[NYT] DT Trade Move Could Increase Costs for Many Online Goods

DT Trade Move Could Increase Costs for Many Online Goods

President DT’s tariff measures included a significant change to trade rules that could increase costs for many products bought online, including on Amazon, Shein and Temu.

NYT Feb 3, 2025. Ana Swanson, Keith Bradsher

President DT’s decision to impose hefty tariffs on Canada, Mexico and China included a little-noticed but significant change to how online purchases will be taxed when they enter the United States.

One provision of Mr. DT’s executive order will increase costs for more than 80 percent of U.S. e-commerce imports. The decision could shift the landscape for online sales from Chinese vendors like Shein and Temu that have swiftly expanded their market share by sending cheap goods into the United States.

The president’s order erased a workaround that many companies have taken advantage of in recent years, particularly since Mr. DT imposed tariffs on Chinese products in his first term. The provision, known as the de minimis exception, allowed certain products that were sent directly to consumers from online platforms to come into the United States without facing tariffs, a huge tax advantage.

This obscure provision of trade law underpins major business models. Shein, Temu and many sellers on Amazon have used the de minimis exemption to bypass tariffs. The exemption allows packages to be shipped from other countries without paying tariffs, as long as the shipments do not exceed $800 per recipient per day.

But critics say the de minimis measure has also helped fuel an American drug crisis. Importers who use de minimis do not have to provide as much information to U.S. Customs and Border Protection as they do with other packages, for ease of processing. That means drugs and the precursors used to make them could be more easily shipped into the United States without the government catching them.

De minimis stems from a century-old trade law that was originally intended for shipments that would be too trivial to merit the attention of customs. But the use of this provision has exploded in popularity.

A report released last week by the Congressional Research Service found that Chinese exports of low-value packages soared to $66 billion in 2023 from $5.3 billion in 2018. While Mr. DT’s executive order applies to China, Canada and Mexico, China is by far the biggest source for such packages. The country is responsible for about two-thirds of them, sending more than all other countries combined, according to federal statistics.

The carve out has given an advantage to Chinese companies like Shein and Temu, which ship millions of low-value packages directly to consumers’ doorsteps each year. That ability to bypass tariffs has helped Shein and Temu to offer cheap prices, boosting their popularity. According to the Congressional Research Service, the two companies together hold about 17 percent of the discount e-commerce market in the United States for fast fashion, toys and other consumer goods.

That has angered traditional retailers, which typically bring big bulk shipments to their warehouses that they must pay tariffs for. Retailers like Walmart and Amazon had been facing pressure to shift more toward Temu and Shein’s model of shipping directly to consumers from China, which would have meant they were creating fewer jobs in U.S. distribution centers.

Express delivery companies like FedEx and UPS that fly many of the packages across the Pacific from China have also spoken out in favor of preserving the de minimis exception.

But the DT administration is focused on targeting de minimis for another reason: its apparent ties to the fentanyl trade. A White Hous official said in a call with a reporter on Saturday that the provision was causing the United States to lose a tremendous amount of tariff revenue and also impeding the efforts of customs officials to catch fentanyl shipments arriving in packages.

A group of law enforcement, trade and drug prevention groups sent a letter to Mr. DT last month asking him to end the trade exception, saying it was “flooding the United States with fentanyl, fentanyl precursors, pill presses and other illicit goods from China and other countries.”

The issue has percolated for years, but efforts to limit or end the provision have recently gained momentum. Lawmakers have been considering legislation to the de minimis rule, and the JB administration proposed changes last year that would narrow the exception when it came to China, but they have not yet taken effect.

Congressional proposals to change de minimis would have preserved an exemption for international travelers who bring up to $800 worth of overseas purchases into the United States in their luggage, allowing them to avoid making customs declarations and paying duties at American airports and other points of entry to the United States.

By contrast, Mr. DT’s executive orders made no mention of preserving the de minimis exemption for people entering the United States. Depending on how customs officials handle it, that could complicate entry to the United States starting on Tuesday for people traveling from Canada, Mexico or China.

Timothy C. Brightbill, a lawyer at Wiley Rein, said the change made by the DT administration would “have broad impacts on many businesses and industries.” He said a variety of importing industries had “abused” de minimis provisions, and eliminating the loophole would be consistent with the president’s goal of addressing fentanyl shipments.

China’s Ministry of Commerce had no response on Monday to questions about Mr. DT’s decision. Shein and Temu also did not respond to a request for comment. A Chinese Embassy spokesperson said that China firmly opposed the imposition of tariffs, and that there is no winner in a trade war.

Congress raised the de minimis exemption in 2016 to $800 from $200 in response to complaints from American customs officials that they were already struggling then to examine all the packages coming in. With the increase in the exemption, the number of low-value packages sent to the United States each year has soared.

Since many Americans purchase such packages, the change will also come with an economic cost. Research has found that eliminating the de minimis exception entirely would result in costs of $11 billion to $13 billion for American consumers and disproportionately hurt poorer and minority households…

Amit Khandelwal, an economist at Yale University who is an author of a study on the trade provision, said his research found that lower-income Americans spent a disproportionate amount on de minimis shipments and imports from China compared with wealthier consumers.

“Lower-income individuals will be hurt more,” he said. “Domestic retailers, domestic producers, they obviously would benefit from taxing those imports, but there is a cost.”

Ending the de minimis exception will result in one other interesting change: The official figures for U.S. trade with China, and the U.S. trade deficit, will immediately rise. De minimis shipments do not appear in the typical trade data that is released by the census.

The change will mean that perhaps as much as $100 billion of trade will no longer be missing from official statistics, said Brad W. Setser, an economist at the Council on Foreign Relations. “It brings shadow trade back out of the shadows.”

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This quote nailed it.

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I highly suggest everyone here hits up their government representatives about this. The de minimis exceptions are in large part what is fueling the disparity in costs between what I can sell imported goods for versus what international sellers can. If I have to pay 25% tariff, duty and they don’t have to, I can’t compete. If our importing costs were equal, I can compete and usually beat my competition. This of course depends on what you are selling but we shouldn’t be giving out that advantage.

Also make note of the extremely reduced shipping costs. As has been pointed out over and over it’s actually cheaper to ship some goods from China than across the USA.

Make your representatives understand this as it’s now “popular” for them to take on these issues.

For those that don’t know, Amazon has copied the Temu/Shein model and started doing this. I don’t remember what they call it, but I’ve already seen advertisements for it online. Kind of like FBA, but the warehouse and goods are in China, ready to be shipped to customers in USA with a promised delivery date of 20 days or so.

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The de-minimus exception benefits Americans because of lower costs.

But understand what is happening.

If that product is sold here (and not direct from china - temu mdel), in a corner store, or Amazon, or Walmart, or a small online american business, there is economic activity here. Stores leased, Employees, accountants, shelfs, advertising, trucking, display, etc, etc.

AMERICANS AT WORK, even if the products are produced and imported in China or Peru or Austria, we all win.

With the de minimus Exception of $800

You order online, the postman delivers.

NO AMERICAN JOBS, ARE PRODUCED. NADA, NOTHING.

China WINS EVERYTHING. Hear that sucking sound???

Even the Postman is for FREE as the postal costs are subsidized by the Universal Postal Convention agreement and the costs to deliver a Chinese Package from Post to Home Address, with tracking is less that an American can send the same package across the street.

edit : and yes, I know I am preaching to the choir !!

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:+1:

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“The orders against China, Canada and Mexico all halt a trade exemption, known as “de minimis,” which allows exporters to ship packages worth less than $800 into the U.S. duty free.”

Note - I couldn’t post link since [P]rump is a banned word, but its important to know that this takes effect tomorrow.

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Temu and Shien operate on razor thin margins, but this is an overall tariff meaning goods that are imported across the board will see a 10% hike overall. This affects amazon sellers as well.

Some strategies on bulk manufacturing that could take advantage is renegotiating pricing on imports vs Shein and Temu ship millions of individual products and they can’t really do that across the board (not quickly enough)

Or they might get assistance from government breaks from the China side - no clue.

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Only China. MX / CA paused

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Also being discussed here …

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@mods please shift discussion if redundant topic

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Merged threads on the same discussion.

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Only paused for a month because both countries suddenly and mysteriously found the funds (and desire) to send manpower to the borders.

It’s amazing what happens when you get smacked in the face after acting for years as if it wasn’t important and not a priority.

Just some history – Teddy Roosevelt often said: “speak softly and carry a big stick; you will go far”.

Apparently you don’t have to speak softly to get a point across either…

:rofl: :rofl: :rofl:

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There’s both an art and a science to be explored in brokering a favourable deal, n’est-ce pas? :wink:

Some of we wee humans are better at melding competing narratives than are others of us; The Recorded History Of Humankind teaches us that those who can, convincingly, have demonstrated over time a marked tendency for influencing subsequent events - for better, or for worse, as the case might be in any individual societal-governance example - but there’s a reason why “Roosevelt’s Corollary” to the Monroe Doctrine continues to carry weight in the Halls of Power of many a foreign Nation, and in our own.

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It is like a record, that plays over and over again.
60 years, so what is so urgent to by “smacking”

Those evil neighbors, supplying us innocents of drugs.

The heroin of the 60’s and weed and cocaine of the 70s and 80s, then 90s ICE crystal meth … and now fentanyl.

■■■■■■■■■ negotiations yes, but “smacking” our allies is silly.

If I was Mr Canada, or Senorita Mexico, I as a citizen would be livid at what our neighbor has done. How it is being handled. Pride works both ways.

Good idea - Terribly bad execution and besides, do we not as Americans have honor?

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Mod edit: Political commentary removed.

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Or someone advised the president that raising the price on avocados the week before the Super Bowl might not go over too well. :wink:

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Gentlepeople of SaS.

It doesn’t matter who you voted for, or who won: The next four years is going to be a bumpy ride.

THAT BEING SAID. I understand all too well that political life and business life ram into each other like the men will be doing this Sunday, but we need to keep it clean (unlike the ref’s this Sunday, come at me bro).

A reminder, the few of us here that are mods do not get paid for SAS. In fact I just got a bill! LOL. PLEASE respect us! If you think something might be over the line, ask. My PM’s are always open!

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If only someone would focus on the US’s insatiable need for drugs.

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Anyone here read “Elmer Gantry”? I’m referring to the towns that suddenly and ferociously cleaned up their vice areas in response to publicity. Then within a month or so, after this big, well-publicized push, everything quietly went back to exactly as it was before.

Maybe I’m being too cynical, but it will be interesting to see how all this promised new border manpower on the part of Mexico and Canada actually plays out in real life, over time. It’s a good look, though – for today, anyway! :grin:

PS: I do recommend readling Elmer Gantry!

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Lets point this back to e-commerce related topics please - myself included.

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