Presidential Order on Tariff Adjustments with China
On Monday, the tariffs on minimal shipments from China were lowered to 54% or $100, whichever is less. This change comes after previously set tariffs of 120% or $200 were put in place for de Minimis shipments back in February.
The DE Minimis exemption was first introduced in 1938 to ease the shipping costs and regulatory burdens associated with sending small packages to the US. During the Obama administration, the exemption threshold increased significantly from $200 to $800, positioning the US threshold noticeably higher than in many other countries.
As a result of this substantial rise in De Minimis thresholds, a new industry has emerged, largely dominated by Chinese businesses. With the rise of online shopping and digital payments, companies like Shein and Temu now ship vast amounts of affordable products directly to American consumers without the need for local distribution centers.
Chinese microshipping firms are reportedly raking in billions. According to recent findings, consumer sales amounted to $240 billion in China last year, reflecting a 7% increase in overseas sales and accounting for 1.3% of GDP.
However, the fast fashion sector has faced scrutiny for its reliance on labor practices that some deem exploitative. The De Minimis exemption has become contentious, as it allows Chinese companies to sidestep legal challenges related to the Uyghur Forced Labor Prevention Act. Additionally, smaller shipments have been linked to the fentanyl trade, with precursor chemicals making their way from China to the US.
A Chinese executive expressed concerns that while a 54% reduction in tariffs might appear advantageous, it could still be too burdensome for the current business model. Consequently, Americans might find themselves waiting longer for their orders.
“If people are eager to buy clothes and see that the product won’t arrive for a month, who will actually make that purchase?” asked Jianlong Hu, CEO of a consulting firm for Chinese e-commerce, Brands Factory.
“Many businesses that have benefited from cross-border trade with the US are considering diversifying away from this market. The risks of relying solely on the US are becoming all too clear,” Hu added.
