Trump’s Global Trade Move Closes Duty-Free Loophole, Affecting Millions of Packages from China and Boosting Costs for American Consumers

The White House has announced the suspension of a global trade loophole that allowed smaller parcels into the U.S. duty-free, effectively closing a backdoor for large Chinese e-commerce companies such as Shein and Temu. This move could potentially force these firms to shoulder additional costs in the form of duties previously waived, which might ultimately be passed on to consumers.

The administration has abolished the so-called “de minimis exemption,” which had previously allowed duty-free entry for goods worth $800 or less into the U.S. This measure was particularly advantageous for large online retailers when shipping millions of packages to American consumers.

Initially applied only to China and Hong Kong during the ongoing U.S.-China trade war in May, the exemption’s elimination has now been extended globally.

In a statement issued on Wednesday, President Trump asserted that “many shippers manipulate regulations to evade law enforcement and hide illicit substances in imports,” particularly in low-value articles eligible for duty-free treatment under de minimis.

This development poses challenges for Chinese retailers and their customers, as it eliminates the option of re-routing small shipments through countries like Vietnam, which faces a tariff rate of 20%. Furthermore, the executive order mandates that the origin of each package must be declared to U.S. Customs and Border Protection (CBP).

In anticipation of this change, Temu and Shein had already begun bulk-shipping goods to U.S. warehouses to expedite delivery times. However, shortly after the de minimis exemption ended for China in early May, Temu announced changes to its shipping model, stating that it would use US-based distributors while maintaining unchanged pricing for American consumers.

However, some customers have since reported higher prices and out-of-stock items. As companies will need to restock their warehouses and face import taxes even when shipping in bulk, these additional costs could potentially be passed on to consumers.

The suspension of de minimis will also impact the millions of sellers on Amazon Haul, a discount competitor to Temu and TikTok Shop that ships directly from China. An Amazon spokesperson has assured CNN that the company will continue to offer competitive pricing across a wide variety of products.

Temu did not respond to CNN’s request for comment.

This change will affect millions of packages previously received duty-free by Americans, with CBP processing nearly 4 million such shipments daily. Research indicates that a majority of these shipments originate from China and Hong Kong, totaling over 1.36 billion packages in the last fiscal year.

Once Trump’s executive order takes effect on August 29, most internationally shipped goods will be subject to tariffs based on their country of origin. These duties may amount to approximately $80 per item for countries with a tariff rate below 16%, $160 per item for those between 16% and 25%, and $200 per item for countries with a tariff rate exceeding 25%. Some of these costs could ultimately be passed on to consumers.

Lower-income households are likely to bear the brunt of increased prices on Chinese e-commerce sites, as data from February shows that 48% of de minimis packages were delivered to America’s poorest zip codes, while 22% went to wealthier areas.

The Trump administration had initially reduced the de minimis exemption for China in May, but later lowered the tariff on those cheap packages from 120% to 54%. There is also a $100 flat-fee option available for these goods.

A federal trade court this week declined to block Trump’s elimination of the de minimis exemption on goods from China, as the issue is already covered in a broader case challenging Trump’s tariff policies.

Initially set for repeal in July 2027 as part of Trump’s “Big Beautiful Bill,” the de minimis rule will now apply to all countries worldwide. Additionally, the bill establishes a potential civil penalty of up to $10,000 for repeated violations of the rule.