Trump Closes Tax Loophole for Chinese Goods: Online Shopping Costs Increase for American Consumers

Taiwan • Business • 05/02 04:31
Trump Closes Tax Loophole for Chinese Goods: Online Shopping Costs Increase for American Consumers

Former President of the United States, Donald Trump, ended the de minimis tax exemption rule applicable to China and Hong Kong at the end of April 2025. The rule allowed low-cost goods to enter the U.S. market tax-free. This move was intended to protect American manufacturing and small businesses. However, it results in higher online shopping costs and delivery delays for consumers. Chinese e-commerce platforms like Shein and Temu are affected, resulting in higher product prices. The policy has drawn international attention, as the UK and the EU consider similar measures.

Key Updates

05/02 18:31

The White House says tariffs will not increase car prices, while automakers such as GM and Ford have expressed concerns.

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05/02 15:30

American Companies Face Tariff Strain: Apple's Costs Skyrocket, McDonald's Sales Decline, The Business Community Urges Policy Changes

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05/02 09:03

U.S. Tariff Policies Impact SHEIN and Temu Severely: Rising Prices, Supply Chain Restructuring, and Drop in App Rankings

Starting May 2, 2025, the United States will remove the tax exemption for small parcels valued under $800 from China and impose an import tax of up to 120% or a fixed tax of $100 per package, having a significant impact on Chinese cross-border e-commerce platforms SHEIN and Temu. The prices of goods on both platforms have risen by 40% to 100%, leading Temu to shift to a local warehouse model and nearly eliminate direct shipments from China. A reduction in advertising has caused a drop in app store rankings. This policy change is forcing consumers to switch to local platforms, altering their shopping habits.

05/02 05:02

Yiwu businesses are turning to South American and Middle Eastern markets: The US-China trade war has severely damaged the US toy supply chain

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05/02 05:02

From China, the US has ended the tariff exemption for low-value parcels, though challenges in implementation remain.

On May 2, 2025, the United States terminated the tariff exemption for low-value import packages from China and Hong Kong, ending the "de minimis" system. This policy change occurred due to accusations by the Trump administration against China's trade practices and drug smuggling, affecting e-commerce platforms such as Shein and Temu. Even though the policy has taken effect, the U.S. Customs and Border Protection is facing challenges in implementation, including complex customs procedures and inadequate logistics handling capacity, revealing systemic bottlenecks.

05/02 04:31

Trump Closes Tax Loophole for Chinese Goods: Online Shopping Costs Increase for American Consumers

Former President of the United States, Donald Trump, ended the de minimis tax exemption rule applicable to China and Hong Kong at the end of April 2025. The rule allowed low-cost goods to enter the U.S. market tax-free. This move was intended to protect American manufacturing and small businesses. However, it results in higher online shopping costs and delivery delays for consumers. Chinese e-commerce platforms like Shein and Temu are affected, resulting in higher product prices. The policy has drawn international attention, as the UK and the EU consider similar measures.

05/02 03:05

In 2025, the US-China trade war heated up: China called for the removal of unilateral tariffs in order to facilitate dialogue.

On May 2, 2025, China's Ministry of Commerce announced it is evaluating the United States' willingness to enter into dialogue, reiterating that the U.S. must remove unilateral punitive tariffs as a precondition for negotiations. The U.S. has imposed tariffs of 145% on Chinese goods, and China has retaliated with tariffs of 125%, resulting in a decline in U.S. exports to China, impacting 860,000 jobs, with the agricultural sector hit hardest. Trade tensions between the two countries are escalating, with growing calls for dialogue and tariff cuts.

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05/01 18:01

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05/01 17:01

In April 2025, the US manufacturing PMI index fell to 48.7, indicating a continued contraction.

In April 2025, U.S. manufacturing activity further contracted, with the ISM Manufacturing PMI dropping from 49.0 in March to 48.7, staying below the 50-point mark for the second month in a row, signaling a contraction. Even though there was a slight improvement in new orders and employment, the decline in output, rising price pressures, and fewer export orders highlight multiple challenges. Uncertainty around tariff policies and supply chain bottlenecks are adding to the pressures on businesses.

Origin and Operation of the "De Minimis" Gap

The term "De minimis" originates from Latin, meaning "insignificant matters." In U.S. trade policy, this rule dates back to 1938 when Congress established a duty-free threshold to avoid the administrative costs of taxing low-value imported goods. Entering the 21st century, this threshold gradually increased, ultimately being set at $800 in 2016. This means that as long as a single package is valued below $800, it can be exempt from tariffs and import taxes, directly reaching American consumers.

Originally intended to simplify customs processes and promote small-scale cross-border trade, this rule has been increasingly exploited with the rise of Chinese e-commerce platforms. According to U.S. Customs and Border Protection (CBP) data, in 2023, the U.S. processed over 1 billion such packages, with over 90% coming from China, averaging a value of only $54 each.

Dependence and Expansion of Chinese E-commerce Platforms

Shein and Temu are the most notable Chinese e-commerce platforms benefiting from the de minimis rule. These platforms have rapidly expanded their market share in the U.S. through extensive social media marketing and extremely low pricing strategies. According to a report by the Congressional Research Service (CRS), the total value of low-priced package exports from China to the U.S. surged from $5.3 billion in 2018 to $66 billion in 2023.

These platforms' business models rely on shipping goods directly from Chinese warehouses to U.S. consumers in individual packages, thereby avoiding the high tariffs imposed on Chinese goods during the Trump administration's first term. This model not only allows the platforms to maintain low prices but also makes it difficult for domestic U.S. retailers and manufacturers to compete.

Trump Administration's Policy Actions and Rationale

In late April 2025, the Trump administration officially announced the termination of the de minimis tax exemption rule for China and Hong Kong. Trump stated in a White House cabinet meeting that the rule was "a major deception against our country and small businesses," emphasizing, "We have put an end to it."

This policy change complements the Trump administration's recent action of imposing a 145% tariff on Chinese goods. According to The New York Times, these tariffs and the closure of the tax exemption loophole aim to curb the impact of cheap Chinese goods on the U.S. market and respond to long-standing demands from U.S. manufacturing and labor unions.

Trump is not the first president to question the de minimis rule. The Biden administration also proposed related reform plans in 2024, pointing out that the rule was being abused for smuggling drugs and unsafe products, making it difficult for customs to effectively monitor imported goods.

Actual Impact on Consumers and E-commerce Platforms

After the policy took effect, American consumers began to feel the impact of rising prices and shipping delays. According to the Associated Press, Temu now marks "import fees" on product pages, doubling the price of some items. Shein displays "tariffs included in the price" at checkout to avoid consumers paying extra fees upon receipt.

Additionally, since all packages must go through a complete customs declaration process, delivery times have significantly lengthened. According to CBP data, over 70% of imported packages in early 2025 came from China, putting more pressure on already stretched-thin border officials. The National Foreign Trade Council (NFTC) warned that eliminating de minimis might force CBP to divert resources from border drug interdiction to package inspection, potentially compromising border security.

Challenges for Businesses and the Logistics Industry

For U.S. companies dependent on Chinese supply chains, this policy change means increased costs and adjustments to their business models. Izzy Rosenzweig, CEO of logistics company Portless, stated that many companies will still choose to produce in China but will be forced to pass the tariff costs onto consumers.

According to estimates by the American Action Forum, a right-leaning U.S. think tank, eliminating de minimis will result in an annual increase of $8 billion to $30 billion in import costs, ultimately borne by consumers.

International Effects and Responses from Other Regions

This U.S. policy has also drawn attention from other countries. UK Chancellor of the Exchequer Rachel Reeves stated that they will review the current rule allowing tax-free imports of goods under £135, as these goods are "undermining the UK local retail industry." The European Union has proposed eliminating tax exemptions for packages under €150, indicating that major global economies are concurrently reviewing tax policies for low-cost cross-border e-commerce.

References

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