The PresidentA trade clause that fueled the rapid expansion of low-cost online merchants like Temu and Shein is the target of Donald Trump’s threats against China, Canada, and Mexico.
Trump issued executive orders putting tariffs on the top three trading partners of the US on Saturday. A 25% tariff will be applied to items imported from Canada and Mexico, while a 10% tax will be applied to goods imported from China. The tariff on Canadian energy resources will be reduced by 10%.It is anticipated that the duties will go into force on Tuesday.
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A trade exception called as de minimis, which permits exporters to send items under $800 into the United States duty-free, is stopped by the orders against China, Canada, and Mexico.
Although the de minimis clause has been in place since the 1930s, its use has recently come under more scrutiny. Last September, the Biden administration took action to stop the misuse and overuse of de minimis, claiming that it has enabled Chinese e-commerce businesses to undercut rivals with cheaper costs.Concerns about product safety have also been raised by officials who claim that de minimis exports are subject to little scrutiny and documentation.
The U.S. Customs and Border Protection Bureau reports that in 2024, the country handled over 1.3 billion de minimis shipments. According to the CBP, there is an increase from 139 million annually in 2015.
Low-cost e-commerce businesses with ties to China, such as Temu, Shein, and Alibaba’s AliExpress, have been able to sell a virtual buffet of inexpensive clothing, electronics, and household goods, including $15 smartwatches and $3 shoes, thanks to the loophole.
In an effort to attract more bargain-hunting customers, Shein and Temu have launched a digital marketing campaign in recent years. For the second consecutive year, Temuin 2024 soared to the top of Apple’s list of the most downloaded free apps in the United States, with Shein ranking at number 12.
Requests for comment were not immediately answered by Temu, Shein, or Alibaba representatives. Temu has previously denied that de minimis is necessary for its growth.
She previously stated to CNBC that ensuring import compliance is of utmost importance. Donald Tang, the executive chairman of Shein, has also stated that he is in favor of reforming de minimis, stating that it requires a total overhaul.
Because of their success in the United States, Amazon launched its own discount store, Haul, last year, enabling independent sellers to ship products straight from China to customers. According to The Information, which cited people knowledgeable with the scheme, Amazon uses the de minimis trade rule to import goods offered on Haul in order to avoid paying duties. A request for comment from CNBC was not immediately answered by an Amazon representative.
The Trump administration’s crackdown on the de minimis loophole may help Amazon, eBay, and Etsy. The businesses compete directly with Temu and Shein by running online marketplaces that enable independent vendors to offer goods to customers directly.
Amazon’s extensive third-party marketplace has long served as a conduit between Chinese producers and American consumers. About 60% of the products sold on Amazon come from the marketplace, making it a crucial part of the company’s retail strategy. By offering sellers fulfillment, shipping, account assistance, and advertising services, Amazon also makes money.
Although Amazon first admitted in 2023 that a large percentage of its merchants are from China, the country has long had a substantial number of Chinese-based sellers. According to Marketplace Pulse data, they are estimated to have a larger number of vendors on the marketplace than American sellers.
Since the de minimis loophole was threatened, Temu and Shein have also broadened their approaches. In order to expedite package delivery to American customers, Temu started onboarding Chinese vendors with inventory at U.S. warehouses last year, according to The Information. Additionally, Shein has established a supply chain hub and distribution locations in the United States.