On Friday, the Trump administration formally closed a loophole that previously allowed American consumers to purchase inexpensive goods from China without incurring tariffs. This action is expected to benefit U.S. manufacturers that have faced challenges competing against a large influx of low-cost products from China, but it has already caused an increase in prices for online shoppers in the U.S.
The loophole, known as the de minimis rule, exempted items valued at up to $800 from tariffs and extra regulations if sent directly to U.S. consumers or small businesses. This led to a spike in the number of individually addressed packages arriving in the U.S., often shipped by air from fast-growing e-commerce sites like Shein and Temu.
In recent years, many businesses took advantage of this loophole to import their goods into the U.S. tariff-free. Following President Trump’s imposition of tariffs on Chinese products during his first term, companies utilized this exemption to continue offering their goods at lower prices in the U.S. The loophole’s usage escalated during Trump’s second term, during which he imposed a minimum tariff of 145 percent on Chinese goods.
In 2023, U.S. Customs and Border Protection processed a billion such packages, with an average value of $54 each.
During a cabinet meeting at the White House on Wednesday, Mr. Trump referred to the loophole as “a scam.”
“It’s a big scam against our country and small businesses,” he stated. “And we’ve put a stop to it.”
His decision was also influenced by worries about the loophole being used to facilitate fentanyl trafficking into the U.S.
The exemption allowed companies shipping cheap products to provide less information to customs officials compared to standard shipments. The administration claimed that traffickers were “exploiting” this loophole to bring in precursor chemicals and other substances needed to produce fentanyl without needing to supply detailed shipping information.
The increasing use of the loophole also posed a risk to U.S. jobs in warehousing and logistics. It encouraged American retailers to ship products directly from China to consumers’ homes, bypassing larger shipments that would incur tariffs and be distributed through U.S. warehouses.
Kim Glas, president of the National Council of Textile Organizations, which advocates for American textile manufacturers, remarked that the loophole had “devastated the U.S. textile industry.” She noted that it allowed unsafe and illegal goods to flood the U.S. market without tariffs for many years, with over half of all de minimis shipments by value consisting of textile and apparel items.
“This tariff loophole has given China almost exclusive and privileged access to the U.S. market, harming American manufacturers and jobs,” she added.
However, critics of the decision to end the exemption argue that it will significantly increase prices for American consumers, negatively impact small businesses that relied on the loophole, and hinder trade. The shift is anticipated to affect airlines and courier companies like FedEx and UPS, which have been busy transporting low-value goods from around the globe to the U.S.
The changes, effective from 12:01 a.m. Friday, apply to shipments from mainland China and Hong Kong, likely causing confusion and challenges for consumers and small retailers.
Temu began listing “import charges” on its website, while Shein informs shoppers that tariffs are “included in the price you pay.”
Gabriel Wildau, a China analyst at Teneo, advised that the change would “reduce Chinese exports” and “compel online retailers, whose primary appeal is low prices, to dramatically increase their prices.”
“This is a price shock for budget-conscious U.S. consumers who benefited from affordable goods,” he remarked.
The Trump administration also plans to remove the loophole for shipments from other countries but is awaiting a plan for collecting fees from such packages. U.S. customs officials are already managing increased loads from tightened immigration controls and a broad rise in global tariffs under Trump.
Initially, the administration suspended the de minimis exemption for China in early February but quickly reversed it due to disruptions in shipping, including at the Postal Service. Trump then reverted the decision to provide more time for his advisors to develop systems to handle the new rules.
The de minimis rule was established in the 1930s to simplify customs procedures for items where the revenue would be less than the cost of collecting duties. Congress adjusted the threshold for de minimis packages from $5 in 1978 to $200 in 1993, and then raised it to $800 in 2016.
In recent times, there has been increasing pressure to abolish the loophole. Legislators have been discussing reforms to the de minimis rule, and last year the Biden administration proposed modifications that would restrict the exemption concerning China.
A concern with the current rules is that they seem to create a disparity, allowing goods shipped via the Postal Service to face lower tariffs compared to those sent through private carriers.
Goods arriving from China through private companies like DHL or FedEx incur tariffs of at least 145 percent — meaning a $10 t-shirt could have an added duty of $14.50. In contrast, packages sent through the Postal Service either face a 120 percent tariff or a flat fee of $100 per shipment, rising to $200 in June.
Shipments through private carriers also seem to bear additional duties, including those tariffs imposed by Trump earlier. However, packages sent via the Postal Service do not face such tariffs.
Moreover, the Postal Service faces less scrutiny regarding tariff collections on goods that are sent from China to other countries and then into the U.S. via foreign postal systems.
For now, the U.S. still provides the de minimis exemption for countries other than China. However, beginning Friday, Chinese-made items will no longer qualify for this exception, even if routed through another country before arrival in the U.S. Private carriers like UPS and FedEx must gather origin information for products, ensuring that tariffs still apply to a Chinese-made item shipped to the U.S. via Canada, for example.
In contrast, the Postal Service is not legally bound to collect information about product origins, nor are foreign postal services. This may result in an uptick in attempts to evade tariffs on Chinese goods using the postal system.
Peter Eavis and Julie Creswell contributed reporting.
