US President Donald Trump’s latest executive order, signed on Wednesday, targets the “de minimis” trade exception that had previously allowed Chinese companies like Temu and Shein to ship low-cost goods to the United States without facing tariffs.
This loophole, which applies to goods valued under $800, has been instrumental in allowing these companies to thrive in the US market by offering ultra-cheap products to American consumers. The new executive order closes this loophole by imposing a 30% ad valorem tariff on shipments of goods worth less than $800 from China and Hong Kong, according to New York Times.
The tariffs will increase to $50 per item starting in June. For companies like Temu and Shein, which have built their businesses around offering inexpensive goods, these tariffs could significantly raise costs, potentially undermining their business model in the US market.
The de minimis rule, originally designed to facilitate the import of small goods by tourists, had been exploited by Chinese fast-fashion retailers. According to a report from the Congressional Research Service, the value of such imports surged from $5.3 billion in 2018 to $66 billion in 2023. As a result of the new tariffs, these companies will face higher costs for every item they ship to the US, likely forcing them to raise prices and complicating their logistics.
Trump’s executive order also requires that international carriers transporting items from China and Hong Kong to the US must secure an international carrier bond to ensure payment of the newly imposed duties. This additional regulation could further strain these companies’ operations.
While the move is hailed by some as a way to curb illicit shipments, particularly of synthetic opioids, critics argue that it will harm lower-income American consumers, who benefit the most from the low-cost imports, particularly in poorer US zip codes. The Cato Institute estimates that scrapping the de minimis exception will cost US consumers between $11 billion to $13 billion annually.
This loophole, which applies to goods valued under $800, has been instrumental in allowing these companies to thrive in the US market by offering ultra-cheap products to American consumers. The new executive order closes this loophole by imposing a 30% ad valorem tariff on shipments of goods worth less than $800 from China and Hong Kong, according to New York Times.
The tariffs will increase to $50 per item starting in June. For companies like Temu and Shein, which have built their businesses around offering inexpensive goods, these tariffs could significantly raise costs, potentially undermining their business model in the US market.
The de minimis rule, originally designed to facilitate the import of small goods by tourists, had been exploited by Chinese fast-fashion retailers. According to a report from the Congressional Research Service, the value of such imports surged from $5.3 billion in 2018 to $66 billion in 2023. As a result of the new tariffs, these companies will face higher costs for every item they ship to the US, likely forcing them to raise prices and complicating their logistics.
Trump’s executive order also requires that international carriers transporting items from China and Hong Kong to the US must secure an international carrier bond to ensure payment of the newly imposed duties. This additional regulation could further strain these companies’ operations.
While the move is hailed by some as a way to curb illicit shipments, particularly of synthetic opioids, critics argue that it will harm lower-income American consumers, who benefit the most from the low-cost imports, particularly in poorer US zip codes. The Cato Institute estimates that scrapping the de minimis exception will cost US consumers between $11 billion to $13 billion annually.
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