As 'de minimis' trade loophole ends Friday, Shein, Temu shoppers could pay a lot more

Juliana Mello, a regular online shopper who buys products from fast fashion website Shein roughly once a month, is already noticing increasing prices from the China-based retailer.

Earrings that might have cost between $3 and $5 cost $20, said Mello, 48, of Farmingville. She's also seen the price of a sideboard buffet cabinet she purchased for her kitchen for around $150 rise to around $300, before the product was discontinued.

"The people getting the heat is the working class," said Mello, a care manager at a local nonprofit. "Rich people don't buy from Shein or Temu."

Shoppers like Mello who buy inexpensive products from China-based e-commerce companies like Shein, Temu and Alibaba can expect to pay more for their purchases after President Donald Trump in April signed an executive order to close a long-established trading loophole with China. The exemption, known as “de minimis,” which applies to packages valued under $800 from China and Hong Kong, is set to end Friday. The White House has pointed to concerns over fentanyl and opioids entering the country through Chinese shipments as the primary factor behind the policy change.

Local experts say the end of the exemption on imports from China, in concert with the 145% tariffs on Chinese goods, will only accelerate price increases for Long Island consumers and small-to-medium-sized businesses.

Exports of low-cost packages from China exploded from $5.3 billion in 2018 to $66 billion in 2023, according to a congressional report. An estimated 48% of packages from China were mailed to some of the poorest ZIP codes in the U.S., while less than half of that, 22%, were shipped to richer area codes, according to UCLA and Yale economists.

For Mello, the change means she and other working-class Islanders have even fewer ways to save money.

"There's nothing we can do," she said.

Here are seven things to know about the end of the de minimis exemption.

What is the de minimis exemption?

Legal experts said the de minimis provision has been in place since the 1930s, and is a recognition of the need for alternative trade rules for smaller, less valuable products.

“If there is a good or a product that has a retail value less than a certain amount — as we have it today, it’s $800 — then those packages can come into the U.S. without any tariffs,” said Stella Lellos, an international business attorney at Rivkin Radler in Uniondale. “The theory behind it was the cost of collecting tariffs for low-priced items was higher than the actual value of the product.”

Why is the U.S. getting rid of the exemption for Chinese-made goods?

“The rationale that this administration has is that it’s an easy means to send illicit substances” like fentanyl, said Jim Wholey, an international business attorney with Phillips Lytle in Washington, D.C.

U.S. Customs and Border Protection processes more than 4 million de minimis shipments into the country each day, according to the White House. That large influx of daily packages helps bad actors sneak drugs into the country, the White House said in early April.

But that isn’t to say that ending the exemption is a purely Republican position, Wholey said.

Last September, more than 120 congressional Democrats signed an open letter to then-President Joe Biden pleading for the end of China's de minimis exemption.

At the time, the elected officials emphasized the harm cheap Chinese imports were doing to U.S. manufacturers — particularly textile businesses — labor unions and retailers.

Which retailers are likely to be hit hardest by the change in trade policy?

Andrew Forman, a Hofstra University associate professor of marketing, international business and legal studies, said companies like Temu and Shein are among the hardest hit.

“Those are the major ones, because those are the ones that really took that de minimis loophole and exploited it,” Forman said. “Their business model was to ship directly from manufacturers in China rather than using middlemen to get the products to consumers," Forman said.

“Both have a huge presence on TikTok and lots of followers and people who were very devoted to shopping on those sites, he said.

Could this impact the price of items not imported from China?

“There’s price pressures across the board now because of tariffs being increased and imposed across the board,” Forman said. “The other thing you could argue as well is if companies like Shein and Temu were putting downward pressure on prices for other retailers.”

Without their ability to undercut U.S. retailers on cost, there is less pressure on local businesses to try and compete on price.

How will this impact Long Islanders?

Long Island experts said consumers will no doubt be seeing higher prices soon.

“The time of Americans purchasing cheap consumer products is going to be over soon,” said Thomas Cook, managing partner of Blue Tiger International, an East Moriches-based international trade and supply chain consultancy.

“Consumers are going to be in for a reality check because they are going to be paying a lot more for items,” Cook said.

Steven Kent, chief economist for the Long Island Association business group, said local small businesses will also be hurt by higher prices, as many of them may use de minimis shipments.

“It’s going to raise the cost of some of these products, and that cost will eat away at people’s wallets,” Kent said.

Do you see this leading to any major shifts in online shopping habits?

Mariano Torras, an economics professor at Adelphi University, said he expects to see customers limiting their shopping as prices begin to rise.

“What I see happening is the average consumer really having to tighten their belt to afford the kind of living standard they had in the past,” Torras said.

“I don’t think this is going to benefit anyone economically, or at least I don’t think we can reasonably anticipate anyone benefiting,” Torras said.

Are there any ways for shoppers to get around the end of de minimis or price hikes?

“Not that I know of. Prices are going up,” Forman said.

“It's a tax. And it’s paid by consumers. I wouldn't say there is much of a way to get around it,” he said. “This was one of the last loopholes of getting around it, and it was closed."