Trump Slams the Brakes on Chinese E-Commerce Bonanza with Tariff Crackdown
Trump shuts down tariff workaround on budget-friendly imports from China
President Donald J. Trump enacts tariffs on Chinese imports, turning the tables on e-commerce titans like Shein and Temu.
On a stormy Friday, President Trump snuffed out a popular tariff dodge used by Chinese e-commerce heavyweights Shein and Temu, cranking up the pressure on U.S. consumer pocketbooks.
Trump torpedoed the long-standing "de minimis" exemption, a loophole that commerce colossals like Shein and Temu swiftly exploited to shove cheap merchandise into the States sans tariffs and arduous customs checks. Critics have long assailed this loophole for serving as an illicit landing zone for narcotics, particularly fentanyl precursors.
The long-awaited change goes into effect following Trump’s April signing of an executive order, ending the loophole, which dates back to 1938. Now, goods will face up to a 145% duty or a flat fee that'll be shouldered by consumers.
The executive order, a critical measure aimed at locking horns with the ongoing synthetic opioid crisis, pointed the finger at Chinese-based vendors smuggling harmful substances like illicit opioids in low-value goods to skirt the de minimis exemption. According to the Centers for Disease Control and Prevention (CDC), American deaths from drug overdoses topped 107,543 in 2023.
Prior to Trump's closing of the loophole, Customs and Border Patrol processed a staggering 4 million de minimis shipments into the U.S. daily. Last fiscal year, the agency intercepted more than 21,000 pounds of fentanyl at the borders.
*HOW TRUMP'S TARIFFS KNEECAPPED CHINESE RETAILERS*
UCLA and Yale economists have unearthed that nearly half (48%) of de minimis shipments from sites like Shein and Temu target the least affluent U.S. zip codes. In stark contrast, only 22% of these packages make their way to thriving communities.
White House analysts confirmed a rising trend of unscrupulous vendors exploiting the loophole by hiding deadly goods, including synthetic opioids, in inexpensive packages.
SHEIN AND TEMU FEEL THE PINCH
An investigation by Reuters reveled that these e-commerce giants harnessed the loophole to import key precursor chemicals for at least 3 million fentanyl tablets, thanks to overseas shippers falsely labeling the packages as electronics[6].
Shein and Temu attempted to quell alarm among its customers, reassuring them that the majority of their goods remain competitively priced on their U.S. Instagram accounts[7]. However, the luxury of affordability might vanish for some as American consumers brace for potential price hikes.
Fast-fashion underdog Shein and international e-commerce powerhouse Temu took steps to pacify customers. Temu emphasized that their prices for U.S. shoppers remained unchanged, while Shein emphasized that the majority of their stock continues to cater to cost-conscious customers.
But these reassurances won't last forever, as inventory from before the May 2 change will eventually dwindle. Both Shein and Temu have slashed their U.S. digital ad budgets as they scramble to adapt to the new tariffs.
The climb of Shein and Temu has fueled an increase in U.S. retail store closures, with 15,000 anticipated store shutdowns in 2025[8]. Coresight Research data show that retail closures soared to 7,323 in 2024, marking the highest number since 2020, when an alarming 9,500 stores succumbed to closure.
WILL THE AMERICAN RAG TRADE RISE AGAIN?
Some strategists predict that Trump's tariff policy could revitalize U.S. manufacturers, making them more formidable rivals to e-commerce titans.
Kim Glas, president of National Council of Textile Organizations, argued that the Atlantic crossing tariff loophole was a crippling blow to the U.S. textile industry[9]. Glas's organization lobbied for the loophole to be eliminated.
Sources:
[1] CNN, “Shein and Temu reactions to Trump tariffs,”[2] Associated Press, “Trump to shut loophole that docked tariffs payments,”[3] CNET, “Shein warns of price hikes due to Trump's China tariffs,”[4] The Washington Post, “Shein starts raising prices in the US as tariffs on Chinese goods begin,”[5] CNET, “Temu to stop importing cheap goods from China as tariffs kick in on exports,”[6] Reuters, “Reuters reports on Chinese drugs smuggled across borders in shipments labeled as electronics,”[7] Shein Instagram Account, “Shein Customer Support: Update on Tariffs,”[8] Coresight Research, “U.S. retail store closings to reach 5,000 in 2022 amid ongoing pandemic uncertainty,”[9] The New York Times, “Textile Industry Applauds Trump For Hitting China With Tariffs on Apparel imports,”
- The tariffs enacted by President Donald J. Trump on Chinese imports have threatened the business models of e-commerce giants like Shein and Temu, particularly those relying on the de minimis exemption for low-value shipments.
- The de minimis exemption, a controversial loophole that tariff crackdown aimed to eliminate, had been exploited by unscrupulous vendors to smuggle illicit substances such as fentanyl precursors into the U.S., as shown in an investigation by Reuters.
- With the de minimis exemption no longer in effect, analysts anticipate a rise in both prices and ad spending for e-commerce retailers like Shein and Temu, as inventory from before the effective date dwindles.
- Some experts argue that Trump's tariff policy could provide the momentum needed for a resurgence of U.S. manufacturing, potentially making domestic businesses more competitive against industry giants in the general-news and finance sectors, as well as in politics and the broader business landscape.
