President Donald Trump has officially closed a major tariff loophole that companies like Shein and Temu have long used to ship cheap goods into the U.S. tariff-free. The move targets the “de minimis” exemption, which allowed imports under $800 to avoid tariffs and customs scrutiny. The change is expected to raise prices for U.S. consumers.
The exemption, in place since 1938, had allowed a flood of small, low-value packages from China and Hong Kong to bypass standard import rules. Critics said it also enabled shipments of fentanyl precursors and other illicit substances. Trump signed the executive order ending the loophole last month, and it takes effect this week.
Now, those goods face up to a 145% tax or a flat import fee. That cost will likely be passed on to buyers. Research by UCLA and Yale found that nearly half of these shipments went to the poorest U.S. zip codes, making the impact more severe for lower-income shoppers.
The executive order framed the move as a response to the opioid crisis. “A critical step in countering the ongoing health emergency posed by the illicit flow of synthetic opioids,” it read. The White House pointed to evidence that drug traffickers used the exemption to hide fentanyl in small packages.
Customs and Border Protection (CBP) processed more than 4 million de minimis shipments daily before the rule change. In the last fiscal year, CBP seized over 21,000 pounds of fentanyl — enough to kill more than 4 billion people. The CDC reported over 107,000 overdose deaths in 2023.
A Reuters investigation found that fentanyl precursor chemicals were successfully imported through the loophole by falsely labeling them as electronics. That report added urgency to efforts to close the exemption.
Shein attempted to reassure customers on Instagram. “Some products may be priced differently than before, but the majority of our collections remain as affordable as ever,” the company said. Shein manufactures mainly in China, and the U.S. is its top market.
Temu updated its site to spotlight products already in U.S. warehouses. A pop-up message read: “No import charges for local warehouse items.” The company stated that all U.S. orders are now handled by domestic sellers, and pricing remains unchanged — for now.
Both companies have cut their U.S. digital ad spending in recent weeks, bracing for a hit to sales. The Congressional Research Service noted that Shein and Temu made up about 17% of the U.S. discount market as of late 2023.
Industry advocates say the move will level the playing field. “This tariff loophole has granted China almost unilateral, privileged access to the U.S. market at the expense of American manufacturers and U.S. jobs,” said Kim Glas, president of the National Council of Textile Organizations. Her group called the exemption’s end long overdue.