The US has decided to lower tariffs on small packages imported from mainland China and Hong Kong, bringing them down from 120% to 54%. This change follows a temporary 90-day halt in the ongoing trade conflict between Washington and Beijing.
Interestingly, Donald Trump has issued more executive orders recently than the total taxes discussed earlier this month.
The exemption, which essentially means “least-important,” allows for items worth up to $800 to be sent from abroad without US tax. This has encouraged several fashion brands, like Sheen and Tem, to ship goods from China.
In February, the president moved to close a gap in tariffs, imposing a 120% tax on packages valued from China, or a flat fee of $100 from May 2. Now, starting Wednesday, that tariff drops to 54%. The flat fee will remain unchanged and won’t increase to $200 as previously intended.
This announcement coincides with Trump’s call for a fresh start in US-China relations, with both countries agreeing to reduce their overall tariffs significantly—by 115 percentage points, leading to 30% and 10% respectively. Trump even claimed during a press conference that “they agreed to open China.”
Initially, Wall Street responded positively to the news, but the following day, futures fluctuated downwards, and European stocks rose only slightly. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, noted that uncertainty surrounding the outcome of this 90-day pause is likely to leave many businesses cautious, delaying necessary investments until a more permanent resolution unfolds.
The De Minimis trade policy, which was set up in the 1930s, permits travelers to return to the US with items valued up to $5 without customs declaration. However, it has faced mounting criticism from lawmakers across both political parties.
Recently, the amount of cargo entering the US under this policy has surged, with over 90% of packages arriving this way. Notably, around 60% of those come from China, often facilitated by direct-to-consumer retailers like Temu and Shein.
Critics have pointed out that these inexpensive imports from China undermine American industries, while also potentially providing cover for illegal drug shipments, including fentanyl.
A beauty brand from the UK has expressed its appreciation for the trade war ceasefire, as nearly a quarter of its sales came from the US last year, with 60% of its US products manufactured in China.
A Bank of America survey reveals that 61% of fund managers now expect the US economy to experience a soft landing—up from 37% in April—yet those predicting a hard landing have surged by nearly 50%, now standing at 49%.
