As the exemption of tariffs for small packages from China to Hong Kong ceased on Friday, May 2nd, some retailers including Temu under Pinduoduo have suspended shipping from China to the United States. The US Customs and major carriers have also prepared for these changes.
President Trump signed an executive order canceling the “de minimis” policy for goods originating in China and Hong Kong, which allowed tax-free treatment for e-commerce packages valued below $800.
For goods shipped from mainland China and Hong Kong to the US through UPS, DHL, and FedEx, a tariff of 145% will be imposed, in addition to any extra tariffs on specific products. Goods sent via the United States Postal Service (USPS) will face a baseline tariff of 120% or a fixed fee of $100 per item. Starting from June 1st, the fixed fee will increase to $200.
The “de minimis” policy was originally introduced to promote international trade. However, the convenience of this policy has facilitated the smuggling of fentanyl from China and led to a surge in the import of cheap clothing, toys, and furniture from China through online platforms like Temu, Shein, and Amazon Haul, making it a target for criticism from both parties.
According to the US Customs and Border Protection (CBP), over 90% of goods entering the US enjoyed tax-free policies.
This policy has also become a channel for the sale of counterfeit goods. In 2024, 97% of counterfeit goods seized by the CBP were transported through the small package exemption.
If this policy is canceled, sellers of Chinese goods must provide more detailed information on the origin of each component to the US Customs.
Both Trump and former President Biden have stated that the tax loophole for small packages damages American businesses and is used to smuggle illegal goods, including drugs. Trump wrote in the executive order, “These drugs cause tens of thousands of American deaths each year, with fentanyl alone leading to 75,000 deaths annually.”
Temu announced on Friday that they will stop directly selling imported goods from China to American consumers through their platform. The online platform stated that sales will be handled by “local sellers,” with orders being fulfilled within the US.
Shein posted on its US Instagram account on Thursday, “Pricing of some products may be different from before, but most of our product lines remain as affordable as before.” Shein’s clothing is mainly manufactured in China, with the US being its largest market.
Goods imported before the policy change on May 2nd will eventually be sold out. In recent weeks, both Shein and Temu have significantly reduced their digital advertising expenditures in the US in preparation for the policy change that could affect their sales.
“E-commerce companies have long been popular, and this is a significant shift in how trade operates,” said Hugo Pakula, CEO of Tru Identity, a customs expert and trade automation platform, to Reuters. “If your inventory has not yet entered the US, selling to the US will be risky.”
Reuters reported that UK beauty retailer Space NK announced on Wednesday that they had suspended e-commerce orders and shipping to the US to avoid customers’ orders being miscalculated or incurring additional charges.
Understance, a Vancouver-based company selling Chinese-made bras and lingerie, posted on Instagram informing customers that due to tariff issues, they will no longer ship to the US and will resume shipping once the situation clarifies.
Etsy, the US e-commerce platform, stated in a recent communication to sellers that as tariffs are based on the country of origin of goods rather than the shipping location, they will streamline the process for sellers to indicate the country of origin of their products.
Mike Branney, Managing Director of UK clothing retailer Oh Polly, mentioned that retail prices in the US are currently 20% higher compared to other markets, and due to the increase in tariffs, they may have to consider further price adjustments.
CNN previously reported that before the implementation of small package tariffs on Chinese goods, an increase in prices was already seen for some products from Temu and Shein.
Although the cancellation of tax exemptions for small packages from China has impacted the e-commerce industry, it may also boost retailers less dependent on e-commerce or Chinese manufacturing.
UK fast fashion retailer Primark stated that they sell clothes to US consumers only through stores across the US and not through online channels, noting that this change will benefit them.
George Weston, CEO of British food company parent of Primark, commented to Reuters on Tuesday, “With the prices of these goods (online products) increasing, I wonder if some Americans will start returning to shopping malls to find value.”
According to a study by economists from the University of California, Los Angeles, and Yale University in February this year, about 48% of small packages are delivered to the poorest postal code areas in the US, while 22% of packages are sent to the wealthiest postal code areas.
Chinese online retailers will also be affected by similar regulations in the UK and the EU.
BBC reported that the UK announced a review of low-value imported goods, mirroring actions taken by the US. Currently, international retailers can send parcels worth less than £135 to the UK without paying import tax.
Chancellor of the Exchequer, Rachel Reeves, stated that these cheap goods are “undermining the competitiveness of UK high streets and UK retailers.”
The EU has also proposed to abolish the tax exemption policy for parcels valued below €150 (approximately £127.50 or $169.35).
French Budget Minister Amelie de Montchalin stated during a visit to a parcel sorting center near Paris Charles de Gaulle Airport on Tuesday that the proposed action to levy fees on such imported goods will be implemented earlier than the EU’s comprehensive tariff reform in 2028.
(This text is partially based on reports from Reuters and the BBC)