One minute of the night on Friday, Eastern Time is a US tariff exemption that has helped fuel the rise of companies like Shein and Temu and shut down cheap fast fashion and other household items in the wardrobes of millions of Americans. As part of Donald Trump’s surge in tariffs on China, the US is closing loopholes that allow low-value goods to be shipped to the US without paying import fees. The “de minimis” loophole is known for its Latin phrase “almost insignificant,” but “a major fraud is happening against our country,” the US president said Wednesday. “We’ve finished it.”
What is the loophole in “de minimis”?
“De Minimis” refers to a trade policy introduced in the 1930s, allowing travelers to return to the US and bring in items worth up to $5 worth without declaring them to customs. Since 2016, the threshold has been $800 (£600).
The term “de minimis” may mean “least important,” but the policy is responsible for a huge amount of consumer goods. According to US Customs, in 2024, approximately 13.6 billion cargoes entered the United States through loopholes in 2024. This represents over 90% of all cargo that enters the US. Approximately 60% of these packages come from China.
As of Friday, parcels under $800 will be subject to a 120% tax or a flat rate of $100, rising to $200 from June. This adds to the 145% tariffs already imposed on all Chinese imports as part of the broader US-China trade war.
Why is Trump closing the loophole in “de minimis”?
The White House is taking advantage of loopholes by accusing Chinese sellers of “deceitful cimperive transportation practices.” The American Industrial Association has been pushing for unfair competition with Chinese sellers for years to push loopholes closed.
Trump also argues that the free flow of small packages into the US allows fentanyl, particularly the chemicals used to make it, to arrive in the country. “These exports play a key role in the US synthetic opioid crisis,” Trump said in an executive order in April.
What does it mean to buy cheap products in the US?
Prices will likely rise and some options will no longer be available. Chinese e-commerce company Temu announced on Friday it would halt shipping low-cost items from China and sell them directly to US consumers. First fashion company Shein has reportedly already begun to raise prices on some of its products. Data compiled by Bloomberg shows that the average price of the top 100 products Shane sells in the beauty and health category has increased by 51% over the past week, while the 10-piece kitchen towel set has increased by 377% in price. The average increase in women’s clothing was 8%.
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A Temu spokesperson said the company has recently moved to a local fulfillment model. That is, all US sales were handled by domestic sellers. “Despite operational changes, Temu prices for US consumers remain the same,” the company said.
Will it stop the flow of fentanyl to the US?
The White House says that the US Customs agency arrested more than £21,000 in fentanyl at the border last fiscal year, which is enough to kill 4 billion people. With the increase in checking small packages, more illegal imports are expected to be arrested.
Before 2020, the year after China cracked down on fentanyl suppliers, 90% of fentanyl consumed in the US came directly from China. Now, almost all of our supply comes across the US-Mexico border, not from packages shipped directly from China.
How did China respond?
The Chinese government and industry groups say the pain is felt by American consumers, not by Chinese exporters. He said earlier this year that US tariffs “will definitely increase costs for American consumers and break down the shopping experience.”
According to Chinese national media, trade associations, including the China Textile Association, supported the government’s position and denounced the United States for “hegemonic actions.”
Shane reportedly is considering a widely anticipated suspension of the London IPO amid uncertainty about how tariffs will affect business. The company did not respond to requests for comment.
JD.com, one of the Chinese e-commerce companies, has pledged to sell 2 billion yuan (£206.6 million) worth of products from Chinese exporters in the domestic market.