President Trump signed an executive order Wednesday closing a trade loophole on cheap goods from China that were previously exempt from tariffs.
Trump, 78, argued that the so-called “de minimus” exception allowed shippers from the People’s Republic and Hong Kong to “hide illicit substances” in packaging and products.
“These shippers often avoid detection due to administration of the de minimis exemption,” the president wrote, claiming that duty-free exports from China “play a significant role in the synthetic opioid crisis in the United States.”
Packages subject to de minimus treatment are valued at less than $800.
Online Chinese retailers such as Temu and Shein have used the loophole to sell ultra-low-cost items to US consumers and could be hit hard by the new tariffs.
In February, Trump briefly suspended the loophole before restoring the exemption to give the Commerce Department more time to develop a plan for how to collect the new revenues.
“The Secretary of Commerce has notified me that adequate systems are now in place to process and collect tariff revenue for covered goods from the PRC otherwise eligible for duty-free de minimis treatment,” Trump wrote.
The new tariffs on de minimus goods will be imposed “in lieu of any other duties that the shipments would otherwise be subject to,” such as Trump’s 20% levy on Chinese imports.
Starting May 2, shipments under $800 will be subject to an ad valorem duty of 30% of the value of the postal item or $25 per postal item. On June 1, the per postal item tariff will increase to $50.
Trump’s order also requires any carrier that transports international postal items containing goods from China or Hong Kong to the US to have “an international carrier bond to ensure payment of the duty.”
Chinese fast-fashion companies have utilized the 1930s-era trade rule in recent years to aggressively ramp up their exports of low-value items.
Cheap exports soared to $66 billion in 2023, up from $5.3 billion in 2018, according to a report released earlier this year by the Congressional Research Service.
The de minimus exception was initially implemented to allow tourists to bring souvenirs back home from abroad duty and hassle free.
The Cato Institute, a libertarian think tank, argues that the de minimis exemption “serves as a crucial trade facilitation tool that particularly benefits lower-income consumers.”
The think tank points to research papers showing that the poorest zip codes in America receive significantly more de minimis shipments, particularly from China, than the richest zip codes.
One study cited by the Cato Institute estimates that scrapping the exception will cost Americans $11 billion to $13 billion annually, or about $35-$80 per person.
The president signed the executive action on the same day he announced new reciprocal tariffs on dozens of nations.
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