Shein and Temu are in Donald Trump’s cross-hairs
An end to the de minimis exemption will hurt Chinese e-commerce firms—and enrage American consumers
The Economist
Business
Feb 6th 2025 | 587 words | ★★★★☆
For American consumers, online shopping has just got dearer. On February 1st Donald Trump did away with a decades-old provision, known as the de minimis waiver, that exempted goods under a certain value (lately $800) from customs duties. With the same stroke he raised tariffs on Chinese goods by 10%. Then on February 5th the United States Postal Service announced that it had temporarily suspended inbound parcels from China and Hong Kong, before abruptly reversing, causing all manner of confusion.
Millions of packages arrive in America from China every day. Mr Trump’s new trade barriers will be a blow not only to American consumers, but also to the e-commerce companies that have cashed in on the de minimis exemption. Shein, a Chinese apparel group whose largest market is America, is now the world’s biggest fast-fashion retailer by sales. Temu, a Boston-based offshoot of the Chinese e-commerce firm Pinduoduo, has also expanded rapidly in America since it launched there in 2022. TikTok, a Chinese-owned short-video app that is currently in legal limbo in America, has built a thriving e-commerce business there as well, through its TikTok Shop feature.
Total de minimis shipments into America were worth around $80bn in 2024, by one estimate, up from $50m in 2012. Late last year American customs officials were processing 4m of these shipments per day, an increase from 2.8m a year earlier. They comprise roughly 20% of America’s e-commerce market and about 7% of all the consumer goods imported into the country. Most come from China.
The exemption helps keep prices low and speeds up processing. Many American consumers have been willing to overlook the often shoddy quality of products from Shein and Temu because they are so cheap. This will change when tariffs and other customs fees are added, which in some cases may double the price for consumers. Logistical disruption could be an even bigger problem for the companies, which have tended to ship products straight from factories in China. Shipments will now be subject to more customs procedures and data provisions from which they were exempt in the past. This will probably overload American customs’ capacity for processing, which is said to be strained already, and delay deliveries.
The changes will test Shein’s and Temu’s ability to adapt. The risk of an end to the exemption has been hanging over their heads for months: it was initiated by Joe Biden before he left office. The resulting disruption will weaken their businesses, but will not be a fatal blow, argues Mark Williams of Capital Economics, a research firm. The companies could push more shipments through third countries, such as Vietnam, though that would add to delivery times, which can already be lengthy. Other options include setting up warehouses closer to customers, to lessen delays, and sourcing products from other countries. Shein already sources wares from Brazil and Turkey.
Meanwhile, the fallout from ending the de minimis exemption will also test Mr Trump’s resolve to wage trade battles using consumer goods. Chinese e-commerce has been wildly popular in America. Many products featured on Amazon, America’s favourite e-emporium, are sold by Chinese companies. A paper by Pablo Fajgelbaum of the University of California, Los Angeles and Amit Khandelwal of Yale shows that poorer zip codes in America receive more de minimis shipments. Ditching the exemption will therefore disproportionately hurt poor families. Mr Trump has delayed the forced closure of TikTok, seemingly to appease its many American users. Perhaps angry shoppers will soon change his mind about the de minimis exemption, too.
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