U.S. consumers may face pricier Chinese goods as duty-free imports end

U.S. consumers may face higher prices and delivery delays as changes to the duty-free exemption on low-value imports from the Chinese mainland and Hong Kong Special Administrative Region take effect. 

President Donald Trump signed an executive order on April 2, eliminating the duty-free de minimis treatment of imports valued at $800 or less from the Chinese mainland and Hong Kong starting May 2 at 12:01 a.m. EDT. 

Trump had initially announced plans to end the de minimis exemption in February but paused the move, causing widespread disruptions for customs inspectors, postal and delivery services, and online retailers. During that period, U.S. customs reportedly experienced significant package backlogs.

The removal of the exemption adds to Trump's newly imposed tariffs on Chinese goods, which now total 145 percent. According to CNN, previous tariff increases have already impacted shipments, with cargo loaded after April 9 subject to the new rates. As a result, fewer ships are departing China, carrying less cargo, as many U.S. importers deem the costs of doing business too high.

With the expiration of the de minimis exemption, packages that were previously duty-free will now face a 120 percent duty or a $100 flat fee, which will increase to $200 on June 1.

Additionally, the de minimis exemption will be eliminated for imports from countries tariffed by the U.S. once "adequate systems are in place to fully and expeditiously process and collect duty revenue" for affected imports, according to an executive order signed by Trump on the so-called reciprocal tariffs.

The U.S. has used the de minimis exemption since 1938 to reduce administrative burdens, originally applying to goods valued at $1 or less. The threshold was raised over the years, with the $800 cap introduced in 2015. Since then, shipments benefiting from the exemption have soared more than 600 percent, reaching over 1 billion items in fiscal 2023, according to U.S. Customs and Border Protection (CBP) data.

In fiscal year 2024, at least 1.36 billion shipments utilized de minimis, an increase of 637 million in 2020, according to CBP.

Ahead of the policy change, the U.S. consumers rushed to download and shop at DHgate, a Chinese e-commerce app, making it once top the U.S. App Store. Meanwhile, the Chinese online retailers Shein and Temu announced price hikes late April in response to U.S. tariff policies. A congressional research report showed that Shein and Temu together accounted for over 30 percent of all daily de minimis shipments to the U.S. in 2022.

With the exemption now gone, parcels from the Chinese mainland and Hong Kong will undergo a more complex customs process, including declarations and duty payments. The days of duty-free and fast delivery for low-value parcels are over.

"That simplicity and affordability may be coming to an end," Matt Barr, vice president and head of marketing for Radial, an e-commerce logistics company, told Inc.com.

"Much of what comes through the de minimis channel is household goods, apparel, and electronics," Amit Khandelwal, professor of global affairs and economics at Yale University, told New York Magazine.

"Our research found that eliminating the de minimis exemption for all imports would particularly hurt lower-income households."

Viktor Yale, a U.S. Luxury Store owner, told CGTN that for the consumer, it (price) is going to be higher. "The tariffs are not going to help because it's just not good for the people with the dollar dropping."

Experts are skeptical about the effectiveness of eliminating the de minimis exemption, given the logistical challenges the Trump administration previously faced in collecting tariffs on goods that were previously exempt.

Sun Taiyi, associate professor of political science at Christopher Newport University, U.S., said: "Even when tariffs are collected, the cost of labor may exceed the revenue generated, making it a potentially money-losing endeavor. It remains unclear whether the Trump administration has resolved these issues, but American consumers are likely to face higher prices and fewer choices."

Sun also pointed out that small and medium-sized enterprises in both the U.S. and China would be particularly hard-hit by the new tariffs. Even larger companies, like Adidas, will face challenges due to limited production capacity in North America, making them heavily reliant on Asian manufacturing.