In the Trump v Shein and Temu showdown, all end up losers

The end of the de minimis exemption on May 2 will have a ripple effect beyond the key parties concerned.

- Tan Dawn Wei

When US President Donald Trump abruptly closed an import loophole in February that allowed cheap Chinese goods to flood the US market tax-free, all hell broke loose at New York's John F. Kennedy International Airport after more than a million parcels piled up within days.

The authorities did a quick U-turn to save its customs infrastructure from being overwhelmed, but, on April 2, Mr Trump decided to end the exemption again for China and Hong Kong, setting the clock to count down from 30 days.

So when the screws tighten on May 2, American consumers will have to cough up more for the budget fast fashion and cut-price household wares they have come to love from Chinese e-commerce platforms like Shein and Temu.

Packages from China that were previously exempted under this waiver, called the de minimis rule, will be slapped with a 120 per cent tax of the shipment's value or a US$100 (S$130.60) fee per package if they are handled by the international postal network. That will increase to US$200 on June 1. Goods shipped from China through other carriers, like FedEx or UPS, will face duties of as much as 145 per cent of the value of the items.

It sounds like a lot to bear for cross-border retailers like Shein and Temu whose value proposition is built on offering a dizzying array of merchandise at rock-bottom prices, with free delivery thrown in.

At this point, it is not certain how badly they will be hit by the new US tax regime, especially given the Trumpian propensity for sudden policy swerves.