A 145% jump in prices overnight tends to have a detrimental impact on the supply chain. This may sound like exaggeration but it’s exactly what occurred among ultra-low-cost ecommerce sites like Temu, AliExpress, Shein, and Alibaba during the first half of March, 2025. At midnight on May 2, 2025, the so-called “de minimis loophole” expired, and these sites felt the full weight of the trade war, with some items jumping in price by 150%. The Guardian reported that Chinese ecommerce exports to the US had plummeted by 65% due to the tariffs in the first three months of 2025. But this was before the de minimis exception, which previously allowed imported parcels valued at under $800 to enter the country duty-free, expired.
Until President Trump de-escalated this move and reached a (temporary) compromise de minimis tariff rate of 54%, according to the Guardian, “a summer dress listed on Temu for $18.47 will cost $44.68 after $26.21 in import charges are added to the bill – a 142% surcharge. Meanwhile, the cost of a child’s swimsuit almost triples from $12.44 to $31.12 when the $18.68 import charge is taken into account. A handheld vacuum cleaner listed at $16.93 now costs $40.11 when factoring in the additional fee.”
The AP reported that on Monday, March 12, 2025, the US and China agreed to a 90-day trade war truce, creating time for US and Chinese negotiators to reach a more substantive agreement. However, not all the news is good, since “the pause also leaves tariffs higher than before Trump started ramping them up last month. And businesses and investors must contend with uncertainty about whether the truce will last. US Trade Representative Jamieson Greer said the US agreed to drop the 145% tax Trump imposed last month to 30%. China agreed to lower its tariff rate on US goods to 10% from 125%.”
The Wall Street Journal reports that President Trump has approved a new 54% de minimis rate for Chinese imports valued at under $800. That’s still a lot when compared to 0%, but certainly less difficult to deal with than the previous rate. For American ecommerce shoppers who have grown accustomed to purchasing super-low-priced goods from these Chinese websites, even a reduced tariff is bound to be a rude awakening.
In 1938, Congress enacted Section 321(a)(2)(C) of the Tariff Act of 1930, to authorize the Secretary of the Treasury to waive or reduce certain duties, fees, and other taxes on certain imported goods with a fair retail value in the country of shipment of $1 or less. The original intent was to “avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected.” In other words, for smaller imports, it was costing the US more in time and resources than the import duties or tariffs were worth.
As the decades rolled on and the value of the dollar dropped, Congress amended Section 321 several times to raise the de minimis threshold, ultimately increasing it to $800 in 2015. So (until May 2, 2025), any import with a value under $800 could enter the country duty-free. This provision is commonly known as the “de minimis” exemption.
According to a congressional research report, more than 80% of total US ecommerce shipments in 2022 were de minimis imports, the vast majority of which come from China. The US retail ecommerce market constitutes over half of all global e-commerce sales, reaching $275.5 billion in 2023, according to the US Census Bureau. The Wall Street Journal reported that around $54 billion worth of Chinese goods were imported under the de minimis exemption in 2023.
CNN reported on one veteran-owned, Minnesota based business, Busy Baby, which specializes in inexpensive products that tether baby toys and utensils to keep them off the floor. The company recently placed its largest-ever order from its manufacturer in China. “But as of last week, that $158,000 order, which is already paid for, was sitting in a warehouse 7,500 miles away. If it were to get shipped to the US, Busy Baby would be on the hook for an additional $229,100 to cover the 145% tariff.” Some businesses have been resorting to crowdfunding to raise the additional money needed to cover the expense. If the 90-day truce expires and the full weight of the de minimis exemption removal is felt, it could have very far-reaching impacts on US businesses that rely on cheap Chinese goods.
Then there’s the increased delays and resource-use related to the US Customs processing of these lower-cost imports. Spokespeople from the government have stated that they’re prepared for the huge increase in items in need of processing, but historically things have not gone well.
In February, when President Trump first put in place the new 145% tariff on previously de minimis items, the US Postal Service briefly stopped delivering parcels from China entirely. Delivery times for packages that did get shipped were delayed, and tracking information became basically nonexistent.
The current administration may present a confident face, but the sheer volume of shipments is quite likely to be a serious problem. As noted above, more than 80% of total US e-commerce shipments qualify as de minimis imports. Imagine you’re in logistics, warehousing, shipping, or parcel importation/processing and your daily quota of packages in need of particular attention instantly jumps by 80%. Customs and Border Patrol processes nearly 4 million duty-free de minimis shipments a day, amounting to 1.36 billion packages over the last fiscal year, according to CNN.
Shippers like UPS, DHL, and FedEx can also potentially feel the impact of a precipitous drop in packages. Before the trade war de-escalation, CNN reported “Goods from China and Hong Kong shipped via UPS, DHL and FedEx are subject to a baseline 145% tariff, plus any additional product-specific tariffs. Goods shipped through USPS will be subject to a baseline 120% tariff or a flat $100 fee per postal item. Come June 1, the flat fee will increase to $200.” This added cost may be more than Chinese companies and shippers are willing to bear, and they may source other methods for delivery, or simply avoid US markets and focus on Europe and elsewhere.
Whether the reduced tariffs agreed to during the 90-day truce will remain is unknown, but it’s nearly certain that a significant increase in cost will persist in the near term. In an economy that’s increasingly hard on struggling lower-income households, even the lower 54% increase in price for these inexpensive Chinese imports might be a deal-breaker. CNN reported that about 48% of de minimis packages were shipped to the poorest zip codes in the United States, while 22% were delivered to the richest ones.
Meanwhile, American consumers who have grown reliant on dirt-cheap Chinese goods will either have to find room in their budget or reduce their purchase frequency in the face of the expiration of the de minimis tariff exception. It could be argued that Chinese ecommerce sites are finally being forced to charge prices inline with what other countries can meet, and the competition will be good for the US market in general. On the other hand, anyone concerned about the human rights issues or poor working conditions of Chinese workers involved in producing these ultra-discount retail products will likely be disappointed if they expect this kind of economic pressure to improve workers’ situations. Since the tariffs must be paid by the business, this can result in dramatically reduced profits and an even greater pressure on leadership to maximize production efficiency and cut costs wherever possible. Unfortunately this can result in workers being laid off or their daily production quota increased even further.
There may be some relief for Chinese companies who export to the US, at least in the case of those who deal with Walmart. According to an April 29, 2025 report in the South China Morning Post, Walmart has told at least some of its Chinese suppliers that it will absorb the additional cost of the tariffs, and that the companies should resume their shipments to the US. This is apparently an attempt to retain market share as Chinese sources are scrambling to find more customers outside of North America.
A Temu spokesperson told CNN that the company was changing its business model to encourage more local fulfillment, growing the number of US sellers on the platform.
The Guardian also reported that Shein is considering restructuring its business within the US in an effort to bypass or reduce the impact of the tariffs. This type of move is growing more common among foreign companies who export a majority of their products to US buyers. Companies in Vietnam, South Korea, and Taiwan have moved or are considering moving at least some portions of their business to Mexico, Canada, or the US to circumnavigate the impacts of high tariffs.
It’s well-known that many of the products sold on discount Chinese sites like AliExpress and Alibaba are illegal counterfeits, but it’s clear that the majority of their customers either don’t care or feel it’s not a big deal. Certainly, US inventors, patent-holders, and manufacturers would disagree, and estimates of the global economic damage done by Chinese counterfeit products range from around $500 billion to $4.2 trillion annually. A 54% de minimis tariff would possibly bring the cheaper counterfeit products more inline with their legitimate domestic (or at least non-Chinese) cousins, and some argue that it’s about time someone did something to combat this cancer of counterfeits.
One interesting area of the Chinese counterfeit market that might be impacted by the new tariffs are so-called “real fakes” of luxury brands, or those that are so close in construction and quality that it’s difficult to distinguish them from the real thing. If these products are priced below the $800 threshold and the tariffs bump them over it, pricing structures could get very interesting for a while.
Additionally, the tariffs might impact a disturbing and recent TikTok trend. As Daxue Consulting reported, “The US-China trade war has inadvertently fueled a surge in counterfeit sellers from China targeting Western consumers on TikTok. As tariffs on Chinese goods escalate up to 145%, Chinese manufacturers have leveraged social media such as TikTok to achieve direct-to-consumer marketing. The trendiest sellers offer luxury items like yoga pants and handbags at a fraction of their retail prices, for USD 5 to 6 per pair. These sellers claimed that their products originate from the same factories as top brands such as Lululemon and Louis Vuitton, asserting that Western consumers can avoid tariffs by buying straight from Chinese suppliers.”
With the expiration of the de minimis exemption, these counterfeit sellers will at least have to cover the (currently) 54% increase in import duties or add it to the cost of their goods. Whether an American consumer buying a “genuine” Louis Vuitton handbag for $8 will suddenly balk if the price jumps to $12 remains to be seen.
This current situation is just one example of how supply chains can be significantly disrupted at any time. Particularly global-oriented supply chains are impacted by this type of political maneuvering, but any business that wishes to remain healthy and resilient must create robust plans and resource allocation to adapt to changes in sourcing, production, logistics, and consumer trends.
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