Business shocks, price hikes and customs chaos expected as U.S. ends duty-free imports

Low-value imports from China are no longer duty-free, as the administration of U.S. President Donald Trump ended the so-called de minimis treatment of imports valued at $800 or less from the Chinese mainland and the Hong Kong Special Administrative Region on May 2.

Terminating this rule, which enabled up to 4 million low-value parcels to enter the U.S. daily, will disrupt supply chains, force price hikes on consumers, and trigger customs delays.

The policy shift is expected to hammer businesses with higher costs, hit shoppers with steeper bills, and overwhelm customs systems with unprecedented bottlenecks.

Shocks for businesses

The move has forced some major e-commerce platforms to restructure their supply chains, raise product prices, and accelerate the construction of local U.S. warehouses to mitigate new tariff costs, Reuters has reported.

The changes have already driven some foreign sellers to suspend U.S. shipments, while some smaller businesses have exited the U.S. market entirely.

Bloomberg documented price increases exceeding 100 percent on some e-commerce platforms and widespread social media complaints over shipping delays.

U.S. domestic businesses are also making adjustments. The Wall Street Journal revealed that one American footwear brand relocated its inventory from Canada to U.S. warehouses after finding that a pair of Chinese-made sneakers originally priced at $175 would now incur over $300 in duties if shipped via Canada.

Even Trump has conceded that his tariffs may lead to fewer and more expensive products in the United States. He said on April 1 that U.S. children now might "have two dolls instead of 30 dolls" and "maybe the two dolls will cost a couple bucks more than they would normally."

Costlier goods for consumers

U.S. consumers are also feeling the pinch. For ordinary Americans accustomed to online shopping, after clicking the "Buy Now" button, they are no longer just waiting for a package but watching their cart totals climb and delivery timelines stretch longer.

According to a report by the Congressional Research Service (CRS), eliminating the de minimis exemption "would reduce aggregate welfare by $10.9-$13.0 billion and disproportionately hurt lower-income and minority consumers."

Experts also point out that this policy disproportionately impacts low-income households, as they rely more heavily on affordable cross-border e-commerce goods such as clothing, daily necessities, and small electronics.

Scott Lincicome, a researcher at the Cato Institute, a think tank, noted that while the policy shift appears tough on China, it effectively imposes a tax hike on American consumers.

Lincicome told local media that it translates to higher prices and slower deliveries, and U.S. consumers are footing the bill for the policy.

Customs chaos ahead

The policy will also place severe strain on U.S. customs systems, likely causing clearance delays.

In a white paper released on April 9, China's State Council Information Office said applying the duty-free de minimis treatment can help reduce administrative costs, as customs can pool more resources in supervising high-value products and high-risk goods, reinforcing the overall effectiveness of supervision.

But eliminating the duty-free rule will add significant costs in checking and taxing low-value packages one by one, in supervision, logistics and customs clearance, it said.

The exact logistical challenge is why the U.S. Congress established the de minimis exemption in 1938 after recognizing that inspecting and taxing low-value packages cost more than the potential revenue gained.

It is also why the Trump administration abandoned its initial February plan of canceling the exemption after reports of immediate package pileups due to a U.S. Customs and Border Protection (CBP) screening system failure.

This time around, the CBP has acknowledged "a massive task at hand" but expressed readiness to enforce the duties on small shipments from China.

Strict CBP enforcement of declared values would trigger chaos, warned Cirrus Global's Derek Lossing in a grim picture to Reuters, noting the policy might require over 10,000 daily shipment inspections.

It could "become chaotic very quickly," said Lossing.

An Oxford Economics estimate also suggests that if the U.S. government intends to inspect and tax every small parcel individually, it would require at least several billion dollars in additional funding to expand systems and hire staff, otherwise risking nationwide port congestion.