Shein and Temu Face Tougher Price Hits Under New De Minimis Rule

Impact of Trump's Suspension of De Minimis Exemption on Global Trade

President Donald Trump recently took a significant step in reshaping the landscape of international trade by suspending a global trade loophole that allowed smaller parcels into the United States to enter duty-free. This decision has far-reaching implications, particularly for e-commerce giants like Shein and Temu, which have relied on this exemption to offer affordable products to American consumers.

The so-called "de minimis exemption" had permitted shipments of goods valued at $800 or less to enter the U.S. without paying duties. This loophole was widely exploited by large online retailers, enabling them to ship millions of packages to American customers at lower costs. However, the administration initially removed this exemption for goods from China and Hong Kong in May during the ongoing U.S.-China trade war. The recent move extends this policy to all countries worldwide.

In an executive order issued on Wednesday, Trump highlighted concerns about the risks associated with low-value imports, stating that many shippers go to great lengths to evade law enforcement and hide illicit substances in these shipments. He emphasized that the potential for evasion, deception, and the importation of illicit drugs is particularly high for such low-value articles.

This change is especially challenging for Chinese retailers and their customers, as it eliminates the possibility of re-routing small shipments through countries like Vietnam, which currently faces a 20% tariff rate. The new rule also requires the origin of each package to be declared to the U.S. Customs and Border Protection (CBP).

Reactions from E-Commerce Giants

Temu and Shein, two major players in the e-commerce space, have already begun adjusting their strategies. Temu started stockpiling goods and bulk-shipping to U.S. warehouses to reduce shipping times. Shortly after the de minimis exemption expired for China in early May, Temu announced a complete overhaul of its shipping model, stating that it would send out all American orders via U.S.-based distributors. However, some customers reported higher prices and items running out of stock.

Experts suggest that companies will now face increased costs due to the need to pay import taxes even when shipping in bulk. Chris Tang, a professor of global supply chain management at the University of California, Los Angeles, noted that by extending the suspension to all countries, there are no viable workarounds left for businesses.

Broader Implications for E-Commerce

The suspension of the de minimis exemption will also impact other platforms like Amazon Haul, a discount competitor to Temu and TikTok Shop that ships directly from China. An Amazon spokesperson stated that the company consistently offers the lowest prices across a wide selection of products and will continue to meet or beat prices versus other retailers.

The scale of the impact is substantial, as the U.S. Customs and Border Protection (CBP) processes nearly 4 million duty-free de minimis shipments daily. Research indicates that a majority of these shipments originate from China and Hong Kong. In total, over the last fiscal year, CBP reported that 1.36 billion packages entered the United States under the de minimis exemption.

Economic Consequences

When Trump’s executive order takes effect on August 29, most goods shipped internationally will be subject to the tariffs of the country of origin. These duties will vary depending on the tariff rate of the country, with costs ranging from $80 per item for countries with a tariff rate less than 16%, up to $200 per item for countries with a tariff rate above 25%. Some of these costs could ultimately be passed down to consumers.

Lower-income households are expected to be the hardest hit, as they rely more heavily on the affordability of Chinese e-commerce sites. According to research conducted by UCLA and Yale economists, about 48% of de minimis packages were shipped to America’s poorest zip codes, while only 22% were delivered to the richest ones.

Legal and Policy Context

The Trump administration initially slashed the de minimis exemption on China in May, but later reduced the tariff on those cheap packages from 120% to 54%. A flat-fee option of $100 was also introduced for these goods. A federal trade court recently 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.

As part of Trump’s “Big Beautiful Bill,” the de minimis rule was slated for repeal on all countries in July 2027. The bill also established a civil penalty of up to $10,000 for more than one violation of the rule.