:max_bytes(150000):strip_icc()/GettyImages-2231981436-caa632f19c564b029f5b5f35e1cbcd46.jpg "The Trump Administration Just Closed the De Minimis Import Tax Exemption. Here’s What That Means for Your Wallet.")
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Key Takeaways
- The Trump administration closed the de minimis import tax exemption loophole on Friday, which could further disrupt the online shopping industry.
- Previously, packages valued at less than $800 could enter the U.S. without being subject to import duties and tariffs.
- The exemption for imports from China ended in May and has now been extended across the globe, with experts predicting higher prices and shipping delays for U.S. consumers.
If you’re wondering why the prices of items that have been sitting in your shopping cart online are rising, the expiration of the de minimis tax exemption on Friday is one possible explanation.
The Trump administration last week axed the rule for all shipments into the U.S. after doing so for products coming from China earlier this year.
What Is/Was the De Minimis Exemption?
Congress created the de minimis exemption in 1938 to simplify the import process for low-value items—initially $1 or less— by exempting them from tariffs or other taxes. Over time, the limit rose with inflation. At least hundreds of millions of packages have been shipped into the U.S. under this exemption in recent years.
However, Chinese retailers like Shein and PDD Holdings’ (PDD) Temu turned the rule into a loophole. They shipped low-cost goods directly from China to U.S. consumers in packages small enough to qualify for de minimis exception.
The Biden administration targeted the companies without naming them in a planned crackdown on the de minimis exemption last year, noting that packages entering the U.S. under the rule had ballooned from 140 million a decade ago to more than 1 billion in 2023.
Trump escalated the effort by closing the loophole for Chinese imports earlier this year. As of Friday, he ended it for all global shipments. Trump cited national security risks, such as drug smuggling, and said the exception gave foreign businesses unfair advantages.
Why It Could Impact Your Finances and Online Shopping Experience
Retailers like Temu and Shein said they are adapting by shipping more from U.S. warehouses. Others may need to raise prices, which is what Trump’s tariffs have done in other areas of the economy. Research has suggested that closing the loophole could hit lower-income households hardest, since they often rely on low-cost goods from sites like Temu and Shein.
Postal services from more than two-dozen countries like Australia, Germany, and Japan said last week that they would temporarily pause shipments through the U.S. Postal Service because of the lack of time and information since the rule change was announced, per the Associated Press. Other shippers like UPS (UPS) and FedEx (FDX) will likely provide a simpler shipping experience until that confusion is resolved, The New York Times reported.
Experts told the AP that the change will likely delay shipments and add a range of logistical costs, as each package will now be subject to the tariff rate for the country it’s coming from. Those rates can vary widely and change quickly.
In addition, the change could impact more than just individual consumers, also hitting small businesses and people who sell on crafting platforms like Etsy (ETSY). That could impact parts and products being delivered to the U.S. in shipments typically below the $800 de minimis threshold, per the AP and the Times.
