Background and Relevance
The United States has announced a reduction in the “de minimis” tariff for low-value Chinese shipments, as per a White House decree published on Monday. This move aims to further de-escalate the potentially damaging trade war between the world’s two largest economies, China and the United States.
Who is Involved?
The key figures in this context are the United States and China, with a particular focus on American President Donald Trump’s policies. His administration has been at the forefront of trade tensions, implementing tariffs on various Chinese goods. Recently, however, there has been a shift towards de-escalation following talks in Ginebra.
Key Tariff Reduction Details
The reduction in tariffs comes after China and the U.S. announced a truce in their trade conflict following discussions over the weekend in Ginebra. Both parties agreed to remove most tariffs imposed on each other’s products since early April.
Although the joint declaration from Ginebra did not mention “de minimis” tariffs, the White House decree later revealed that these tariffs would be cut from 120% to 54%, maintaining a flat rate of $100, effective from May 14.
What are “De Minimis” Tariffs?
“De minimis” tariffs previously allowed items valued up to $800 and shipped from China via postal services to enter the U.S. duty-free with minimal inspections.
In February, President Donald Trump ended the “de minimis” exemption by setting a 120% tariff on package value or a flat rate of $200, set to take effect in June. He blamed companies like Shein, Temu, and other e-commerce firms, along with fentanyl traffickers and illicit goods, for exploiting this loophole.
Impact on Trade
The number of packages entering the U.S. through the duty-free channel has surged in recent years, with over 90% of all packages arriving via “de minimis.” Of these, around 60% originated from China, led by direct-to-consumer retailers like Temu and Shein.
Key Questions and Answers
- What is the “de minimis” tariff? It’s a low-value exemption from customs duties and inspections for items valued up to $800 shipped from China via postal services.
- Why was the “de minimis” tariff ended by President Trump? He accused companies like Shein, Temu, and other e-commerce firms, along with fentanyl traffickers, of exploiting this loophole to bring in cheap Chinese goods, undermining U.S. industries.
- What is the new tariff rate after the reduction? The tariffs have been reduced to 54%, with a flat rate of $100.
- Which companies are likely to benefit from this tariff reduction? Internet retailers shipping primarily from China, such as Shein, Temu, and AliExpress (Alibaba), stand to gain significantly.
Broader Implications
The U.S. “de minimis” norm, dating back to 1938, has faced increasing criticism from both Democratic and Republican lawmakers. Critics argue it allows massive, low-cost Chinese products to flood the U.S. market, undermining domestic industries while serving as a cover for illegal drug trafficking and chemical precursors.
The Ginebra agreement reduced tariffs for both the U.S. and China by 115 percentage points each, bringing them down to 10% and 30%, respectively, for at least 90 days.
This tariff pause will give internet retailers like Shein and Temu a breather to adjust their businesses, as they likely use this time for bulk shipments and restocking U.S. warehouses, according to industry experts.
Among the significant beneficiaries of the “de minimis” are internet retailers shipping mainly from China, including Shein, Temu, and AliExpress. Their growth prompted Amazon to launch its own discount service, Haul, enabling merchants on the market to send accessories worth $5 and other items directly from China using “de minimis.”
On the other hand, China has lifted the ban on airlines receiving Boeing planes following the Ginebra trade agreement, according to Bloomberg News. Chinese authorities have started communicating with domestic airlines and government bodies about resuming Boeing deliveries, as reported by Bloomberg.
