Trump Took on De Minimis. But Will It Stick?
- President Trump signed an executive order imposing tariffs on goods from Canada, Mexico, and China, which included the termination of de minimis trade for countries subject to the tariffs.
Over the weekend, President Donald Trump signed an executive order levying duties on goods from Canada, Mexico and China. Nestled within that legislation was a ruling that de minimis trade—or the duty-free treatment of individualized shipments worth $800 or less—would be terminated for countries subject to the tariffs.
News of the duty increases shook up world leaders and Wall Street for about 36 hours before the Canadian and Mexican heads of state were able to negotiate with Trump for one-month deferrals of the 25-percent tariffs on their countries. But a 10-percent duty increase on China remains scheduled to take effect at 12:01am on Tuesday—and the elimination of the de minimis exemption for shipments from the country stands to be the most economically significant portion of Trump’s trade plan.
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Over the past decade, de minimis trade has boomed, expanding by more than 600 percent. In 2023, the number of low-value, direct-to-consumer shipments crossed the 1-billion threshold for the first time. Last year, 1.36 billion de minimis shipments made their way to shoppers’ doorsteps, many from Chinese marketplaces like Shein and Temu, as well as drop shipments from third-party sellers on platforms like Amazon.
For years, lawmakers on both sides of the aisle have railed against the trade “loophole,” saying it has allowed China to evade paying its fair share of duties while creating a thoroughfare for illicit and dangerous goods, like fentanyl and narcotic precursors. The Biden Administration sought to take on de minimis reform through a series of executive orders and rulemaking proposals, but failed to get the issue over the finish line.
So was Trump really able to solve the problem with the stroke of a pen?
Doubtful, according to some experts.
Not toothless…But legless?
“It’s huge; the biggest thing in this executive order is de minimis,” Ram Ben Tzion , founder of Ultra Information Solutions, told Sourcing Journal.
However, that doesn’t mean shipments from Temu and Shein will grind to a halt in the immediate term. “It’s beyond enforcement capability. It’s beyond compliance capability,” he said of Trump’s executive order.
Ben Tzion, whose firm is behind the digital shipment vetting platform Publican, is about three shades beyond dubious that Customs and Border Protection (CBP) has the tools in place to deal with intercepting violative de minimis shipments.
“It’s about 1,000 times more than they’re capable of dealing with right now; we’re talking about 4 million packages a day, 2 million of which are coming from China,” he said. “They’re not able to process even 1 percent of that volume effectively,” he added. There aren’t enough X-ray machines, nor enough staff to support physical sorting. “And then the data disclosure requirements and all the targeting systems are not compatible.”
So why sign an executive order that can’t be carried out? Ben Tzion believes Trump, now flanked by tech billionaires like Elon Musk, has subscribed to the mindset of a Silicon Valley iconoclast. “While there has been talk on the need to change de minimis for years with not much happening, this sends a clear message that this administration plans on changing things. And they’re going to do it the startup way, which is to move fast, break things and recreate reality on the other side,” he said.
The opposite of the Biden administration’s approach—”planned, strategic, calculated, careful”—Trump’s executive order has immediately put e-commerce heavyweights on the defensive. “Every executive in each and every one of these companies is struggling to find a way to comply, to remain on the good side of this legislation,” he said.
That reaction in and of itself may be key to Trump’s strategy for de minimis reform. “I don’t think it’s toothless because he cannot enforce it—I think it just puts the burden on the platforms to define how they do business and how they regulate whatever happens within their marketplace,” Ben Tzion explained.
“What I consider to be smart about this move is that it’s not about the consumers anymore, and it’s not CBP’s ability to enforce it anymore,” he added. “It’s about whether a company like Amazon is willing to continue operating in a manner that violates U.S. trade policies—and my guess is no.”
“E-commerce cannot slap tariffs back at the U.S.,” he added. “The Trump Administration has taken this action knowing full well it is beyond enforcement or beyond application, that means they expect somebody’s reaction.”
Flexport vice president of Customs Bernie Hart agreed that CBP is in no position to adequately screen millions of de minimis shipments entering the country each day. “To be brutally honest, they can’t keep up with that,” he said.
“If the government turns this off”—“this” being de minimis entry—”or requires exams for all [shipments], the ports are going to come to a standstill. It will clog all of our major arteries in terms of ports of entry. There’s going to be so much congestion, it’s going to be worse than Covid,” he said.
Instead, he believes in the immediate term, shipments will arrive at their destinations as ordered, and consumers won’t immediately feel the shifts taking place behind the scenes. As the administration continues to work with CBP on the rollout of the directive, retroactive duties could be imposed, or other enforcement mechanisms put in place.
In the medium term, companies—especially those dependent on de minimis—will have to examine their compliance capabilities. “They’re going to have to look at informal entries, or potentially formal entries, and with that comes a whole morass of additional data that everybody is going to have to provide to the government,” Hart said.
They’ll also have to scrutinize their business models, especially if they rely solely or primarily on de minimis trade. Without the duty-free provision, there will of course be new tariffs to pay, but also fees to brokers (like Flexport), as well as surety bonds that ensure the government will receive all duties, taxes and fees associated with a shipment.
“Those are all additional costs that nobody has built in today. So, can they absorb the potential duty hit? Yeah, probably. Can they afford all of this? Maybe not,” the Customs expert said.
Hart anticipates that importers will begin shipping in bulk and investing in warehouses and distribution centers across the country in order to continue to provide not just the products, but speedy shipping, that consumers have become accustomed to. “They didn’t have to invest in that infrastructure, but now, they might have to in order to hit the demand and the cycle time that they’re looking for,” he said.
He also believes there will be a shift from air to ocean freight to mitigate the added logistics costs. As a result, consumers will see longer wait times for goods originating in China—and likely, higher prices.
But Hart believes Trump’s first attempt at de minimis reform is unlikely to be the final nail in the trade exception’s coffin. “Yes, there’s an executive order. Yes, we need to follow that. No issues or concerns—you have to comply with the overall law,” he said. “But is this going to stick over time? Probably not.”
Trump’s edict is likely the first of “a number of iterations and updates that will come out,” he believes. “There are always going to be concessions, because there are always unintended consequences” to trade actions—including harms to American small and medium sized businesses sourcing from overseas.
Not enough juice
A longtime proponent of de minimis reform, National Council of Textile Organizations (NCTO) president and CEO Kim Glas was buoyed by the president’s weekend announcement imposing duties on China—but she doesn’t believe the tariffs, or the barrier to entry created by the new de minimis rule—are high enough to stem the flow of cheap, China-made goods into the U.S. market.
“While we welcome President Trump’s plan to impose a 10 percent penalty tariff on imports from China… to mitigate China’s massive predatory and often illegal trade practices, we encourage higher penalty tariffs on China that are aggressively targeted to finished apparel and textiles,” she said in a statement.
In addition to raising duties “significantly higher” than the proposed 10 percent, Glas believes Trump should “eliminate the de minimis tariff waiver exception for all countries, including Mexico and Canada.”
Without comprehensive de minimis reform, other countries may continue to serve as a “back door” for illicit shipments, she believes. NCTO said Monday that the administration’s executive order should come with beefed up Customs enforcement to stop practices like undervaluation, misclassifying imports and transshipment of goods to take advantage of free trade agreements. Repeat violators should face maximum penalties and blacklisting, the group said.
“This dangerous loophole allows importers to avoid paying duties on billions of dollars of imported products and facilitates illegal and deadly products such as fentanyl and goods made by forced labor,” Glas said. “Even with a resolution to any disputes with Mexico and Canada, it is critical to move forward with an elimination of de minimis for all countries and maintain this critical provision.”
