Lower-Income Households Will Be Most Strained By The Closure of This Tariff Loophole

A loophole that allowed some imports to come into the United States tariff-free ended, increasing the cost of cheap products and primarily affecting low-income households.

The de minimis rule exempted imports worth $800 or less from tariffs and other administrative fees. This created a loophole for online foreign retailers like Shein and Temu, who could send low-value goods into America tariff-free.

President Donald Trump began cracking down on this loophole earlier this year by eliminating the de minimis exemption for China in May. Last week, Trump ended the tariff exemption for all countries.

Now, all imports will be subject to Trump’s wide-ranging tariffs on many of the U.S.’s trading partners.

Quickly after Trump closed the loophole for imports from China earlier this year, prices at the Chinese bargain companies Shein and Temu rose, reports said. Cheap imported products from other countries could similarly rise, which would likely hit low-income households the most.

In 2023, about 1 billion shipments, or 7.3% of all U.S. imports of consumer goods, qualified for the de minimis exemption, according to a report from the National Bureau of Economic Research. The majority of these imports were going to low-income households, meaning they will be more exposed to tariff-related price increases.

Almost three-quarters of the direct shipments to consumers in the lowest-income zip codes were de minimis imports. Comparatively, only 52% of direct shipments to those in the highest-income zip codes were cheap enough to be exempt from tariffs.

Lower-income households have already taken the brunt of the U.S. labor market slowdown, recently seeing lower wages and fewer hours. Their situation may get even worse when the shrinkage of several federal government assistance programs from the “One Big, Beautiful Bill” begins.