Last week saw a monumental shift in global trade policy initiated by former U.S. President Donald Trump, and it came in the form of suspending the ‘de minimis exemption’. This move effectively ends the allowance for small packages to enter the United States without any imposed duties. Notably, this change might have a noticeable impact on large Chinese shipping companies such as Shein and Temu, who could then transfer the burden of these newly imposed duties onto their customers.
The de minimis exemption played a significant role in global e-commerce trading by permitting shipments valued at $800 or less to enter the U.S. without any customs duties. Global e-commerce giants had been actively using this loophole to ship millions of packages to U.S. customers without any fiscal constraints.
The exemption for goods from China and Hong Kong was initially abolished by the Trump administration in May while the U.S.-China trade war was underway. With the recent change, this suspension now applies to all countries globally. The intention behind the move was encapsulated in an executive order by Trump, which indicated that many shipper companies employ elaborate measures to evade law enforcement and transport unlawful substances through the international commerce route.
According to Trump’s executive order, the risk of illegal substances entering the U.S., evasion, and deception is especially amplified with lower-valued packages often eligible for the previously available de minimis treatment. This change in policy compounds the problems for Chinese retailers and their customer base as it annuls the option of redirecting small, duty-free shipments through countries like Vietnam, which itself carries a tariff rate of 20%.
The recent executive order also requires every package’s original location to be reported to the U.S. Customs and Border Protection (CBP). Interestingly, Shein and Temu have already begun amassing goods and shipping them in bulk to U.S. warehouses to decrease shipping times.
Just hours after the exemption for China was terminated in May, Temu declared a revamp of their shipping model. They aimed to expedite all U.S. orders via U.S.-based distributors, asserting that their American consumers wouldn’t witness changes in pricing. However, the aftermath saw some American buyers of Temu voicing complaints about increases in pricing and rapid depletion of stock.
Professor of global supply chain management at the University of California, Los Angeles, Chris Tang, shared with CNN that restocking warehouses will become a necessity for companies. This inevitability, combined with the de minimis suspension for all countries, offers no alternative avenues to escape import duties. It implies that even bulk shipments would now be subject to substantial import taxes, likely leading to a subsequent rise in consumer prices.
The de minimis suspension also holds ramifications for numerous sellers on Amazon Haul, a discount competitor to Temu and TikTok Shop. This significant shift in policy may revise how Americans shop due to the volume of packages Americans habitually receive free of duty.
The range of packages which Americans received duty-free was vast and has witnessed sharp growth over the last decade. As shared by CBP with CNN, nearly four million such packages were processed daily. The majority of these were reportedly from China and Hong Kong, totaling 1.36 billion packages entering the U.S. under the de minimis exemption in the previous fiscal year.
Trump’s executive order will come into effect on August 29, enforcing tariffs on most goods shipped internationally based on their country of origin. Goods from countries with a tariff rate of less than 16% will be imposed an $80 duty per item. Those from countries with a tariff rate between 16% and 25% will attract a $160 duty per item, while countries with a rate above 25% will mean a $200 duty per item. These costs could conceivably be transferred to the end consumers.
The imposition of these new tariffs could affect lower-income households the most since they are frequent shoppers on Chinese e-commerce sites. About 48% of de minimis packages were shipped to America’s poorest zip codes, while only 22% were delivered to the richest ones. The initial curtailing of the de minimis exemption was on China in May, before reducing the tariff on affordable packages from a staggering 120% to 54%.
This change was supplemented with a $100 flat-fee option. In Trump’s ‘Big Beautiful Bill,’ it was predetermined that the de minimis rule would be repealed globally in July 2027.
The legislation also introduces a civil penalty around $10,000 for recurring violations of the ruling. It goes without saying that this change in trade dynamics is monumental and its ripples will be felt across various sectors and consumers alike.
The post Global Trade Policy Shift: End of ‘de minimis exemption’ Under Trump’s Administration appeared first on Real News Now.
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