By: Sophia Ward
“Gone are the days of America being taken advantage of.” At least that is what President Donald Trump emphasized in his new trade policy. The U.S., citing national security concerns, is targeting its top three trading partners—Mexico, China, and Canada—which collectively accounted for over $1.2 trillion imports and 42% of total U.S. imports in 2024. On February 1, 2025, the Trump Administration issued an executive order imposing an additional 10% tariff on any existing tariffs until China takes action to curb fentanyl smuggling.
However, Trump’s tariff expansion resulted in major whiplash earlier this month when Trump revoked and then suddenly reinstated the de minimis exemption for low-cost Chinese imports in a matter of days. This erratic policy change raises significant questions about the stability of U.S. trade regulations, their impact on global supply chains, and the broader implications for U.S.-China economic relations.
The de minimis exemption, established under Section 321 of the Tariff Act of 1930 (codified as amended 19 U.S.C. § 1321(a)(2)(C)), permits duty-free importation of goods valued at $800 or less (per person per day). Initially intended to improve efficiency and avoid customs burdens for low-value imports, the use of Section 321 has rapidly expanded as e-commerce companies look for ways to cut costs and maximize profits in direct-to-consumer sales. Importers are not required to file formal entry documents for de minimis shipments or pay duties, fees, and taxes on the covered merchandise.
This rule has become a cornerstone of the booming e-commerce economy, particularly for fast-growing platforms like Shein, Temu, and Alibaba. According to data from the U.S. Customs and Border Protection agency (CBP), the U.S. processed more than 1.3 billion de minimis shipments in 2024. And in a 2023 report, the U.S. House’s Select Committee on the Chinese Communist Party found that Temu and Shein are “likely responsible” for over 30% of all packages shipped to the U.S. under Section 321, and “likely nearly half” of all de minimis shipments from China.
The ability to avoid standard tariffs and duties made this loophole a crucial tool for global retailers seeking to remain competitive in the U.S. market. Businesses across various industries such as apparel, consumer goods, and health and beauty, have widely adopted de minimis as a cost-saving strategy. Meanwhile, consumers benefit from lower prices and a greater variety of product choices, reinforcing the appeal of global e-commerce platforms that utilize this trade mechanism.
But all good things must come to an end. On February 5, 2025, Trump signed an executive order eliminating the de minimis exemption for Chinese imports, immediately subjecting low-cost e-commerce shipments to new tariff obligations. Under this guidance, imports that were previously exempted from duties were required to follow the same rules for higher-value shipments, while also being subject to the new additional 10% tariff.
The immediate impact was significant: delays at U.S. borders, rising shipping costs, and widespread disruptions in global e-commerce. Within 24-hours, CBP began holding thousands of packages at the border, but later resumed acceptance of these packages, exacerbating the backlog at customs checkpoints. Even shipments that already paid duties were caught in this congestion, particularly in major hubs like John F. Kennedy International Airport in New York City, as customs officials struggled to enforce the new procedures. Similarly, many U.S. shoppers were hit with bills for duties for low-cost orders, even for parcels already in transit. For example, one consumer purchased a $65 top from an online seller, I.Am.Gia, and received an email that she owed duties and fees of $45.19 due within five days from the arrival of the package or the item would be returned to the sender.
Just two days later, facing intense backlash from business leaders, logistical concerns, and economic pressures, the administration reversed course and temporarily reinstated the exemption on February 7, 2025. However, the broader tariffs remained in place.
The impact of this change was brief, but huge. Domestic manufactures benefit from reduced foreign competition and higher import tariffs, but consumers bear the brunt of these changes, facing higher prices on previously low-cost goods. Further, it is unclear whether any of the consumers affected by the revocation of the de minimis exemption would be eligible for refunds for any duties paid. Although Trump promised the American people during his campaign that the tariffs were “not going to be a cost to you, it’s going to be a cost to another country,” this misleading comment was proven untrue in the face of the de minimis controversy.
Businesses may be able to catch their breath for now, but more changes are coming in the near future. A new executive order is giving the Secretary of Commerce and CBP time to implement “adequate systems . . . to fully and expediently process and collect tariff revenue.” Once that is sorted, Trump is likely to remove the de minimis exemption for China again. Put differently, businesses need to prepare for the end of de minimis and additional changes now.
It is unclear whether Chinse e-commerce platforms would be able to sustain continued growth in the U.S. if subject to tariffs and duties. Businesses should begin deciding whether they will adjust by absorbing higher costs, passing them onto consumers, or finding other innovative ways to navigate this changing landscape. And for companies like Temu and Shein that use this streamlined model to quickly respond to consumer trends, they may need to invest in micro-fulfillment centers to allow brands to produce and stock goods closer to demand hubs and reduce tariff exposure.
For consumers, the de minimis exemption has a silent enabler of affordability. A 2024 economic study concluded that eliminating the de minimis exemption “would reduce aggregate welfare by $10.9-$13.0 billion and disproportionately hurt lower-income and minority consumers.” If the exemption is permanently eliminated, consumers will likely forced to pay higher process fees or switch to domestic “Made in the USA” alternatives, which are often more expensive due to production costs. Whether the broader goal of promoting American manufacturing will materialize remains uncertain, but in the meantime, consumers should certainly prepare for rising prices, longer shipping times, and a potential shift toward locally sourced goods.
While the de minimis rule remains intact for now, the future is uncertain, signaling potential economic turbulence for global e-commerce and U.S.-China relations in the coming months. In any case, adaptability will be the key to surviving this increasingly unpredictable trade market.
