Trump’s Executive Order Ends De Minimis Rule, Shaking up Global Ecommerce

Starting on August 29, the “de minimis” exemption which allowed parcels valued at less than $800 to enter the U.S. without being subjected to any import duties is going to come to an end. This change is aimed at addressing tariff evasion while also improving oversight on all imports.

The rule change is going to reshape global ecommerce since many online platforms, especially Chinese ones like Temu and Shein, leveraged this de minimis exemption to penetrate the U.S. market with their cheaper products. Subjecting all imports to tariffs and other duties will increase the cost of those cheap imports and make them lose their competitive edge against locally produced alternatives.

While the end of the de minimis exemption wasn’t surprising, it came sooner than expected. The recently enacted spending bill had indicated that the exemption would be ended in 2027 but the executive order brought forward the end of the exemption.

The Trump administration offers a number of reasons for ending this rule. First, they say that low-value parcels have been used to smuggle illegal substances, such as drugs containing fentanyl, into the country. They also say the rule allowing small parcels to enter the country without incurring any duties created an avenue for foreign-based sellers to sidestep product safety rules.

However, it is also clear that ending the de minimis exemption is yet another way to combat Chinese dominance of the ecommerce landscape in the U.S. Products made in China are generally cheaper than those made within the U.S., and the duty-free rule had allowed Chinese sellers to take full advantage and flood the market with their products.

This particular executive order comes at a time when the U.S. and China are working on a trade deal ahead of the August 12 deadline before higher tariffs on China-made products come into force. The termination of the import duty exemption for small parcels is likely to be another complication that negotiators have to work through before a deal is agreed.

It should be noted that the U.S. isn’t the only major market taking steps to end duty-free small parcel imports. Last year, the EU proposed that a fee of €2 ($2.32) be imposed on small parcels to cater for checking their adherence to safety regulations. The bloc is also considering ending the duty-free exemption for these parcels.

Attention will now be on the negotiations taking place between America and China. If those talks don’t yield a deal, the ending of the de minimis rule will be yet another measure showing the protectionist stance of the U.S. Ecommerce giants like Amazon.com Inc. (NASDAQ: AMZN) are likely to follow any news about the talks between these two major global economies since any decisions made have the potential to reshape global trade.

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