Trump Orders Payment for De Minimis Packages as Shein and Temu Lose Tariff Edge

Starting from May 2 at 12:01 AM ET, the U.S. has closed off one of the busiest trade pathways used by major online retailers to keep their pricing highly competitive: the tariff exemption known as 'de minimis.' This regulation, which has been effective since 1938, permitted Duty-free import for shipments with a value below $800. Nevertheless, following directives from ex-President Donald Trump, this benefit has disappeared, affecting platforms such as Shein and Temu.

According to Barron’s , Over half of the shipments coming into the nation within this system came from China, which was the main focus of President Trump’s new tariff measures. Additionally, he introduced tariffs as high as 145% on specific goods originating from China. Even though he stated that this number might "significantly" drop later on, the current situation is that numerous affordable items will now come with a substantially higher price tag.

What did the 'de minimis' exception entail? Supported by Section 321 of the Tariff Act of 1930, the exemption allowed the Treasury Department to waive taxes on low-value products. What began as a tool to facilitate trade in items under $1 evolved into a powerful means to import items up to $800 without facing customs or taxes, especially via postal or courier services.

Amazon, Shein, and Temu have exploited this legal loophole to their advantage. . For example, Temu and Shein account for over 30% of all daily parcels coming in through this exception. , according to Reuters With the shutting down of the 'loophole,' Their business models must undergo a compelled shift.

What changes for consumers?

Beginning May 2, packages from Items from China valued at less than $800 are subjected to either a 120% tariff or a flat fee of $100 for each package. , which will increase to $200 on June 1, based on White House data. Despite the policy not being formally enacted until May, consumers began experiencing its effects starting in April.

Both Shein and Temu released statements on April 16 announcing " price adjustments from the 25th because of “ latest modifications in worldwide commercial regulations. An independent analysis showed that some items saw their prices double within just a few days. This trend affects even major platforms like Amazon. For instance, according to data from MoffettNathanson Research, the situation remains unchanged. The cost of 50 chosen items on the platform has increased by 4.2% since April 2nd.

Andy Jassy, the CEO of Amazon, acknowledged that The trade conflict with China will result in increased costs for consumers, which is further supported by estimates from Morgan Stanley indicating that 25% of non-grocery items listed on Amazon originate from China. Trump’s approach to eliminate the 'de minimis' threshold appears to target Chinese e-commerce directly; however, this move has widespread repercussions including increased costs for consumers, delivery holdups, job cuts in logistics firms (as evidenced by UPS cutting 20,000 positions), and an overall escalation towards a more contentious trading atmosphere.

At the forefront of experiencing these changes are American consumers. With the once-celebrated mantra of "affordable and speedy goods" driving the success of marketplaces such as Temu and Shein, this trend seems poised for transformation. The key issue at hand is whether these platforms can adapt their approach successfully... or if shoppers will turn towards more local options instead.

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