Shein and Temu to raise prices in response to Trump closing tariff loophole
The “de minimis” exemption let smaller shipments worth less than $800 avoid tariffs. It is slated to end May 2.
Fast fashion is about to get pricier.
President Donald Trump said this week that he was looking to close a popular “de minimis” loophole that exempted import shippers from paying added duties. The exemption allowed shipments less than $800 to ship dirt-cheap goods to the states without dealing with tariffs.
Trump said the move was to correct the trade imbalance between the world’s two largest economies, imposing increased tariffs on China in response to the country’s retaliatory tariffs on the United States.
Foreign online retailers, especially fast-fashion retailers like Shein and Temu, benefited from the loophole.
But the White House announced its goal Thursday to close that loophole, making it harder for those online retailers to sell to American buyers or profit as much as they once did. Shein and Temu have already announced intentions to raise prices as soon as next week for U.S. customers.
Here’s what we know.
What is the ‘de minimis’ exemption? What was the maximum amount?
The “de minimis” provision was a widely used exemption that allowed sellers to ship goods they said were worth $800 or less duty-free and avoid paying additional tariff costs.
E-commerce companies are some of the biggest exemption users. Sellers mainly from China have used the loophole to flood the U.S. market, shipping dresses, shoes, toys, and bags directly to U.S. shoppers in small packages.
As many as 4 million low-value parcels — most of them originating in China — arrive in the United States every day under the soon-to-be canceled provision.
The provision was enacted in 1938 but has been amended several times since then. The maximum threshold was $200 until 2016, when it was raised to $800.
When will the loophole go away?
Trump signed an executive order this month eliminating the loophole.
Starting May 2, goods from China and Hong Kong will be subjected to a 145% import tax without being able to use the “de minimis” exemption to avoid fees.
Why is Trump getting rid of the “de minimis” exemption?
Trump isn’t the first politician to try and remove the exemption.
U.S. politicians, law enforcement agencies, and business groups have lobbied to remove the long-standing exemption, describing it as a trade loophole that gave inexpensive Chinese goods an advantage and served as a portal for illicit drugs and counterfeits to enter the country.
Former President Joe Biden’s administration also aimed to remove the provision last year.
Who is impacted by the raised tariffs and ‘de minimis’ exemption going away?
From overseas retailers, to consumers, to U.S. small businesses, the exemption going away and higher tariffs impact everyone and the entire economy.
Consumers will likely see higher prices on imported goods that historically have been marketed as inexpensive. Popular online shopping platforms such as AliExpress and DHgate will likely pass those increased costs onto U.S. buyers. Temu and Shein have already said that would be the case.
Small businesses that use international suppliers will see hikes in import costs, particularly low-margin goods, and could face supply chain disruption that causes a ripple effect.
When and by how much will Shein and Temu prices go up?
An April 9 White House fact sheet said that goods shipped by mail from China costing less than $800 that used to be protected by the de minimis loophole will instead face a 120% tariff (or $100 per item from May 2 until June 1, when it will increase to $200 per item).
Shein and Temu announced the competitor companies would begin making “price adjustments” starting April 25.
Neither company detailed the scope of those price increases.
The Associated Press contributed to this article.