergo less examination and regulation compared to bigger deliveries.
The White House stated that 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.
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 logic for their argument.
"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 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 firms, commended 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 to the U.S. utilizing the de minimis exemption.
Under the revised 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 ideologies, argues that Ending the exemption will "lead to significantly adverse impacts on Americans, especially impoverished consumers."
The think tank cited research papers indicating that the most impoverished ZIP codes in the U.S. receive a higher volume of small-value packages, especially from China, as opposed to the wealthiest 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 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 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 sending 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 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 earlier this year.
Will tiny international shipments 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 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. Another executive order Issued on Wednesday stated that the de minimis exemption will be eliminated as soon as a mechanism for "quickly 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 significant impact on low-income and minority families.
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