The United States Government, led by Donald Trump, has ended a tariff exemption known as “minimis” for shipments from China. This decision will significantly change the landscape of cross-border commerce and marks the end of an era of extremely cheap retail sales. The “minimis” policy, established in section 321, allowed retailers to avoid tariffs on individual shipments of less than $800, making it possible for them to import Chinese products at reduced prices.
The elimination of this exemption will affect platforms such as Temu or Shein, and more recently, Amazon Haul, which had been expanding aggressively in the US market. These companies had been taking advantage of the “minimis” policy to keep prices low. With its elimination, Chinese retailers will now have to face the same costs that their US competitors have been facing for years.
Since the tax-free threshold increased from $200 to $800 in 2016, imports under this modality increased significantly. According to US Customs Data, the value of “minimis” imports grew from $9.2 billion in 2016 to $54.5 billion in 2023, with Chinese vendors representing almost 60% of those shipments. Although the total number of imports increased by 99% between 2019 and 2023, the average value per package decreased drastically from $111.71 to $54.50, indicating a strategy focused on selling very low-cost products.
The impact on American retailers has been significant. Companies such as GAP, based in the United States, paid $700 million in import taxes in 2022, while their direct competitors from China operated with minimal costs. This allowed companies like Temu to offer ultra-competitive prices, reaching an ambitious global sales target of $60 billion by 2024.
Changes in E-commerce
The elimination of the exemption will bring significant changes to e-commerce. Chinese platforms will now face greater costs and restrictions. Despite a 30-day delay in its application, the measure will also affect shipments from Canada and Mexico, preventing sellers from using nearby storage as a tariff mitigation strategy. Ryan Petersen, CEO of Flexport, revealed that at least 30 of the 100 main US brands in Shopify had been using shipments from Mexico to take advantage of the “minimis” exemption, so the impact will extend beyond China.
New Challenges for Companies
For companies like Temu and Shein, the new regulation raises a dilemma: absorb the additional cost and reduce their already thin margins or increase prices and risk losing their value proposition based on ultra-low prices. However, some of these platforms have significant financial support. For example, Temu is part of PDD Holdings, a conglomerate that could cushion the financial blow.
Impact on Competition and the Future of E-commerce
The regulatory change arrives at a critical moment for Amazon Haul, the new direct market from China of the e-commerce giant. Designed as a Temu competitor, Amazon Haul was based on the same “minimis” strategy to maintain low prices. Now, its growth will be hindered just when it began to gain traction. For American retailers, the suspension of this exemption represents a relief after years of unequal competition. Small and medium enterprises (SMEs) that maintained their national production despite low price pressure can now compete in more equitable conditions.
However, the broader impact could be a fundamental change in purchasing habits. For years, consumers got used to artificially low prices provided by tariff exemption. As these advantages disappear, the direct sales model from China could become unsustainable. Platforms must innovate beyond the price war or will face a loss of market share. The coming months will be key to determining if Temu, Shein, and other e-commerce giants can maintain their growth without their main competitive advantage. What is certain is that the era of unrestricted trade with China has come to an end.