Tariff Loophole That Helped Temu, Shein Will Close May 2

De minimis tariff exemptions, which currently allow packages worth as much as $800 from China and Hong Kong to enter the US duty free, will end on May 2, the White House said, a potential blow to discount marketplaces like Temu and Shein.President Donald Trump in February signed executive orders to eliminate the loophole. The Wednesday announcement, which followed news of sweeping tariffs, provided greater detail on the de minimis changes, including when duties totaling more than 50% would apply to products shipped from China.

Temu-owner PDD Holdings Inc.’s shares plunged 6% in after-market trading. Alibaba Group Holding Ltd.



and JD.com’s shares in Hong Kong also dropped as much as 6% on Thursday.The near century-old de minimis loophole helped startup marketplaces like Temu and Shein expand rapidly in the US.

The total volume of de minimis shipments into the US hit 1.4 billion packages in fiscal year 2024, according to the US Customs and Border Protection agency, about double the number in 2022. Trump Reciprocal Tariffs Live: India Monitoring Impact, China Vows Countermeasures, Australia Won't RetaliateStill, critics say the flood of parcels from China is hard to monitor and may contain illegal or dangerous goods, and Trump said closing the exemption was part of his effort to prevent opioids from being shipped into the country.

Since last year, Temu and Shein have begun diversifying their logistics chains, expanding networks in the US and moving to bigger bulk orders.Temu in particular exploded in the US by offering steep discounts on a variety of products for people willing to wait a week or so for delivery. The popular marketplace — which EMarketer Inc.

estimates will sell $30 billion in products to US shoppers this year — became an alternative to Amazon.com Inc. as well as retail chains such as Hobby Lobby, Party City and Dollar Stores.

Shoppers showed they were willing to wait for their packages in exchange for discounts, defying Amazon’s quick delivery model. By sending individual orders directly to customers from China, the shopping sites avoided tariffs through the de minimis exemption. Large retail chains that buy inventory wholesale imported on ships generally pass the tariff costs along to customers.

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