Trump tariffs could close loophole that let China’s Shein and Temu soar

• New tariffs could end decades-old rule allowing some companies to benefit from not paying taxes on imports. Officials said it undercuts American businesses and gives foreign competitors a boost in securing more customers.
• “De minimis” exemption allows goods worth less than $800 to enter U.S. without charge.
• U.S. Customs reported a 600% increase over 10 years in shipments that qualify under the rule.

President Donald Trump’s new tariffs on the U.S.’s largest trading partners are closing a long-standing exemption that has helped online retailers keep prices low for years. While this change is set to level the playing field for American businesses, it also means shoppers could see higher prices.

Executive Order puts tariffs on Canada, Mexico and China

An executive order issued on Saturday imposes a 25% tariff on goods coming from Canada and Mexico, while China faces a 10% tariff. The move aims to close what’s known as the “de minimis” exemption, a provision dating back to the 1930s. The exemption allows goods worth less than $800 to enter the U.S. duty-free, benefiting companies that ships small packages.

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Trump’s decision to end the provision is expected to have significant effects on the e-commerce landscape. By targeting Chinese companies like Temu and Shein, which have benefited from the loophole to offer products at low prices, the U.S. government is pushing for a more competitive environment for American retailers.

Explosive growth in ‘de minimis’ shipments

Experts said the “de minimis” exemption is attributed to the rise of budget Chinese retailers. According to Mary Lovely, a senior fellow at the Peterson Institute for International Economics, it’s not just Chinese companies benefiting from this trade loophole.

“U.S. logistics companies are also making money from these packages as are warehousing facilities in Mexico and Canada,” Lovely said. “So business had been built around these small packages.”

In response, companies like Amazon have also joined the competition, launching third-party apps like Haul, which allow customers to shop for cheap products directly from China.

U.S. Customs and Border Protection data shows a large increase in the use of the “de minimis” exemption. From 2015 to 2024, the number of qualifying shipments grew tenfold, from 139 million packages to 1.36 billion. Customs officials said the influx of foreign-made goods makes it more difficult to screen what’s inside, impacting national security.

Efforts to reform ‘de minimis’

The Biden administration also took steps to address the issue, proposing a rule to prevent Chinese goods subject to tariffs from benefiting from the exemption.

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While Trump’s tariffs were initially set to apply to China, Canada and Mexico, a deal was reached with Mexico to pause the tariffs for one month. Mexican President Claudia Sheinbaum announced Monday, Feb. 3, she had agreed to increase security at the northern border and work with the U.S. National Guard to combat drug trafficking, part of the negotiations aimed at preventing the tariff increase.