Order goods from Temu, Shein? Get ready to pay more
What's the story
US President Donald Trump has signed an executive order imposing new tariffs on Chinese products.
The move seeks to close a trade loophole that previously exempted certain low-cost items from tariffs.
The "de minimus" exception, which permitted goods valued at less than $800 to enter the US without incurring duties, has been targeted.
Online Chinese retailers like Temu and Shein, which capitalized on this loophole to sell low-cost items to US consumers, could be heavily impacted by these latest steps.
Tariff details
Concerns over de minimus exception
Trump argued that the de minimus exception has been exploited by shippers from China and Hong Kong to hide illicit substances in packaging and products. He alleged duty-free exports from China "play a significant role in the synthetic opioid crisis in the United States."
Implementation
New tariffs to be imposed on goods under $800
Starting May 2, shipments worth less than $800 will incur an ad valorem duty of 30% of the item's value or $25 per item. This per item tariff will rise to $50 on June 1.
Trump's order also requires that any carrier transporting international postal items, containing goods from China or Hong Kong to the US must have "an international carrier bond to ensure payment of the duty."
Trade implications
Impact of de minimus exception on US-China trade
Chinese fast-fashion companies have exploited the de minimus exception to ramp up their low-value item exports aggressively.
Cheap exports skyrocketed to $66 billion in 2023 from $5.3 billion in 2018, a Congressional Research Service report found.
The Cato Institute argues scrapping this exemption could cost Americans between $11 billion and $13 billion annually or about $35-$80 per person.
Policy shift
Trump's vision of economic independence
Trump's "Liberation Day" plan to impose new duties on imports marks a departure from globalization.
He imagines that products sold to American consumers should be manufactured in American factories.
This policy shift could discourage investment in low-cost manufacturing hubs such as Vietnam and India.
However, some multinational corporations are gearing up to expand their operations in the US in response to these tariffs.