The de minimis loophole, a long-standing aspect of U.S. trade regulations, is facing new challenges as the Biden administration and former President Donald Trump aim to curb its exploitation by Chinese e-commerce giants. This provision has allowed companies like Temu, Shein, and AliExpress to flood the U.S. market with low-cost goods, contributing significantly to the growth of budget online retailers. Scheduled to take effect on Tuesday, the tariffs will impose a 10% tax on goods from China and a 25% tariff on those from Canada and Mexico, targeting this trade strategy.
The de minimis provision, existing since the 1930s, permits exporters to send packages valued under $800 into the U.S. without incurring duties. However, this has increasingly drawn scrutiny as millions of shipments enter the country under minimal documentation and inspection. The U.S. Customs and Border Protection agency reported that over 1.3 billion such shipments were processed in 2024 alone. This has raised concerns about unfair competition, primarily benefiting Chinese merchants who have become dominant on platforms like Amazon.
Amazon has recognized that China-based merchants constitute a significant portion of its marketplace. By some estimates, these sellers outnumber their American counterparts on the platform, accounting for about 60% of products sold on the site. The de minimis loophole has thus become a key component of Amazon's retail strategy, connecting Chinese manufacturers with American consumers. This has resulted in a virtual smorgasbord of cheap apparel, household items, and electronics readily available to U.S. shoppers.
In 2023, the Biden administration took steps to address what it described as the "overuse and abuse" of de minimis provisions by foreign e-commerce companies. The administration argued that this practice enables firms like Temu and Shein to undercut domestic competitors by offering lower prices. Temu's popularity is evident as it topped Apple's list of the most downloaded free apps in the U.S. for two consecutive years by 2024, while Shein ranked twelfth.
The impact on the U.S. economy and local businesses is profound, with the de minimis loophole fueling explosive growth in budget online retailers. President Donald Trump's tariffs against China, Canada, and Mexico specifically target this provision. These measures aim to level the playing field for American companies facing competition from low-cost imports facilitated by de minimis shipments.
China-based merchants have long been a sizable contingent of Amazon's marketplace. The platform's third-party marketplace has acted as a bridge for these manufacturers to tap into the lucrative American market. Amazon acknowledged in 2023 that China-based sellers account for a significant portion of its offerings, further illustrating their influence on the platform.