Shein and Temu depend on a 100-year-old tariff loophole that Trump wants to close

Feb 04, 2025 05:25 AM - 5 days ago 6571

President Donald Trump’s sweeping tariff threats person been touch and go. As it stands currently, the 25 percent taxation connected equipment from Mexico and Canada is on crystal for a month, but a 10 percent tariff connected Chinese equipment is group to return effect connected Tuesday, via an executive bid of questionable legality.

Nestled wrong the bid is simply a little but important proviso that could alteration really Americans shop online: the closing of a little-known loophole called the de minimis exception.

Under the de minimis rule, packages that are weighted nether $800 tin participate the US work free, and recipients successful the US tin get up to $800 worthy of worldly per time without paying import taxes.

E-commerce giants for illustration Temu and Shein (but besides countless smaller operations) person utilized this loophole to vessel low-value packages to shoppers, who, successful turn, use from not having to salary import taxes connected their purchases. Temu, Shein, and different companies that vessel straight to consumers don’t person to shop tons of merchandise successful warehouses successful the US: they tin message orders straight from manufacturers aliases warehouses successful China, wherever galore products are produced.

The de minimis proviso has been on the books for astir 100 years, but it’s arguably a bigger rumor now than astatine immoderate constituent successful the past century. The number of packages avoiding taxes has skyrocketed, from 139 cardinal a twelvemonth successful 2015 to complete 1.36 cardinal successful 2024, according to US Customs and Border Protection. The costs limit was accrued from $200 to $800 successful 2016 aft groups for illustration eBay, Etsy, and package transportation companies lobbied Congress. And the increasing fame of platforms for illustration Shein and Temu successful the past fewer years normalized waiting a fewer weeks for orders to travel from China successful speech for bargain bin-priced goods.

The Biden management antecedently proposed tightening the de minimis loophole. Trump’s executive order, arsenic written, efficaciously kills it — making low-value shipments taxable to existing tariffs plus the further 10 percent tax. That’s not conscionable an other fee; it’s an existential threat to the business models of Shein and Temu. A T-shirt from China, for example, would beryllium taxable to Trump’s caller 10 percent tax, positive modular tariffs that are based connected the circumstantial merchandise and past additional China-specific tariffs that the first Trump management put successful place.

Temu and Shein’s business models support the retailers’ prices impossibly debased and has threatened Amazon’s power successful online shopping. Last November, Amazon took a page retired of Temu’s playbook and introduced Amazon Haul, a marketplace of ultracheap location goods, gadgets, and clothing that looks and feels for illustration Chinese e-commerce platforms. As I wrote successful December, Amazon is taking advantage of this aforesaid de minimis exemption: the products connected Haul are moreover cheaper than normal Amazon listings, and the marketplace features galore products that besides look for waste connected Shein, Temu, and AliExpress.

If de minimis is so closed for packages from China, it’s apt that the impossibly inexpensive dresses, coats, handbags, and location decor Americans are hooked connected will soon get much expensive. Tariffs are a taxation connected the personification aliases entity importing the goods, not connected the exporter. Research has shown that getting free of the de minimis loophole would some cost the authorities billions of dollars much successful enforcement and disproportionately raise costs for poorer Americans.

It’s not conscionable large corporations that would beryllium affected. Dropshippers who fulfill orders straight from overseas would beryllium affected, arsenic would mini businesses importing components, parts, aliases supplies successful batches nether $800. Small orders from platforms for illustration Etsy aliases eBay coming from China could costs consumers more, too.

Temu, Shein, and Amazon did not instantly respond to a petition for comment.

Trump has justified imposing tariffs and ending the de minimis loophole by pointing to “the synthetic opioid proviso chain,” claiming that de minimis packages person little scrutiny and tin beryllium utilized for shipping supplier ingredients. A Reuters investigation past twelvemonth outlined really de minimis packages could beryllium utilized to postulation narcotics — but it’s not clear that low-value parcels airs a greater threat than larger shipments.

The prices connected platforms for illustration Shein and Temu consciousness unbelievably inexpensive because, successful a way, they are. These equipment dangle connected a technicality that some sides of the governmental aisle look motivated to stamp out, and connected Tuesday, they mightiness succeed.

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