In a significant shift in U.S. trade policy, President Donald Trump announced on April 2, 2025, the termination of the de minimis exception, a provision that had allowed low-cost goods from China and Hong Kong to enter the United States without incurring tariffs. This decision, effective from 12:01 a.m. Eastern time on May 2, 2025, is expected to have far-reaching implications for online retailers and consumers alike.
The de minimis rule, established under Section 321 of the Tariff Act of 1930, was originally designed to enable American tourists to send goods purchased abroad back to the U.S. without facing taxes. However, in recent years, it was exploited by e-commerce companies to ship products valued under $800 per recipient per day without incurring tariffs. This loophole significantly boosted the volume of duty-free parcels entering the country, with Chinese exports exempted by the rule soaring to $66 billion in 2023, up from just $5.3 billion in 2018, according to a report by the Congressional Research Service.
Trump's administration has targeted the de minimis loophole, citing its connection to the fentanyl trade as a primary concern. A White House official indicated that the provision complicated customs officials' ability to identify fentanyl shipments among the flood of low-cost goods. "We are losing tariff revenue due to this loophole," the official stated during a press briefing.
Retailers in the U.S. have expressed frustration with the de minimis rule for different reasons. Traditional retailers, such as Walmart and Amazon, typically send bulk shipments to warehouses that are subject to duties. As competition from Chinese e-commerce platforms like Shein and Temu has intensified, these retailers have explored shipping directly to consumers from China. Amazon even launched a new service called Haul in late 2024 to compete with these low-cost rivals.
In the wake of the announcement, the White House clarified that goods shipped through the "international postal network" will now be subject to a duty rate of either 30% of their value or a flat fee of $25 per item. This change is poised to reshape the landscape of online sales, particularly for fast-fashion retailers such as Shein and Temu, which have thrived on the ability to send inexpensive goods to American consumers.
Shein and Temu currently hold about 17% of the U.S. discount e-commerce market, which includes fast fashion and various consumer goods. The loss of the de minimis exemption could severely impact their operations. While both companies have begun diversifying their supply chains by working with U.S.-based sellers and opening warehouses in the United States, the upcoming changes will still pose significant challenges.
Experts warn that smaller online retailers will also feel the pinch. Approximately 25% of the largest sellers on the e-commerce platform Shopify rely on the de minimis loophole to ship products from China affordably. Aaron Rubin, CEO of ShipHero, a warehouse management software firm, noted that the loophole is "pretty widely used" among smaller sellers. Santiago Gallino, an associate professor at the Wharton School, echoed these concerns, stating, "Any of these sellers that were shipping directly from China are definitely going to be disrupted."
The repercussions of this policy shift will extend beyond businesses to consumers as well. For instance, a $15 dress from Shein could see its price rise to $17 due to the new tariffs, as noted by Izzy Rosenzweig, CEO of Portless, a third-party logistics company. Research suggests that abolishing the de minimis provision entirely could lead to an increase in costs for American consumers ranging from $11 billion to $13 billion, disproportionately affecting poorer and minority households.
As the U.S. government prepares to implement these changes, reactions from various stakeholders have emerged. Express delivery companies like FedEx and UPS have advocated for the maintenance of the de minimis exception, arguing that its removal would increase the burden on U.S. customs officials. Customs and Border Protection, the agency tasked with enforcing these regulations, will now face additional pressures as it adapts to the new rules.
The announcement has sparked a significant response from the media as well. The Guardian reported on the implications of Trump's tariff decisions, emphasizing the potential for economic fallout. The Times noted that the EU would face a 20% tariff, effective April 5, 2025, while the Daily Mail characterized the situation as a "blizzard of damaging new tariffs". Meanwhile, the Daily Mirror warned that the world now faces an economic war, with targeted nations poised to retaliate.
Trump's announcement is seen by some as a declaration of economic independence, as highlighted by the Telegraph. However, others view the implications as a significant risk to jobs and wages, particularly in the UK, which has been relatively spared with a basic 10% tariff rate.
As the countdown to May 2 begins, businesses and consumers alike are bracing for the changes that will inevitably reshape the landscape of online commerce in the United States. With the de minimis rule now a thing of the past, the impact on both large and small retailers, as well as everyday shoppers, remains to be fully realized. The ongoing trade tensions and tariff policies will likely continue to dominate headlines and influence economic discussions in the months ahead.
