US ends tariff exemption for small parcels, forcing international retailers and e-commerce brands to adjust strategy

Malay Mail

02-05-2025

LONDON, May 2 — As the United States ends a tariff exemption for small parcels on Friday, some retailers have stopped selling to US customers while others are seeking temporary workarounds in the hope the tariff rate may be reduced.
The removal of 'de minimis' — duty-free treatment of ecommerce packages worth less than US$800 — for products originating from China and Hong Kong exposes those goods to tariffs of 145 per cent on most Chinese goods following US President Donald Trump's decision last month, a move that upended global trade and triggered retaliation from Beijing.
British beauty products retailer Space NK has paused e-commerce orders and shipping to the US 'to avoid incorrect or additional costs being applied to our customers' orders', the company said in a notice on Wednesday.
It is not alone.
Understance, a Vancouver-based company that sells bras and underwear manufactured in China, told customers in an Instagram post that it would no longer ship to the United States due to the tariffs, saying it will resume once there is clarity.
'We're going from zero to 145 per cent, which is really untenable for companies and untenable for customers,' said Cindy Allen, CEO of Trade Force Multiplier, a global trade consultancy.
'I've seen a lot of small to medium-sized businesses just choose to exit the market altogether,' she added. Import charges can vary depending on shipment methods. For goods handled by the US Postal Service the tariff will be 120 per cent of their value, or US$100 per package. The amount is due to increase to US$200 in June, according to implementation guidance from US Customs and Border Protection.
Price hikes underway
Players willing to continue to access the US market are forced to hike their price tags.
Oh Polly, a British clothing retailer, has increased prices in the US by 20 per cent compared to its other markets, and may have to consider further price increases because of the higher tariffs, said managing director Mike Branney.
Singapore-based fast-fashion giant Shein sought to reassure customers in a post on its US Instagram account on Thursday, saying: 'Some products may be priced differently than before, but the majority of our collections remain as affordable as ever.' Shein sells clothes mostly manufactured in China, and the US is its biggest market.
Temu, the international arm of Chinese ecommerce giant PDD Holdings, prominently featured products already in US warehouses on its website, labelled 'Local', and a pop-up informed customers there would be no import charges for local warehouse items. But items imported before the May 2 change will eventually run out.
Both Shein and Temu have slashed their US digital advertising spending in the past weeks as they prepared for the change that is likely to hit their sales.
Shein did not immediately reply to a request for comment. Temu did not immediately reply to a request for comment.
De minimis was initially introduced to smooth online shopping and boost international trade, but became the target of bipartisan criticism due to its role in facilitating smuggling of fentanyl ingredients from China and fuelling a surge in imports of cheap clothes, toys, and furniture made in China through online platforms like Temu, Shein, and Amazon Haul.
De minimis has also been a channel for counterfeit goods. In 2024, de minimis shipments accounted for 97 per cent of the intellectual property infringement-related cargo seizures made by Customs and Border Protection.
Without de minimis, sellers of goods made in China have to provide US customs with more detailed information about where each component of their product is made, an increased administrative burden that, along with the huge tariff cost, is dissuading small retailers.
UPS CEO Carol Tome said on Tuesday that many of the delivery firm's small to medium-sized business customers source 100 per cent of their goods from China.
US online marketplace Etsy said in a notice to sellers earlier this month that it was making it easier for them to clarify the country of origin of their products, as tariffs are applied based on where a good is made rather than where it is dispatched from.
While disruptive to ecommerce, the end of de minimis treatment of Chinese goods could give a boost to retailers less reliant on ecommerce or on Chinese manufacturing. British fast-fashion retailer Primark, which sells clothes to US customers only through its stores across the country, not online, said it could benefit from the change.
'With prices going up from this part of the trade, I wonder if some Americans might start going back to shopping centres to find value there,' George Weston, CEO of Primark owner Associated British Foods, told Reuters on Tuesday. — Reuters