The latest research shows that the United States’ decision to close the De Minimis loophole used by Chinese companies for small package tax exemption will hit hundreds of billions of dollars in China’s trade and lower China’s economic growth (GDP growth) for this year.
According to reports from Bloomberg on Thursday (February 6), companies such as Shein and Temu used the provision allowing goods valued below $800 to be imported into the U.S. duty-free to ship $46 billion worth of small packages to the U.S. last year.
With the implementation of new tariffs on China by the Trump administration on February 4, which includes canceling the small package tax exemption clause, the U.S. Customs and Border Protection (CBP) announced that packages mailed from China must now go through customs. Products eligible for temporary tariff exemptions from China will also be subject to a 10% U.S. tariff. This is due to the Chinese government’s failure to take decisive action to address the issue of Chinese fentanyl and synthetic opioid drugs entering the U.S.
Economists at Nomura, including Lu Ting, stated in a report that imposing tariffs of 10% or more on China, along with other new costs, will significantly reduce the volume of small package shipments, leading to a 1.3 percentage point decrease in overall exports and a 0.2 percentage point decrease in China’s GDP growth for this year.
According to a report on the small package tax policy updated by the Congressional Research Service (CRS) last week, China’s global e-commerce exports increased more than tenfold in the past five years. The export value of China’s small individual packages expanded from $5.3 billion in 2018 to $66 billion in 2023. A key part of China’s global e-commerce growth is its expansion into the U.S. market. The U.S. retail e-commerce market accounts for over half of global e-commerce sales; according to data from the U.S. Census Bureau, U.S. e-commerce sales reached $275.5 billion in 2023. China’s e-commerce policy has boosted its exports while limiting the scope of Chinese e-commerce imports.
In a report by the U.S. Congress-China Commission in June 2023, it was stated that nearly half of the packages transported under the “tax-exempt for small amounts” category come from China. According to a report by the Peterson Institute for International Economics, Temu and Shein account for approximately 30% of the parcels shipped to the U.S. daily.
Analysts at Nomura estimate that the official Chinese data reported a small package export value of around $23 billion last year, which is believed to be underestimated. Reports indicate that companies bulk ship goods to Mexico and then break them down into small packages to enter the U.S.
The CRS report stated that Temu and Shein together held around a 17% market share in the U.S. consumer goods, fast fashion, and toy discount market in 2023.
According to CBP data, in 2024, around 13.6 million items entered the U.S. using the small package tax exemption provision, a 36% increase from 2023.
Reuters reported that Nomura analysts estimate that (after canceling the small package tax exemption clause), the volume of small package shipments to the U.S. from companies such as Shein, Temu, and Amazon Haul could plummet by 60% due to higher prices faced by U.S. shoppers.
The new tariffs implemented by Trump have already prompted Chinese companies to raise prices. SF International, a Chinese logistics company, announced on Wednesday that they will charge a ¥20 (approximately $2.75) fee and a 30% tariff deposit on all packages shipped from China or Hong Kong.