US slashes ‘de minimis' tariff on small China parcels to as low as 30%
China exported US$240 billion worth of goods under the de minimis rule globally in 2024, representing 7% of exports and 1.3% of GDP. (AP pic)
HONG KONG : The US will cut the 'de minimis' tariff for low-value shipments from China to as low as 30%, according to a White House executive order and industry experts, further de-escalating a potentially damaging trade war between the world's two largest economies.
The order published late on Monday offers some relief to big Chinese e-commerce players Shein and Temu and follows a weekend deal between Beijing and Washington to unwind for 90 days most of the tit-for-tat tariffs imposed on each other's goods since early April.
While their joint statement following talks in Geneva did not mention the de minimis duties, the order signed by President Donald Trump said levies for those direct-to-consumer postal shipments will be reduced to 54% from 120% for items valued at up to US$800, starting on Wednesday.
An alternative flat fee of US$100 per postal package remains in effect, but a planned June 1 increase to US$200 was cancelled.
There are different rules for packages handled by commercial delivery firms such as United Parcel Service, FedEx and DHL, which shipped millions of Shein and Temu packages before Trump ended duty-free status for Chinese shipments valued under US$800.
The rate for those packages now defaults to the reduced US tariff rate of 30% from 145% for Chinese imports, two delivery experts told Reuters on condition of anonymity for fear of retribution.
The 30% rate reflects the Trump administration's decision to cut China's 'reciprocal' duty rate to 10% from 145%, plus a separate 20% duty related to the US fentanyl crisis.
The White House and the US trade representative's office did not immediately respond to a request for clarification.
Trade representative Jamieson Greer told CNBC on Tuesday that the 10% global duty rate would likely remain in place to help rebuild the US manufacturing base.
Collection difficulties
Commercial shippers generally collect duties from sellers in China prior to shipment, but the US Postal Service is not set up to handle tariff collections. Four sources told Reuters most Temu and Shein shipments are handled by commercial carriers.
Many consumer goods from China in the commercial channel will still be subject to much higher duties imposed under previous trade actions or sectoral national security investigations. For example, syringes and surgical gloves are subject to 100% duties under a US Section 301 trade action.
One of the delivery experts said, however, that if shipped by a postal carrier in quantities valued at less than US$800, they may be able to arrive in the US for only a US$100 fee, or an effective 12.5% rate.
In February, Trump ended the de minimis exemption and imposed different rules for packages handled by postal services or commercial delivery firms – blaming the exemption for enabling a flood of shipments from Chinese e-commerce firms and traffickers of fentanyl and other illicit goods.
The number of shipments entering the US through the tax-free channel exploded in recent years with more than 90% of all packages coming via de minimis. Of those, about 60% came from China, led by direct-to-consumer retailers such as Temu and Shein.
According to 2024 congressional testimony from a US Customs and Border Protection official, the average value of a de minimis shipment during fiscal year 2023 was just US$54.
Chinese online retailers Shein – which is considering a London stock market listing – and PDD Holdings-owned Temu, as well as US rival Amazon did not immediately respond to requests for comment.
China exported US$240 billion in direct-to-consumer goods benefiting from de minimis worldwide last year, accounting for 7% of its overseas sales and contributing 1.3% of gross domestic product, according to Nomura estimates.
Jianlong Hu, CEO of Brands Factory, a Chinese cross-border e-commerce consultancy, said a 54% tariff was still very high.
'Sellers are probably taking a wait-and-see approach but in general I think it's fair to say the boom times of small package delivery from China to the US, the Golden Age is already gone.'
Shein is more exposed to de minimis changes due to its reliance on speed of getting thousands of new styles each week to consumers in the West by air than others such as Temu.
Shein might still be one player that would want to send by air freight some packages from China and pay the 54% tariff rather than import all by boat, said Hu.
'If people are buying clothes on Shein and are told the product will arrive one month later, who will buy that?'
Loophole
China's yuan jumped to a six-month high against the dollar on Tuesday, joining a global rally in riskier assets following the broader trade deal between Beijing and Washington.
Trump's global trade war, which shredded the playbooks that have governed international trade for decades, has shaken up financial markets and raised fears of a recession.
The US de minimis rule, which dates back to 1938, has been the target of growing criticism from both Democratic and Republican lawmakers as a loophole that allows Chinese products to skirt US tariffs and illegal drugs and fentanyl precursors to enter the US unscreened, as Reuters reporting has confirmed.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
an hour ago
- The Star
Nepal's US trade preference at risk amid growing tariff tensions
KATHMANDU: New tariff tensions could further undermine the modest gains of least developed countries (LDCs), small island developing states (SIDS) and landlocked developing countries (LLDCs), according to a recent report. The United Nations Conference on Trade and Development, in its May publication titled 'Sparing the Vulnerable: The Cost of New Tariff Burdens', warns that these vulnerable economies could face some of the highest new US tariffs. This could lead to a decline in critical exports and pose substantial risks to their long-term development prospects. The report defines 'vulnerable economies' as LDCs, SIDS, and LLDCs—nations already struggling with structural economic and geographic disadvantages. 'US President Donald Trump is creating tariff uncertainty as a bargaining tactic in trade negotiations,' said Purushottam Ojha, a former commerce secretary. 'There is uncertainty in US tariff policy, with new tariffs being imposed, suspended, and then reinstated without predictable patterns.' Ojha noted that Nepal's trade benefits under the Nepal Trade Preference Programme are set to expire this year, potentially creating new hurdles for exporting goods to the US market. 'This tariff uncertainty increases the cost of trade, which can have a wider impact on economies that heavily rely on imports,' he said. 'The erratic US tariff policy is not a healthy sign for global trade.' The US recently increased tariffs on steel and aluminium from 25 per cent to 50 per cent and imposed 45–50 percent tariffs on products from several countries, though these have been temporarily suspended for 90 days. According to Ojha, one silver lining is that the tariff differential between Nepal and other countries has temporarily improved the competitiveness of Nepali goods. 'But with the implementation of new US tariffs still unclear, it's hard to rely on this advantage.' In the last fiscal year, Nepal recorded a trade deficit of Rs2.16 billion (US$15.8 million) with the US. According to the Department of Customs data, Nepal exported goods worth Rs17.31 billion to the US while imports totalled Rs19.48 billion. Top Nepali exports to the US included carpets, dog chew, felt goods, readymade garments for men and women, ceramic goods, pashmina, essential oils, musical instruments, handmade paper and cotton bags. Meanwhile, Nepal imported items such as soybeans, coal, oil cake, aircraft and helicopter parts, printed software manuals, artificial filament tow of cellulose acetate, laboratory and diagnostic equipment, wood pulp and almonds from the US. The US introduced the Nepal Trade Preference Programme after the April 2015 earthquake, granting duty-free access to 77 items to support economic recovery. However, trade experts say the preferential treatment has failed to significantly boost exports. The programme applies to 77 tariff lines: 56 textile products, ten footwear items, nine clothing goods and two fodder-related products. According to reports, as of Thursday (June 5), the average effective US tariff rate stands at 15.1 per cent, up sharply from the 2.5 per cent rate before the recent rounds of tariff increases. This rise results from ongoing trade disputes and retaliatory measures, contributing to a highly complex and volatile trade environment. Despite special provisions under multilateral trade rules, the participation of vulnerable economies in global trade remains minimal. They make up less than 0.5 per cent of total US imports and contribute insignificantly to US tariff revenue or trade deficits. According to the report, the least developed and landlocked developing countries account for only 1.3 per cent of global exports—a figure that has largely remained unchanged over the past three decades. This stagnation persists despite the Sustainable Development Goal (SDG) of significantly increasing the export share of developing countries, with a particular aim of doubling LDC exports by 2020. Instead, export growth for these nations has moved at a 'snail's pace' over the last 30 years, the report says. Though the US market is critical for the exports of these vulnerable economies, their footprint remains small. The report states that LDCs account for 8.9 per cent of total US exports and just 0.9 per cent of US imports. Similarly, LLDCs buy 2.1 per cent of US exports while supplying 0.2 per cent of imports. Regarding trade deficits, LDCs contribute 1.5 per cent to the US deficit, while LLDCs have a negative contribution of 0.2 per cent, meaning the US runs a trade surplus with them. The report emphasises that newly imposed US tariffs, which are layered and vary by the country, represent an added burden for these countries. Under new US tariffs announced between January and mid-May 2025, a ten per cent tariff has been applied across the board, excluding Canada, Mexico, and China. In 2023, the US imports from landlocked developing countries amounted to US$6.2 billion. Of this, 59 per cent of goods were subject to country-specific tariffs, while 41 per cent enjoyed exemptions. Imports from least developed countries stood at US$27.4 billion, with 93 per cent falling under country-specific tariffs and only seven per cent exempt. The exemptions mainly apply to primary goods such as vegetable products, footwear, foodstuffs, and headgear. The report warns that LDCs will bear the brunt of these new tariff policies. The trade-weighted average tariff the US applies to imports from LDCs is 43.9 per cent—far higher than the 7.3 per cent tariff those countries impose on US exports. For LLDCs, the US applies an average tariff of 17.1 per cent, compared to a 5.2 per cent tariff on US exports. The report concludes that shrinking preferential tariff margins threaten to erode export viability for dozens of vulnerable countries, potentially setting back years of slow but hard-earned progress in trade and development. - The Kathmandu Post/ANN
New Straits Times
2 hours ago
- New Straits Times
US-China renewed dialogue seen lifting Malaysia's trade outlook
KUALA LUMPUR: Renewed trade talks between the United States and China are expected to boost investor confidence and strengthen Malaysia's trade momentum, an economist said. Putra Business School economist Professor Dr Ahmed Razman Abdul Latiff said any move to reduce tariffs between the two economic giants could steady the sails for Malaysia by boosting confidence and trade visibility. "If the US and China agree to resume talks and reach a deal to reduce tariffs on each other, Malaysia's trade environment and investor sentiment will become less volatile and uncertain," he told Business Times. "This would boost investor confidence and encourage continued investment in Malaysia," Razman added, noting that while tensions persist, Malaysia is taking steps to shield its economy. Razman also expects Malaysia's export markets and supply chains to remain competitive, although growth may moderate slightly. This, he said, is supported by ongoing efforts to diversify export destinations, grow the country's trading partnerships and enhance intra-Asean trade. Should US-China negotiations break down again, he said the impact on Malaysia would likely remain limited. "There will be some negative impact but it will be minimum as majority of Malaysia's products such as semiconductor will not be subjected to higher tariffs by the US," he said. Trump and Xi held a 90-minute phone conversation on Thursday, marking their first direct dialogue since Trump resumed office. The call, widely viewed as a positive step towards easing the prolonged trade tensions between the world's two largest economies, laid the groundwork for renewed bilateral cooperation and the resumption of high-level trade negotiations. Both leaders agreed to restart trade talks, with senior US officials, including Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, expected to meet their Chinese counterparts. The timing and venue for these negotiations have yet to be finalised but are anticipated to be announced in the coming weeks. Although the call sparked market optimism, US stocks closed lower as a sharp decline in Tesla shares outweighed the positive momentum from progress in US-China tariff negotiations. Tesla shares plunged over 14 per cent in heavy trading as the escalating public feud between Trump and businessman Elon Musk rattled investors, wiping out about US$150 billion in market value. Razman downplayed concerns over the spat saying, "The impact on Malaysia will be minimal, as the fallout primarily affects the SpaceX program and Tesla production."
The Sun
2 hours ago
- The Sun
Billion-dollar battery plant pauses construction in US amid electric vehicle, tariff uncertainty
NEW YORK: A Japanese company has halted construction on a US$1.6 billion factory in South Carolina to help make batteries for electric BMWs, citing 'policy and market uncertainty,' reported Xinhua quoting the Associated Press. 'While Automotive Energy Supply Corp. (AESC) didn't specify what those problems are, South Carolina's Republican governor said the company is dealing with the potential loss of federal tax breaks for electric vehicle buyers and incentives for EV businesses as well as tariff uncertainties from President Donald Trump's administration,' noted the report. 'What we're doing is urging caution -- let things play out because all of these changes are taking place,' Governor Henry McMaster said. AESC announced the suspension in construction of its plant in Florence on Thursday. 'Due to policy and market uncertainty, we are pausing construction at our South Carolina facility at this time,' the company's statement said. AESC promised to restart construction, although it didn't say when, and vowed to meet its commitment to hire 1,600 workers and invest US$1.6 billion. The company said it has already invested US$1 billion in the Florence plant. The battery maker based in Japan also has facilities in China, the United Kingdom, France, Spain and Germany. In the United States, AESC has a plant in Tennessee and is building one in Kentucky. The statement didn't mention any changes with other plants.
