Trump closes tax loophole in blow to fast fashion firms

Donald Trump has signed an executive order to shut down a trade loophole known as de minimis” that has allowed lowvalue packages from China and Hong Kong to enter the US free of duties.

- ALISHA RAHAMAN SARKAR

The move appears to be a massive blow to fast-fashion companies such as China-based Shein and Temu, which managed to rapidly expand in the US through the almost century-old de minimis rule. This tariff exemption will end on 2 May, the White House said on Wednesday.

More than 90 per cent of all packages coming into the US enter via de minimis, and of those, about 60 per cent come from China, according to reports. The number of shipments entering the US through the duty-free route has exploded in recent years, reaching nearly 1.4 billion packages in 2024.

Mr Trump had signed an initial order on 1 February ending duty-free entry for the cheap Chinese goods, but later paused the order because of logistical issues following pushbacks.

The announcement was made shortly after Mr Trump announced sweeping “reciprocal” tariffs on China, with Beijing now facing 54 per cent tariffs on exports to the US.

The “de minimis” exemption, a longstanding rule that applies to packages entering the US worth under $800, allows retailers overseas to sell products at lower prices by shipping them straight to consumers, bypassing domestic warehouses.

The de minimis rule, derived from the Latin phrase de minimis non curat lex (the law does not concern itself with trifles), was initially introduced in the US in 1938 to reduce administrative burdens.