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Shein and Temu hauls could soon cost significantly more.
President Donald Trump revoked a nearly century-old tax loophole that saved companies from paying tens of billions of dollars in fees on cheap imports, most of which come from China. The move, which came Wednesday after Trump announced sweeping tariffs on most U.S. trading partners, could affect businesses from Etsy sellers and family-run footwear companies to e-commerce behemoths starting May 2. In fiscal 2022, 83 percent of all U.S. e-commerce imports used the loophole—known as “de minimis”—according to a government report.
Shein has major operations in Indiana. In summer 2022, the company opened its Midwest distribution hub just northwest of Indianapolis—a 659,000-square-foot center in Whitestown—and announced plans for a second, 550,000-square-foot warehouse on its Boone County campus. At the time, Shein said it expected to boost employment at the site from about 750 to 1,400 by the end of 2025.
Trump initially did away with the de minimis exemption in February, but the move quickly overwhelmed U.S. Customs and Border Protection workers and prompted the U.S. Postal Service to briefly suspend inbound shipments from China and Hong Kong. The administration then reinstated the loophole to allow the Commerce Department to craft a way to collect the levy. The agency now has “adequate systems … in place to collect tariff revenue” on these low-value goods, the White House said Wednesday.
Imports that qualify for the exemption will now face a duty of either 30 percent of their value or $25 per item; that $25 tax will increase to $50 after June 1, according to a White House fact sheet.
“If a retailer is really reliant on manufacturing or shipping directly from China, this is going to be really painful for them,” said Jess Meher, a senior vice president at Loop Returns, a returns-management software company.
Ultimately, though, those costs are likely to filter down to consumers. Here’s why.
What is the de minimis exception?
In Latin, “de minimis” means something that is too small or insignificant to be considered. The rule, passed by Congress in the 1930s and amended over the years, allows items being shipped or brought into the United States that are worth less than $800 to circumvent import taxes.
E-commerce sites Shein and Temu have thrived off this loophole, allowing them to avoid paying billions of dollars in duties. Some trade experts contend that these apps have fueled a surge in imports since fiscal 2015, when the number of de minimis entries hovered at about 139 million, according to CBP data. Between that fiscal year and 2023, the number of de minimis exceptions swelled to 600 percent. By 2024, they had surged to 1.36 billion, worth about $66 billion, said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, a nonpartisan think tank based in Washington.
While those volumes represent a mere fraction of U.S. imports—now totaling more than $3 trillion annually—they help boost margins for small- to medium-size businesses in the United States, said Maggie Barnett, chief executive of LVK, a third-party logistics company with warehouses in the United States and Canada.
Many of these companies have about “30 percent of their revenue in retail, but the other 70 percent is leveraging the de minimis,” she said. If they’re not shipping directly from China, they often ship their items in bulk from manufacturers in China or Southeast Asia to warehouses in Canada or Mexico and “ship them over [to the United States] one by one when the orders come in,” she said.
So far, only items originating from China are prohibited from using the de minimis loophole, according to Trump’s executive order.
What does this have to do with Trump’s tariffs?
Killing the de minimis loophole is part of Trump’s broader strategy to boost domestic production. On Wednesday, he ordered a 10 percent tariff on all U.S. imports starting Saturday, as well as additional taxes that will bring levies of as much as 50 percent on goods from certain countries starting April 9. A separate 25 percent tariff on imported vehicles took effect Thursday.
Trump’s first effort to end the exemption in February was part of a plan to impose tariffs on the three largest U.S. trading partners—China, Canada and Mexico. Even before Wednesday’s announcement, Trump had imposed tariffs on 25 percent of imports from Canada and Mexico, with an exception for goods covered under his 2018 trade agreement with those countries, and 20 percent in additional tariffs on products from China.
Opposition to the de minimis loophole largely has been bipartisan, with some critics arguing that it has also enabled illicit drugs, such as fentanyl, to be sent through the mail into the United States. President Joe Biden, in his final days in office, issued limitations on the loophole, excluding certain imports from circumventing tariffs.
How will this affect orders from Shein, Temu and Amazon Haul?
Without de minimis, prices on those orders could jump as much as 30 percent, costing consumers about $22 billion annually, Hufbauer said.
A good chunk of that will apply to Temu and Shein orders, which are responsible for an estimated 30 percent of packages shipped into the United States each day, according to a report from the Peterson Institute. Nearly half of all de minimis shipments originate in China, according to a report by House Republicans.
Also potentially affected is Amazon, which announced its own platform in November called Haul that similarly sells cheap goods directly from China. With the tax loophole going away, brands that rely on sourcing low-cost goods, especially from China, “are going to have a really tough time because their margins are already really thin,” Meher said.
Shein, Temu and Amazon did not immediately respond to The Washington Post’s request for comment. (Amazon founder Jeff Bezos owns The Post.)
Who are the winners and losers?
American companies that haven’t been able to take advantage of the exemption could be the biggest winners, UBS analyst Jay Sole wrote in a February note after Trump initially revoked the loophole. He pointed to U.S. “fast fashion” retailers, specialty retailers, off-price retailers, department stores and kids’ clothing companies that have lost customers to these foreign e-commerce sites.
The flip side is that budget-seeking consumers, who have turned to these companies for cheap apparel and housewares, will bear the brunt of any price changes, Hufbauer said.
The same goes for small- and medium-size businesses, Barnett said. They have less cash on hand, less flexibility on inventory, fewer options to diversify their supply chain and less leverage to negotiate fair prices with major retailers selling their product.
“It’s going to be hard for those medium-sized businesses to maintain in this chaotic environment,” she said.
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Doesn’t talk about the USPS loophole on how cheap they can ship them into the country. Glad to see this crap stopped.