Earlier this month, President Trump closed a longstanding loophole that had allowed a flood of inexpensive Chinese goods to be mailed to the United States without any tariffs.
Starting on May 2, those packages faced a tariff of 120 percent or a $100 flat fee.
After the United States and China agreed this week to a temporary truce in trade tensions, that tariff is now 54 percent. The changes, which took effect on Wednesday, were described in a White House executive order and guidance from Customs and Border Protection.
For the past decade, a tax loophole known as the de minimis exemption allowed goods worth up to $800 to enter the United States without import duties. The result was millions of packages shipped from China to the United States, as American shoppers got hooked on buying everything from flash drives to water bottles at low prices.
Chinese companies like Shein and Temu built their businesses around the loophole, sending goods made in Chinese factories directly to American shoppers. At the same time, China pushed its manufacturers to find buyers overseas.
Last year, nearly four million packages a day entered the United States with no customs inspection and no duties paid, angering American businesses that said the loophole made it difficult for them to compete.
Mr. Trump said the loophole had created a pathway for the chemicals involved in making fentanyl to come into the United States from China because of limited checks on these packages.
Under the rules for de minimis shipments, carriers of international mail packages can pay either the 54 percent tariff or the fee of $100 per package. In practice, that means a $10 pair of cargo pants on Shein would be taxed $5.40 if the carrier chose the tariff, but for a package with 25 pairs of cargo pants, it would be cheaper to pay the flat fee. One caveat: Carriers must use the option they choose — either the tariff or the fee — on all packages they ship, and can elect to change only once a month.
In 2023, the average value of a de minimis package was $54, according to the congressional testimony of a U.S. customs official.
It is likely that much of the extra cost resulting from the new tariffs will fall on shoppers. The tariffs on these shipments are also disrupting the economics of global trade.
In Guangzhou, the center of China’s garment industry, factory owners and managers said customers were placing fewer orders because of the higher prices.
Many said the drop in orders and the overall uncertainty generated by trade tensions risked making their businesses unsustainable. Some had closed their doors or hired fewer workers. Others packed up their operations for other provinces or other countries, like Vietnam, in the hope of paying lower wages and lower export duties.
The trade war poses a particular challenge for China, where economic growth has been largely driven by exports in recent years. New orders for export from China dropped in April to their lowest level since the end of 2022, according to official data.
On Monday, the United States and China said they would reduce their respective tariffs for 90 days while they continue negotiations, ending a standoff that had brought to a halt much of the trade between the world’s two largest economies.
Source: nytimes.com
