President Donald Trump is weighing a move to alter a major U.S. trade advantage, the “de minimis” exemption on import tariffs, as tensions with China continue to escalate. The exemption lets goods worth less than $800 avoid regular customs procedures and tariffs, making it easier for international shipments, especially from China.
What is De Minimis?
Introduced since 1938, the ‘de minimis’ rule came into wider application under the Obama administration, increasing the de minimis threshold from $200 to an amount that’s sufficient to push the flow of shipments that dodge tariffs past 1 billion items entering the U.S. alone for fiscal 2023. The exemption has been controversial, however, for two primary reasons: trade imbalances and the importation of the synthetic opioid fentanyl.
For instance, reports have indicated how easy it was to import fentanyl precursors under this system, thereby creating public health risks. Shein, Temu, and AliExpress are examples of retailers who benefit from de minimis since they can send their goods at a relatively cheaper rate from China to the U.S. Critics point out that the policy lets companies circumvent the U.S. tariffs imposed on Chinese goods, some of which use forced labor.
Recently, in response, the Trump administration put out an ‘America First Trade Policy’ memo that instructed many of the US departments to estimate the impacts and suggest potential alterations of de minimis. Attention lies on reducing losses in revenue from these imports along with stopping counterfeit product and illicit drug entries, without suggesting any definite changes yet.
China, which shipped $240 billion in goods eligible for de minimis worldwide last year, stands to suffer economic losses if the U.S. alters this policy. Apparel, electronics, and beauty products are especially vulnerable because de minimis accounts for a large share of Chinese exports. If similar changes happen in Europe or Southeast Asia, the economic loss for China would be much worse.
