In New York, a shift in trade policy is set to impact consumers and businesses alike as the Trump administration plans to terminate the duty-free exemption on low-value imports from China on Friday. This change, concluding the de minimis exemption that permitted nearly 4 million parcels a day from China to enter the U.S. without duty, is compelling companies to reassess their operations to manage costs efficiently.
This adjustment may come as a relief for American manufacturers, who could find respite from the fierce competition posed by inexpensive Chinese goods, potentially leading to improved sales and local market growth. The policy affects products from both mainland China and Hong Kong and is part of a broader tariff strategy by President Trump, which includes a 145% levy on Chinese imports. In retaliation, China has imposed a 125% tariff on American goods, escalating tensions between the two economic giants.
President Trump criticized the de minimis exemption, labeling it as a detrimental scheme against the U.S. and its small businesses. “We put an end to it,” he declared, signaling a major shift in trade practices.
The de minimis provision, introduced in 1938, originally aimed to simplify the influx of parcels worth no more than $5, adjusted to about $109 in modern value. Raised to $800 in 2016, this threshold saw an unprecedented rise in low-value shipments from China, with exports reaching $66 billion in 2023. However, a proposal from former President Joe Biden recommended that companies refrain from exploiting the tariff exemption with underreported valuations. Initial attempts to end this exemption earlier in the year indicated unpreparedness by the U.S. to handle the surge in parcel processing.
For consumers, this shift means facing increased product costs and potential shipment delays due to more stringent customs procedures requiring declarations and duty payments. Businesses could incorporate these additional tariffs into final pricing or list them separately akin to sales taxes. For example, PDD Holdings’ Temu has introduced “import charges” that have substantially increased product prices. Conversely, Shein, operating from Singapore, assures customers that tariffs are already included in product prices. Amazon, however, has not announced any plans to visibly adjust prices to reflect added tariffs, despite rumors and recent official rebuttals.
Parcel carriers, too, are affected, tasked with collecting duties and navigating the added complexities and paperwork implications of the new rule. UPS and FedEx have expressed confidence in their readiness to comply with this mandate, collecting 145% tariffs on declared values. The U.S. Postal Service offers an alternative: apply either a 120% tariff on small parcels or a flat rate per shipment, which will increase come June. Officials from the U.S. Customs and Border Protection have voiced readiness to implement the restrictions by May 2025, yet challenges concerning workload capacity are anticipated.
The impact trickles down to businesses reliant on the de minimis rule as well. John Curry, CEO of HAPARI International, adapted to de minimis shipping for improved logistics but now faces increased costs from tariffs. Continuing current practices, he remains hopeful for a mutually beneficial resolution between the U.S. and China. Meanwhile, logistics experts like Izzy Rosenzweig of Portless highlight the likelihood of businesses maintaining operations within China due to cost advantages, though some may consider domestic warehousing to mitigate tariff expenses.
Yet, the termination of the duty exemption does place some industries in an advantageous position. Trade associations, including flag and bike manufacturers, anticipate a resurgence of locally made goods. The Flag Manufacturers Association of America identified a significant decline in sales due to imported flags falsely marketed at discounted rates. Embroidery Solutions Manufacturing LLC’s CEO, Larry Severini, emphasized the detrimental effects of the de minimis rule on revenue and competitive fairness. Similarly, bike dealer associations observe consumers swayed by cheaper, lower-quality imitations due to past loopholes. These policy changes are seen as a step towards leveling the trade field to uphold industry standards.