Photo by Tom Fisk
The era of unexpensive Chinese products in the United States is drawing to a close. For many years, Chinese e-commerce leaders such as Shein and Temu benefited from a trade loophole that permitted them to send low-cost items to the US without incurring tariffs. Beginning on May 2, the United States will abolish a long-standing regulation that allowed imports valued under $800 to bypass duties if they originated from China or Hong Kong.
This action is part of Donald Trump’s renewed trade enforcement strategy and is likely to alter global supply chains, resulting in increased prices and delayed deliveries for consumers worldwide. This regulation is now obsolete, at least for shipments from China and Hong Kong. In an effort to escalate the trade conflict with China, President Donald Trump enacted an executive order that terminates the de minimis exemption for goods entering the US from these regions. The new regulation will take effect on May 2 and is anticipated to cause significant disruption in global e-commerce.
The de minimis exemption was initially established to facilitate customs processes, as it was deemed impractical for the government to expend more resources on tariff collection than the tariffs themselves generated. While many nations uphold similar policies, the US’s $800 threshold is among the highest globally.
Trump’s executive order contends that this exemption has been misused by Chinese shippers to import illegal or hazardous items, including synthetic opioids, without detection. The order references ‘deceptive shipping practices’ that enable dangerous materials to enter the country in low-value shipments. Beyond national security issues, legislators from both political parties have long asserted that the de minimis rule undermines American manufacturers, adversely affects unionized workers, and inundates the market with counterfeit products.
The Biden administration faced increasing calls to eliminate the tariff exemption for China. Over the years, pressure has mounted, culminating in 2024 when 126 House Democrats urged President Biden to revoke the exemption, citing concerns related to labor and national security.
In response, the administration proposed new restrictions aimed at enhancing data collection and excluding specific product categories such as apparel and textiles. Although Biden refrained from taking executive action, former President Trump has now taken the lead, achieving a policy victory for domestic manufacturers, particularly in the textile and garment sectors that have actively advocated for this change. The termination of the de minimis exemption is expected to impact prices and shipping to the US significantly.
Following the announcement, Chinese e-commerce platforms like Shein and Temu alerted US customers to anticipate price increases starting April 25. Additionally, Hong Kong’s postal service has temporarily halted deliveries to the US, and major companies like Amazon, which processes numerous orders from China, may also face repercussions. US consumers are likely to experience higher prices and extended delivery times, as the previous de minimis exemption facilitated rapid and seamless shipping.
Now, shippers will be required to complete customs documentation for each package and pay applicable duties, resulting in increased time and costs. A similar suspension of this rule in February led to a backlog of nearly one million packages at JFK Airport within just two days, causing significant disruptions. Despite the implementation of these new rules, businesses may seek alternative methods to bypass the restrictions. One prevalent workaround involves the “Tijuana two-step,” where shipments from China are divided into smaller packages in a third country, such as Mexico, before being sent to the US, thereby still qualifying under that country’s de minimis regulations.
Furthermore, there are concerns regarding the effectiveness of this policy in genuinely reducing the influx of fentanyl and other synthetic opioids.Although China is recognized as a significant supplier of precursor chemicals, the majority of fentanyl crosses through the southern border. Experts contend that implementing more specific detection methods could prove to be more effective than broad trade restrictions.
