President Donald Trump has formally closed the decades-old "de minimis" tariff exemption for imports from China and Hong Kong, triggering a wave of price increases and operational shifts for e-commerce giants Shein and Temu. The rule change, which took effect Friday at 12:01 a.m. Eastern, ends duty-free access for shipments valued under $800-a key mechanism both companies used to dominate the U.S. discount market.
The policy shift follows an executive order signed last month, citing national security and public health risks, particularly around the flow of synthetic opioids. "We put an end to it," Trump said Wednesday. It "was a big scam going on against our country."
The exemption, originally introduced in 1938 and expanded in 2016, allowed low-value parcels to bypass tariffs and customs scrutiny. According to U.S. Customs and Border Protection (CBP), the U.S. received more than 1.36 billion de minimis shipments in fiscal year 2024-over 90% of all cargo entries-with roughly 60% originating from China.
Under the new rules, packages under $800 will now face a 120% levy or a flat $100 fee, increasing to $200 in June. These charges are layered atop existing 145% tariffs on Chinese goods. According to the White House, many Chinese-based shippers have exploited the exemption to smuggle fentanyl and its precursors, often disguising them as consumer electronics.
CBP intercepted more than 21,000 pounds of fentanyl at U.S. borders last fiscal year, an amount officials say could kill over 4 billion people. The administration said the loophole made it easier for illicit drugs to enter the country undetected. A 2023 Reuters investigation found precursor chemicals for millions of fentanyl pills had been successfully shipped under the de minimis label.
While the policy change targets national security and trade imbalances, it also has sweeping retail consequences. Research from UCLA and Yale found 48% of de minimis shipments went to the poorest U.S. zip codes, compared to just 22% reaching the wealthiest.
Shein, which relies on China-based manufacturing, posted on Instagram: "Some products may be priced differently than before, but the majority of our collections remain as affordable as ever." Data compiled by Bloomberg shows the average price of Shein's top 100 beauty and health products surged 51% in the last week, with a 10-piece kitchen towel set jumping 377%.
Temu, owned by PDD Holdings, updated its website to highlight products shipped from domestic warehouses marked "Local." "All sales in the U.S. are now handled by locally-based sellers, with orders fulfilled from within the country," Temu said in a statement. "Temu's pricing for U.S. customers remains unchanged."
Yet analysts say inventory imported before May 2 will quickly deplete. Both platforms have sharply cut U.S. digital ad spending in recent weeks as they brace for slowed sales. Congressional Research Service data shows Shein and Temu together controlled 17% of the U.S. discount market as of late 2023.
The National Council of Textile Organizations, a longtime critic of the de minimis rule, welcomed the change. "This tariff loophole has granted China almost unilateral, privileged access to the U.S. market at the expense of American manufacturers and U.S. jobs," said president Kim Glas.
Retail analysts at Coresight Research project the shift could accelerate U.S. store closures, forecasting 15,000 closures in 2025-up from 7,323 in 2024.
Chinese officials have pushed back, warning the policy will hurt U.S. consumers. The U.S. tariff hikes "will undoubtedly increase costs for American consumers and degrade their shopping experience," commerce ministry spokesperson He Yongqian said.
Shein is reportedly considering delaying its planned London IPO amid uncertainty over U.S. tariff policy. JD.com, another major Chinese retailer, pledged to buy 2 billion yuan in goods from local exporters to offset losses in U.S. shipments.
