WASHINGTON — President Donald Trump has decided to temporarily hold off on implementing tariffs for low-value packages coming from China. This pause is likely aimed at providing federal agencies with the necessary time to figure out how to manage the vast influx of such shipments, which arrive at the U.S. border daily without incurring any taxes.
The executive order issued on Wednesday did not specify a timeline for the resumption of these tariffs but indicated that the pause would continue until the Department of Commerce could establish “adequate systems” to efficiently process and collect the tariff revenue.
John Lash, Vice President of Product Strategy at e2open, expressed that the quick implementation of regulations can lead to significant implications that are not immediately clear. He mentioned that Trump’s order affects a staggering number of small packages, many of which are already in transit.
Lash remarked, “The volumes are absolutely incredible. Suddenly, they transition from not requiring filing for tariffs to needing full filing, which adds a level of complexity.” Support for ending tariff exemptions on these low-cost packages has found favor on both sides of the political aisle. The decision to halt these exemptions came right after Trump raised tariffs on Chinese imports by 10% early in the week, making these duty-free packages not only subject to existing tariffs—25% on many Chinese goods—but also to the newly implemented 10%.
This latest pause is part of a series of interruptions to Trump’s policies as his second term unfolds, which also includes postponed orders for tariffs on neighboring Mexico and Canada after they responded to concerns regarding border security and drug trafficking.
The U.S. Postal Service faced the responsibility of collecting these tariffs on small packages and initially announced it would not accept parcels from mainland China and Hong Kong. However, just a day later, the decision was reversed and the Postal Service stated it would collaborate with Customs and Border Protection to create a collection process for the new tariffs.
Introducing changes so swiftly can leave stakeholders unprepared, according to Lash. The de minimis exception, first introduced in 1938 to ease the movement of small shipments valued at no more than $5—equating to approximately $106 today—has undergone multiple adjustments since, expanding to a threshold of $200 in 1994 and $800 in 2016. Recently, the dramatic growth of cross-border e-commerce from China has raised questions about the effectiveness of this long-standing customs exemption.
The value of Chinese exports of low-value packages surged to $66 billion in 2023, compared to just $5.3 billion in 2018, as reported by the Congressional Research Service. The U.S. has emerged as a significant market for these goods. For the first time in 2023, over 1 billion such packages passed through U.S. customs, a marked increase from 134 million in 2015. By the end of the previous year, Customs and Border Protection was managing nearly 4 million small shipments daily, a large portion of which originated from Chinese online retail sites like Shein and Temu.
Critics of the de minimis exception argue that it has facilitated not only tariff evasion but also the entry of hazardous items such as counterfeit goods and illegal drugs into the U.S. Conversely, supporters defend it by stating it has helped keep prices lower for American consumers and small enterprises.
Following Trump’s removal of the exemption, analysts suggested that the policy alteration could result in increased costs and delivery delays as customs officials grapple with an overwhelming number of packages to inspect. Neil Saunders, a managing director at GlobalData, noted, “We are discussing millions of packages every week that currently receive treatment similar to domestic shipping.” He highlighted that Temu has proactively expanded its warehousing in the U.S. over the last year and is now opting to ship products in bulk containers rather than individually.
Lash predicted that eliminating the de minimis exception would significantly reshape the cross-border e-commerce landscape, as the added costs from tariffs and necessary paperwork could drive international sellers to shift towards bulk shipping methods.
