Loophole That Let Temu Thrive Will Be Closed May 2

A loophole that allowed millions of Americans to buy cheap, tariff-free goods from online Chinese retailers like Temu and Shein is being closed as part of President Trump's "Liberation Day" tariff actions. In an executive order Wednesday, Trump eliminated the "de minimis" exemption for packages worth under $800 from China, including Hong Kong, effective May 2, the Wall Street Journal reports. According to the White House, shipments sent through the international postal system will be "subject to a duty rate of either 30% of their value or $25 per item (increasing to $50 per item after June 1, 2025)."

Trump briefly closed the loophole in the early days of his second term but suspended the change days later, Axios reports. His Wednesday executive order states that Commerce Secretary Howard Lutnick has informed him that "adequate systems are now in place to process and collect tariff revenue." The loophole, which is almost a century old, helped Temu and similar companies rapidly expand sales in the US after their websites caught on with consumers, reports Bloomberg. Customs and Border Protection says there were 1.4 billion packages sent to the US under the exemption in fiscal 2024, around double the total from 2022.

When Trump first suspended the exemption, the Cato Institute, a free-market think tank, warned that eliminating "de minimis shipments entirely—or only for China—would have far-reaching negative effects for Americans, particularly poorer consumers," and would be an "administrative nightmare." The institute said closing the loophole only for China would lead to an increase in Chinese goods being sent through Mexico in what's known as the "Tijuana two-step." Critics of the loophole, however, say it has done a lot of damage to American businesses, including Forever 21, which cited competition from Temu and Shein in its bankruptcy filing earlier this year, reports Axios. (More Temu stories.)