Game over for Temu and Shein's tax-free imports
The White House officially revokes the De Minimis exemption, hitting fast-fashion giants with high tariffs.
The tax exemption that turned Temu and Shein into an empire will be revoked on May 2. After the announcement of Donald Trump's tariff plan, the White House said on Wednesday that it will eliminate the tax exemption for imported packages worth up to $800.
The exemption, known as De Minimis, has been a key factor in the success of Chinese fashion giants Temu and Shein. While traditional fashion companies import containers of products to the U.S., Chinese companies sell their goods directly to consumers. Because of their low prices, most packages shipped by these companies to the U.S. contain goods valued at less than $800, allowing them to bypass import duties.
President Trump initially revoked the exemption in February but later froze the decision, stating that the exemption would remain in place until proper systems were established for tariff collection. Now, the administration has confirmed its final revocation.
Although this tariff exemption for small goods was introduced nearly a century ago to encourage imports and lower costs for consumers and small businesses, in the last decade, it has become a loophole for retailers to avoid paying taxes. The major shift occurred in 2016, at the end of the Obama administration, when the exemption threshold was raised from $200 to $800. The rationale was to continue reducing costs for consumers and ease the burden on the supply chain. However, shipping and retail companies such as eBay and Etsy actively lobbied for the change.
The U.S. government estimates that 1.4 billion packages will enter the country under the De Minimis exemption in 2024—nearly double the number in 2022. According to research firm eMarketer, Temu alone is projected to sell $30 billion worth of goods in the U.S. this year.
With the removal of the exemption, Temu and Shein's packages will now be subject to 54% tariffs on imports from China, which will likely force both companies to significantly raise their prices.
