Business
How Trump Scrapping the De Minimis Rule Could Affect Consumers and Retailers
President Trump’s executive orders on Saturday imposing broad tariffs on the country’s three largest trading partners also scrapped a shipping workaround for low-cost products, a move that is poised to alter how many online purchases are taxed.
The provision, known as the de minimis exception, has been used by many e-commerce companies to send goods to the United States from China without having to pay taxes on them. Mr. Trump’s decision to revoke the loophole set off confusion and chaos within the U.S. Postal Service, which initially said it would no longer accept packages from China and Hong Kong, before reversing its decision some 12 hours later.
Mr. Trump’s order on Saturday required that all goods leaving China must follow the same rules for higher-value shipments. His ban on duty-free handling of shipments worth up to $800 could shift the landscape for online sales from fast-fashion retailers like Shein and Temu, which rely on Chinese vendors. Both companies have been able to expand their market share largely by exporting goods into the United States without being subject to duties.
On Monday, leaders of Canada and Mexico reached deals with Mr. Trump to delay the tariff rollouts by 30 days. The broad 10 percent tariffs on Chinese goods went into effect on Tuesday.
Here’s what to know about the de minimis rule:
What is the de minimis provision?
The de minimis rule, or Section 321 of the Tariff Act of 1930, was originally aimed at allowing American tourists to send goods bought overseas to the United States without facing taxes. But more recently, companies have used the provision to ship products from other countries that have a retail value below a certain threshold without being subjected to taxes — a huge tax advantage.
In 2016, Congress raised the entry threshold to $800, from $200. Since then, the number of duty-free parcels has risen tenfold. Under the rule, packages can be shipped from other countries without paying tariffs, as long as the shipments do not exceed $800 per recipient per day.
Retailers have increased their reliance on the workaround in recent years, especially since Mr. Trump imposed tariffs on Chinese products in his first term. It underpins major business models, as Shein, Temu and many sellers on Amazon have used the de minimis exemption to bypass taxes.
A report released last week by the Congressional Research Service found that Chinese exports that are exempted by the de minimis rule soared to $66 billion in 2023 from $5.3 billion in 2018.
Why is the Trump administration targeting the rule?
The Trump administration has said it is focused on eliminating the de minimis loophole because of its apparent ties to the fentanyl trade. A White House official said in a call with a reporter on Saturday that the provision was causing the United States to lose tariff revenue — and that the large flow of low-cost goods from China has made it challenging for customs officials to identify fentanyl shipments sent through the mail.
Traditional retailers have expressed frustration with the workaround for different reasons. These retailers typically send big bulk shipments to their warehouses that are subjected to duties. Under pressure from the rising popularity of Chinese e-commerce sites like Temu and Shein, retailers like Walmart and Amazon had explored shifting more toward shipping directly to consumers from China. In late 2024, Amazon started Haul, which was intended to help it compete with Temu and other low-cost online retailers.
Express delivery companies like FedEx and UPS, which fly many of the packages across the Pacific Ocean from China, have spoken out in favor of preserving the de minimis exception. Supporters of de minimis have also long said that eliminating the provision would increase the burden on U.S. customs officials. Customs and Border Protection is also the primary agency responsible for carrying out much of Mr. Trump’s enforcement actions at the border.
How will online retailers be affected?
Shein and Temu, which rely on Chinese vendors, have been able to expand their market share largely by sending cheap goods into the United States. The two companies together have about 17 percent of the discount e-commerce market in the United States for fast fashion, toys and other consumer goods, according to the Congressional Research Service. The unraveling of the de minimis loophole threatens their operations.
While a majority of Shein and Temu products are shipped directly from China, both companies have diversified by working with more U.S.-based sellers and opening warehouses in the United States, which could limit some of the impact.
But other retailers might stand to gain.
“Amazon, as a whole, as well as other online retailers that fulfill from U.S. warehouses, will benefit as their competitors will be negatively affected,” said Yannis Bakos, an associate professor at the Stern School of Business at New York University who studies e-commerce.
What about smaller sellers and consumers?
Small and medium-size online retailers that source from China are likely to be affected, too. About a quarter of the biggest sellers on the e-commerce platform Shopify — sellers that are much smaller than Shein and Temu — also use the de minimis loophole to cheaply ship many of their products from China, said Aaron Rubin, the chief executive of ShipHero, a warehouse management software firm.
The loophole is “pretty widely used,” Mr. Rubin said. Beyond direct sales to customers, many small brands have also opted to ship products worth less than $800 at a time to Amazon to avoid paying taxes, Mr. Rubin added.
“In general, any of these sellers that were shipping directly from China are definitely going to be disrupted,” said Santiago Gallino, an associate professor at the Wharton School at the University of Pennsylvania who researches retail supply chains. Some retailers, including smaller companies, might eventually shift toward bulk orders and set up distribution centers in the United States, if the changes last, he added.
The ban on de minimis will also come at a cost for American consumers. A $15 dress from Shein, for example, could jump to $17, said Izzy Rosenzweig, the chief executive of Portless, a third party logistics company. Research has found that eliminating the provision entirely would result in costs of $11 billion to $13 billion for American consumers and disproportionately hurt poorer and minority households.
Jordyn Holman contributed reporting.
China’s exports and imports each set monthly records in April, further cementing the country as the world’s leading trading nation as Beijing prepares to welcome President Trump for a summit next week with Xi Jinping, China’s leader.
China also ran a trade surplus — the excess of exports over imports — of $84.8 billion last month, according to data released on Saturday by the General Administration of Customs. However, that surplus did not set a record. The war in Iran and closure of the Strait of Hormuz pushed up the cost of imported oil and natural gas, causing China’s overall imports to increase slightly faster than exports.
The surplus in April keeps China on track for a third year of roughly trillion-dollar trade surpluses. China posted a $1.19 trillion trade surplus last year, easily breaking the world record of $992 billion that it had set the year before.
Mr. Trump is expected to press Mr. Xi to buy more American goods during their scheduled summit, part of his long-running effort to narrow China’s longtime trade surplus with the United States. But two recent court decisions overturning Mr. Trump’s tariffs on imports have eroded some of his leverage.
China’s exports to the United States jumped 11.3 percent last month compared to its shipments in April of last year, when President Trump’s “Liberation Day” tariffs produced a slump in imports from China.
The country’s imports from the United States rose only 9 percent in April this year. As a result, its trade surplus with the United States widened by 13 percent.
China has long used state-run purchasing collectives in big categories like farm goods and commercial aircraft to manage its trade with the United States, ensuring it sells three to five times as much as it buys. Mr. Trump and his advisers have criticized that imbalance.
Semiconductor exports doubled last month compared with April of last year. Chinese manufacturers cashed in on the artificial intelligence data center boom even though they cannot yet produce some of the fastest kinds of chips.
Overall exports of electronics and machinery were up 20 percent in April from a year earlier.
China acts in many ways as a shock absorber in global oil markets. Beijing buys more oil for its vast reserves when the price is low, then cuts back purchases when prices are high, as they were last month.
With oil prices spiking upward this spring, the tonnage of China’s oil imports dropped last month to its lowest level since July 2022, when Shanghai’s two-month Covid lockdown reduced demand. The lockdown hurt many of China’s oil-dependent industries.
Because prices rose faster last month than the tonnage declined, China’s overall bill for crude oil imports rose 13 percent from a year earlier. Rising oil prices helped drive China’s overall imports up 25.3 percent in April from a year ago, to a record $274.6 billion. Its exports surged 14.1 percent last month from a year earlier, to a record $359.4 billion.
China has been particularly successful this year in exporting electric cars as well as renewable energy products like wind turbines and solar panels. Exports of electric vehicles were up 52.8 percent last month from a year earlier.
China has been running large, and widening, trade surpluses over the past several years with most of the rest of the world. It has trade deficits with only a handful of countries, including those like Brazil and Australia which have very large commodity exports.
The European Union and many developing countries now find themselves with rapidly growing trade deficits with China. Practically all of them have run their own trade surpluses with the United States to fund their deficits with China, sometimes repackaging goods from China and shipping them on to the United States to do so.
China’s huge trade surpluses are not necessarily a sign of economic strength. They partly reflect very weak spending by Chinese households on imports and domestic goods alike after five years of sliding housing prices wiped out much of the savings of the middle class. This has prompted many families to scrimp on purchases like new cars, leaving Chinese automakers with more cars to export.
“The Chinese economy still demonstrates resilience in trade and industrial supply chains,” said Zhu Tian, an economics professor at the China Europe International Business School in Shanghai, after the release of the trade data.
But weak domestic spending and a leveling off in the trade surplus, he said, “suggest that economic growth will continue to face significant challenges for the rest of the year.”
Walt Disney Co.’s ABC is forcefully resisting Federal Communications Commission efforts to soften the network’s programming, accusing the federal agency of an overreach that violates 1st Amendment freedoms.
Last week, the FCC took the unusual step of calling in the licenses of eight Disney-owned television stations for early review. The move — widely interpreted as an effort to chill the network’s speech — came a day after President Trump demanded that ABC fire late-night host Jimmy Kimmel over a joke about First Lady Melania Trump.
The FCC separately has taken aim at ABC’s daytime discussion show, “The View,” which delves deeply into politics.
The FCC has questioned whether the show, which prominently features Trump critics Whoopi Goldberg and Joy Behar, could continue toclaim an exemption to rules that require broadcasters to provide equal time for opponents of political candidates.
In its response this week to the FCC, Disney’s Houston television station raised the stakes in “The View” dispute, calling the commission’s actions “unprecedented” and “beyond the Commission’s authority.” The ABC station’s petition for a declaratory ruling said “The View,” has long qualified as a “bona fide” news interview program with freedom to conduct interviews of legally qualified political candidates.
“The Commission’s actions threaten to upend decades of settled law and practice and chill critical protected speech, both with respect to The View and more broadly,” the Houston station KTRK-TV said in the filing.
The network’s firm stance sets up a clash with the Trump administration, including the president’s hand-picked FCC Chairman Brendan Carr, who has made no secret of his disdain for Kimmel and other ABC programming. Earlier this year, Carr announced that decades-old exemptions from the so-called “equal time rule,” for some programs, including “The View,” were no longer valid.
In a statement, the FCC said it would “review Disney’s assertion that ‘The View’ is a ‘bona fide news program’ and thus exempt from the political equal time rules,” according to a spokesperson.
“Decades ago, Congress passed a law that generally prohibits broadcast television programs from putting a thumb on the scale in favor of one political candidate over another,” the spokesperson said. “The equal time law encourages more speech and empowers voters to decide the outcome of elections.”
ABC’s strenuous arguments mark a turning point for the Disney-owned outlet.
In December 2024, a month after Trump was elected to a second term, the network quickly settled a lawsuit over statements made by news anchor George Stephanopoulos that Trump found offensive. ABC agreed to pay Trump $15 million to end his legal fight — sparking an outcry among free speech advocates, who accused the network of caving on a case it may have won.
But, over the past year, the network has weathered several storms, including a threat by Carr in September to punish ABC if it didn’t muzzle Kimmel for comments he made in the wake of conservative activist Charlie Kirk’s death. ABC briefly benched Kimmel to allow tensions to cool but, during the week his show was off the air, protesters loudly bashed Disney, demanding the legendary company stand up for free speech.
Thousands of consumers canceled their Disney+ and Hulu subscriptions in protest.
Protesters swarmed Hollywood Boulevard, protesting ABC’s move to bench Jimmy Kimmel in September over comments he made about the shooting of right-wing influencer Charlie Kirk.
(Genaro Molina/Los Angeles Times)
Some conservatives, including Sen. Ted Cruz (R-Texas) and commentator Ben Shapiro also criticized Carr’s handling of 1st Amendment issues.
“The days of the FCC as a paper tiger are numbered,” the FCC’s lone Democrat, Anna M. Gomez, said Friday in a statement. “What the public will remember is who complied in advance and who fought back. I’m glad Disney is choosing courage over capitulation.”
The high-profile dispute presents an early challenge for Disney Chief Executive Josh D’Amaro, who succeeded longtime chief Bob Iger in March.
ABC has asked for the full commission — a three member panel of Carr, Gomez and Commissioner Olivia Trusty, a Republican — to rule on the equal time exemption for “The View.” ABC said that, in 2002, it received a ruling from the FCC that granted the exemption, and the show’s format has not changed. “The View” is produced by ABC News.
“Some may dislike certain — or even most — of the viewpoints expressed on The View or similar shows,” the station said in its filing. “Such dislike, however, cannot justify using regulatory processes to restrict those views.”
ABC described a logistical nightmare of providing equal time for political opponents by pointing to California’s crowded primary field of gubernatorial candidates. “Affording equal time would mean accommodating over 60 legally qualified candidates, regardless of their perceived newsworthiness,” the station wrote.
The network said it makes show bookings based on newsworthiness, not partisan politics. It also noted it has invited politicians from both sides of the aisle to appear on “The View,” but some, including Vice President J.D. Vance, Health Secretary Robert F. Kennedy, Jr., Secretary of State Marco Rubio and entrepreneur Elon Musk, have declined the invitation.
The station also noted that, while the FCC has questioned the exemption for “The View,” the agency hasn’t shown interest in regulating programs on other networks, “including the many voices — conservative and liberal — on broadcast radio.” The FCC also oversees radio station licenses.
“The danger is that the government will simply decide which perspectives to regulate and which to leave undisturbed,” ABC said.
On April 28, Carr called for a review of Disney’s broadcast licenses, including for the Houston station and KABC-TV in Los Angeles, two years before any of them were set to expire. The FCC said the review was part of the agency’s year-old inquiry into Disney’s diversity, equity and inclusion policies and whether they violated federal anti-discrimination rules.
In its Thursday petition, ABC said it had fully complied with the FCC’s request for documents related to its diversity and hiring.
The company has produced more than 11,000 pages of documents to comply with the request, Disney said.
The same week that Disney sent documents to the FCC, Kimmel made a joke on his show about Melania Trump, comparing her glow to that of “an expectant widow.” On April 25, a gunman tried to breach security at the Washington Hilton, where the first couple were on stage for the White House Correspondents’ Assn. Dinner. Shots were fired outside the ballroom.
Three days later, the FCC announced it was requiring early license renewal applications for the Disney-owned stations.
The United States on Friday announced a flurry of new sanctions intended to increase pressure on Iran’s economy, targeting people and companies in China and Hong Kong that have been helping the Iranian military gain access to supplies and war equipment.
The sanctions came ahead of a major summit between President Trump and China’s leader, Xi Jinping, in Beijing next week. China’s support for Iran has become a flashpoint with the Trump administration, which has been trying to compel independent Chinese refineries to stop purchasing Iranian oil.
China is Iran’s biggest buyer of oil, and the Trump administration has said that it is sponsoring terrorism by propping up the Iranian economy.
The new sanctions are aimed at Iran’s military industrial supply chain, and are intended to make it harder for Iran to secure access to the material it needs to build drones and missiles. In addition to China, the sanctions also target people and companies based in Belarus and the United Arab Emirates.
“Under President Trump’s decisive leadership, we will continue to act to keep America safe and target foreign individuals and companies providing Iran’s military with weapons for use against U.S. forces,” Treasury Secretary Scott Bessent said in a statement.
The Trump administration has been looking for ways to squeeze Iran’s economy and pressure the Iranian government to reopen the Strait of Hormuz, a conduit for the flow of global oil. Oil tankers have had sporadic access to the critical waterway since the war started earlier this year, and the United States and Iran have been fighting over who should control it.
U.S. warships that have been trying to transit the strait have been attacked by Iranian forces. The United States on Friday fired on and disabled two Iranian-flagged oil tankers as they tried to reach an Iranian port.
The Treasury Department has also imposed sanctions on the Chinese “teapot” refineries this month. The independent refineries are major purchasers of Iranian oil. But China invoked a domestic policy ordering its companies to disregard the sanctions.
Mr. Bessent said earlier this week that he expected Mr. Trump to urge Mr. Xi to use the country’s leverage over Iran to pressure it to allow oil cargo to travel.
“Let’s see if China — let’s see them step up with some diplomacy and get the Iranians to open the strait,” Mr. Bessent told Fox News on Monday.
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