Shein and Temu icons are seen displayed on a phone screen in this illustration photo taken in Krakow, Poland on August 27, 2024.
Jakub Porzycki | Nurphoto | Getty Images
President Donald Trump’s tariffs against China, Canada and Mexico target a trade provision that helped fuel the explosive growth of budget online retailers, including Temu and Shein.
Trump on Saturday signed executive orders imposing tariffs on the country’s top three trading partners. Goods imported from Canada and Mexico will be slapped with a 25% tariff, while goods from China will be charged a 10% tax. Energy resources from Canada will have a lower 10% tariff. The duties are expected to take effect on Tuesday.
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.
The de minimis provision has existed since the 1930s, but its use has come under increasing scrutiny in recent years. The Biden administration took steps last September to curb the “overuse and abuse” of de minimis, arguing it has helped Chinese e-commerce companies undercut competitors with lower prices. Officials have also argued that de minimis shipments are “subject to minimal documentation and inspection,” raising product safety concerns.
The U.S. processed more than 1.3 billion de minimis shipments in 2024, according to data from the U.S. Customs and Border Protection agency. That’s up from 139 million a year in 2015, the CBP said.
The loophole has enabled low-cost e-commerce companies like PDD Holdings-owned Temu, Shein, and Alibaba‘s AliExpress, which all have links to China, to offer a virtual smorgasbord of cheap apparel, household items and electronics, such as $15 smartwatches and $3 shoes.
Shein and Temu have gone on a digital marketing blitz over the last few years in an attempt to lure more deal-hungry shoppers. Temu in 2024 vaulted to the top of Apple’s list of the most downloaded free apps in the U.S. for the second year in a row, while Shein came in at number 12.
Their popularity in the U.S. prompted Amazon to launch its own bargain outlet, called Haul, last year that allows third-party sellers to ship goods to consumers directly from China. Amazon reportedly relies on the de minimis trade rule to import items sold on Haul to bypass tariffs, The Information reported, citing people familiar with the program. An Amazon spokesperson didn’t immediately respond to CNBC for a request for comment.
Amazon, eBay and Etsy could stand to benefit from the Trump administration’s clampdown on the de minimis loophole. The companies operate online marketplaces that let third-party sellers market wares directly to consumers, competing directly with Temu and Shein.
Amazon has long connected Chinese manufacturers to American shoppers through its sprawling third-party marketplace. The marketplace is a key component of Amazon’s retail strategy, accounting for about 60% of products sold on the site. Amazon also generates fees by providing fulfillment, shipping, account support and advertising services to sellers.
China-based merchants have made up a sizable contingent of Amazon’s marketplace for many years, though the company acknowledged for the first time in 2023 that they account for a “significant portion.” By some estimates, they outnumber American sellers on the platform, according to data from Marketplace Pulse.
Temu and Shein have also expanded their strategies as the de minimis loophole came under threat. Last year, Temu began onboarding Chinese sellers to its site that have inventory at U.S. warehouses, allowing it to ship packages faster to American shoppers, according to The Information. Shein has also opened distribution centers and a supply chain hub in the U.S.
WATCH: Amazon Haul takes on Temu to bring shoppers cheap goods from China
