In a significant shift in U.S. trade policy, President Donald Trump has signed an executive order to close the de minimis loophole for imports from China and Hong Kong, effective May 2, 2025. This change, which allows shipments valued at or below $800 to avoid tariffs and taxes, is set to reshape the landscape of e-commerce and has already prompted major retailers like Shein and Temu to announce price increases for U.S. consumers.
The de minimis loophole has been a contentious issue in American trade discussions, particularly as it has allowed Chinese e-commerce giants to dominate the market. According to a 2023 report from the House Select Committee on the Chinese Communist Party, Shein and Temu account for a staggering 30% of all de minimis shipments into the United States. These companies have thrived under the exemption, which has enabled them to offer low prices that appeal to American consumers.
However, the closure of this loophole is expected to level the playing field for U.S. manufacturers and workers, who have long struggled to compete against the influx of cheap Chinese goods. As Trump noted in his executive order, Chinese shippers have exploited the de minimis exemption to evade customs scrutiny, allowing illicit items, including narcotics, to enter the U.S. undetected.
In light of the impending changes, Shein and Temu have both communicated to their customers that price adjustments will take effect on April 25, 2025. Shein stated, "Due to recent changes in global trade rules and tariffs, our operating expenses have gone up. To keep offering the products you love without compromising on quality, we will be making price adjustments starting April 25, 2025." Temu echoed this sentiment, indicating that it too would raise prices due to increased operational costs.
The executive order comes amid an alarming rise in fentanyl overdose deaths in the U.S., which have surpassed 70,000 annually. The de minimis loophole has been linked to this crisis, as it has allowed packages containing illicit drugs to bypass thorough inspections by U.S. Customs and Border Protection (CBP). By closing this loophole, the Trump administration aims to enhance public safety and consumer protection.
Moreover, the order aligns with the Uyghur Forced Labor Prevention Act (UFLPA), which prohibits the importation of products tied to forced labor practices in China. The de minimis exemption had previously hindered enforcement of this law, as products did not require formal entry documentation. With the closure of the loophole, goods produced with forced labor will face increased scrutiny, thus supporting human rights efforts.
In a related development, UPS and FedEx have already begun implementing surcharges for U.S.-bound parcels from China, Hong Kong, and Macau, with UPS leading the way by introducing a $0.29 per pound surcharge starting April 13, 2025. This additional cost reflects the anticipated changes in shipping dynamics as companies prepare for the end of the de minimis exemption.
Experts predict that the closure of the de minimis loophole will have profound implications for the e-commerce sector. Phil Masiello, CEO of revenue acceleration agency Crunchgrowth, expressed that the end of de minimis will eliminate the unfair advantage that companies like Shein and Temu have enjoyed. He stated, "I am not sorry that [de minimis is] going away, because I do think that Shein and Temu had an unfair advantage against people selling on Amazon."
As the deadline approaches, the number of de minimis parcels shipped to the U.S. has surged to over 1 billion in 2023, a significant increase from 153 million in 2015. This trend underscores the importance of the loophole to Chinese e-commerce platforms, which have relied heavily on this exemption to maintain low prices.
In anticipation of the changes, both Shein and Temu are exploring strategies to mitigate the impact of increased costs. Reports indicate that Temu has begun moving some of its production outside of China while also storing inventory in U.S. warehouses to reduce shipping times and costs. Shein, on the other hand, faces challenges in diversifying its supply chain due to pressure from the Chinese government to maintain operations within the country.
As the e-commerce landscape evolves, analysts warn that consumers may ultimately bear the brunt of the changes. Brian Ehrig, a partner in the consumer practice at Kearney, noted that the closure of the de minimis loophole will likely lead to higher prices for consumers, stating, "Closing this loophole and requiring brands such as Shein and Temu to pay duties on imports will have a detrimental effect on sales for these brands because they will have no choice other than to significantly raise prices."
The implications of closing the de minimis loophole extend beyond just pricing. Experts are concerned about potential delays in shipping and disruptions in supply chains as companies adjust to new customs procedures. Layfield, a director at ePost Global, remarked, "Companies like Shein and Temu, which thrive on fast, cost-effective turnaround times, will likely experience delays in shipping as they navigate new customs procedures for smaller shipments."
Despite these challenges, some industry insiders believe the end of de minimis could ultimately benefit the U.S. economy by encouraging local manufacturing and reducing reliance on overseas production. Masiello suggested that the closure of the loophole might accelerate efforts to establish domestic manufacturing operations, stating, "Their long-term goal was to set up manufacturing locally anyway. Now they’re just going to speed up that portion of it."
As the U.S. prepares for the closure of the de minimis loophole, the future of e-commerce remains uncertain. While it may level the playing field for American businesses, it also poses challenges for consumers who have come to rely on the low prices offered by Chinese retailers. The upcoming changes will undoubtedly reshape the e-commerce landscape, and all eyes will be on how companies adapt to the new realities of international trade.
