The U.S. government has recently taken the position of terminating the de minimis exemption for shipments originating from China. Because we believe this decision will unalterably harm American consumers, right now, exports worth less than $800 get in duty-free. This loophole has contributed to the rapid expansion of low-cost goods through foreign retailers such as Shein and Temu. This temporary exemption will expire on May 2. Consequently, American households may have their budgets reduced by as much as $2,100 due to the projected tariffs.
Recently, the use of the provision has increased exponentially. Just this year, more than 1.36 billion shipments used this exemption to come into the U.S. The unprecedented increase in imports, especially through the West Coast, has raised fears that the tsunami is harming U.S. businesses. For instance, retailer Forever 21 recently filed for bankruptcy, citing difficulties in competing with lower-priced foreign imports afforded by the de minimis exemption.
The exemption has been a highly controversial issue within U.S.-China trade relations. One of the first moves made in the space was undertaken by former President Donald Trump on Feb. This sudden decision resulted in massive confusion as the U.S. Postal Service quickly stopped all related shipments. Perhaps realizing the enormity of this change and facing widespread backlash, within a few days, Trump backtracked, restoring the exemption.
The recent announcement from the White House to end the de minimis exemption stems partially from efforts to combat the illicit fentanyl trade. The Chinese Ministry of Commerce criticized this move, warning that it could “endanger global economic development and the stability of the supply chain.” They further urged the U.S. to “immediately cancel its unilateral tariff measures and properly resolve differences with its trading partners through equal dialogue.”
As the September 30th deadline looms, worry continues to grow about what this extraordinary policy change will mean for American consumers. The removal of the de minimis exemption will almost certainly lead to increased prices. A number of products that were previously an affordable option because they were duty-free will see increased costs. This could hit the most vulnerable shoppers, who are often more price sensitive and have increasingly moved to online retailers in search of better prices.
“No country should fantasize that it can suppress China and maintain a good relationship with China at the same time.” – Chinese Foreign Minister Wang Yi
The ripple effects of such a policy change would go far beyond what consumers would pay at the register. Experts warn that imposing tariffs could disrupt supply chains and lead to inflationary pressures across various sectors. Especially worrisome is the increased cost search imposed on valuable imported goods. Businesses are dealing with inflationary costs, the effects of which will be felt on the national economy.
American enterprises are sounding their alarm over the dangers posed by the de minimis loophole and how it undermines risk-free competition. Retailers such as Forever 21 respond that they would not be able to stay in business in a marketplace swamped with less expensive foreign competition. The significant number of shipments entering the country under this exemption has exacerbated challenges for these domestic companies, leaving them at a disadvantage.
National security, trade practices, tariffs—these are still hot topics of executive branch discussion. What remains to be seen is how consumers and businesses will adapt to these changes. The elimination of the de minimis exemption to end the year is another big shift in U.S. trade policy. This move would have a huge impact on international trade between the U.S. and China.
