Why Temu’s bargain prices are about to hit a tariff wall
Elyse Betters Picaro / ZDNETPresident Trump has signed an executive order that ends the “de minimis” tariff exemption for low-value imports from China and Hong Kong. This policy change, which will take effect on May 2, 2025, is set to have a ripple effect across the e-commerce world, especially for sites like Temu that rely on affordable, small shipments to keep prices low.Also: Are tariffs about to make your next iPhone way more expensive? It’s complicatedHere’s what it all means and how it will most likely impact you, the consumer. What exactly is de minimis? In simple terms, it refers to a threshold below which certain regulations, taxes, and inspections do not apply. The idea is that imported goods of very little value are not worth the administrative cost of processing.For decades, the de minimis rule has acted as a backstage pass for small packages entering the US. It became law in the US Tariff Act of 1930, allowing items valued at $800 or less to bypass customs duties and lengthy inspections. The level used to be $200, but it rose to $800 in 2016, making it even easier and cheaper for companies to import goods. Also: New US tariffs are shaking up tech – here’s how it could hit your walletThe de minimis exemption has become particularly relevant in recent years, as online shopping has exploded with Chinese direct-to-consumer retailers such as Temu. They have grown rapidly by shipping countless low-cost items directly to US consumers. The de minimis rule was a secret weapon they used to help drive down costs and boost sales.According to Congress.gov, de minimis shipments to the US rose from 153 million in 2015 to 1 billion in 2023. Reuters reported that of the 122 million de minimis shipments to the US in January, 89 million were from China alone. Why is Trump closing this loophole?President Trump’s administration decided to close this loophole for several reasons. First, there was growing concern that the de minimis rule was being exploited not just for consumer goods but also for other, more dubious items.Trump framed the closure of the loophole as a measure to combat the flow of synthetic opioids into the US, especially fentanyl, which he claimed is often manufactured in China. In his statements, Trump said low-value shipments from China had been exploited by drug traffickers to bypass US customs checks. By closing this loophole, the government aims to curb these illicit activities. In other words, it’s a move to protect public health.Also: If you need a new laptop, you might want to buy it now – here’s whyHowever, many trade experts and analysts suggest that the real reasons for closing the loophole are more related to economic and trade policy rather than public health. They argue that Chinese companies have increasingly exploited the de minimis rule, leading to a surge in low-cost imports that have hurt US manufacturers.Critics of de minimis, such as former North Carolina Representative Dan Bishop, call these imports “cheap crap.” In the Congressional Record, he said Temu and Shein account for one-third of all de minimis shipments. “Temu appeared on the American scene only in 2022, Shein not much earlier,” Bishop noted. “You can go buy sneakers on Temu for $5.” More
