End of U.S. De Minimis Exemption: Higher Costs for Shoppers, Strain on Small Businesses

Gerik

Summary:

The Trump administration’s repeal of the duty-free import exemption for parcels under $800 will push up costs for U.S. consumers, disrupt global e-commerce flows, and pressure small businesses reliant on foreign suppliers....

Why the De Minimis Exemption Mattered

The de minimis exemption allowed U.S. consumers to receive parcels worth less than $800 without paying import duties. It became a cornerstone of cross-border e-commerce, fueling the growth of platforms like Shein and Temu, where shoppers could buy low-cost goods delivered directly from China and other exporting countries. In fiscal 2024 alone, 1.36 billion shipments valued at $64.6 billion entered under this regime, with nearly three-quarters coming from China.

Retailers like Walmart and Target argued that the exemption gave foreign competitors an unfair advantage since domestic importers must pay tariffs upfront, which are embedded in their prices. The U.S. government also cited fentanyl smuggling through small parcels as a justification for removing the exemption.

Impact on U.S. Shoppers

Consumers will now face higher prices for imported goods previously shielded by the $800 threshold. Bargain items such as $12 dresses on Temu or budget household goods on Shein will no longer arrive duty-free. Some platforms have already started adjusting their prices upward to reflect the new tariff regime.

The move particularly hurts price-sensitive buyers who turned to cross-border e-commerce during a period of inflationary pressures on everyday goods. Unlike large retailers that can spread costs, small-ticket online purchases will now face disproportionate tariff burdens, reducing their appeal.

Global Supply Chain Disruptions

The end of de minimis has triggered turmoil in postal and logistics networks. Australia Post, Royal Mail, Germany’s DHL, Japan Post, and Korea Post have paused or slowed U.S.-bound shipments as they adapt to customs’ new duty-collection requirements. Unlike large logistics companies that can handle customs clearance at scale, many national postal systems lack the infrastructure to manage millions of small parcels that now require detailed declarations.

This has created bottlenecks and additional paperwork. Sellers must now provide precise data on product origins and classifications, complicating fulfillment and slowing delivery speeds.

Pressure on Small Businesses

The new tariffs weigh most heavily on small businesses that source inputs from abroad or sell directly to U.S. customers through platforms like Etsy and eBay. Unlike giants such as Shein or Amazon, small enterprises lack the financial cushion to absorb duties. Many are already notifying customers of price increases. For instance, British sewing-pattern firm Merchant & Mills raised U.S. prices by 15%.

For niche sellers vintage clothing resellers, artisan shops, or specialty electronics providers higher costs could erode competitiveness and suppress demand. As consumers push back against higher prices, some businesses may see demand collapse.

Strategic Implications

Large platforms like Shein and Temu may paradoxically emerge stronger despite tariffs. Having adapted since China’s exemption was lifted in May, they now benefit from scale efficiencies that make direct shipments from China relatively cheaper compared to sourcing from other countries. This could consolidate their dominance even as overall volumes fall.

On a macro level, the removal of de minimis marks a structural shift in U.S. trade policy, signaling a move away from frictionless consumer imports toward tighter customs control and industrial policy. While aimed at protecting domestic retailers and curbing illicit shipments, it risks dampening consumer spending and complicating global supply chains.

Source: Reuters

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