A Tariff Exemption Just Closed. Expect Delays, Shortages, and Higher Prices.

The de minimus exemption helped the Chinese retailer Temu win market share in the U.S. (Dreamstime)

The end of a rule that allowed low-value parcels to enter the U.S. duty-free could make those goods more expensive and harder to get, a particular setback for low-income households and small businesses.

While the Trump administration closed the de minimus exemption, for Chinese products in May, it went further on Friday. Now, the shift applies to all foreign goods valued at under $800. In the firing line are apparel, cosmetics, and small household appliances, but also dietary supplements, many electronics, medicines from Canada, and gourmet items from Europe.

The exemption had allowed roughly 1.36 billion packages into the U.S. a year without duties or much scrutiny, the administration said. It had been a popular route for discount Chinese retailers such as Shein and Temu, who have rapidly gained market share in the U.S. The Trump administration has said it has also been a route for deadly synthetic opioids to enter without scrutiny.

Friday’s move could bring in an additional $10 billion a year in revenue, according to Peter Navarro, an advisor to President Donald Trump on trade and other issues. At the same time, though, a variety of products are expected to cost more, and to become harder to find. Analysts are expecting disruptions in shipping and logistics such as customs processing that could result in shortages or delays ahead of the year-end holidays.

The cost to consumers could be an estimated $13 billion, or about a fifth of the costs of the tariffs the Trump administration imposed in his first term, according to a 2024 paper by Yale economists Amit Khandelwal and Pablo Faigelbaum.

The biggest hit, the economists argue, will be borne by lower-income households. The duo’s work indicates that 73% of what the lowest-income zip codes in the U.S. purchase falls under the de minimis exception, compared with just about half for wealthier zip codes.

“Lower-income consumers tend to spend relatively more on de minimis shipments and their de minimis shipments tend to be relatively more from China,” Khandelwal said via email.

Shipments that fall under the de minimis exemption make up the bulk of cargo by volume, but a small portion of the overall value of imports. “It isn’t a big thing for the broader economy versus other tariffs and considering the U.S. imports nearly $3 trillion,” said Gary Hufbauer, the director of studies at the Center for Foreign Relations and a nonresident senior fellow at the Peterson Institute for International Economics.

“It isn’t a macro thing but an important micro thing,” said the former Treasury official. “This is a blow on low-income folks and small businesses.”

Whereas multinational companies have teams of specialists to help them deal with trade law, Hufbauer says the $800 exemption threshold was one of the few customs provisions favorable to smaller businesses and less wealthy households that tend to shop more for these goods.

While the end of the exemption could help domestic producers and retailers, it could also cause issues for smaller businesses that relied on foreign suppliers for lower-value goods. The additional paperwork they now will face could be more cumbersome than the additional tariffs, Hufbauer says. To the extent that they respond by choosing not to import, there could be less availability of some of these lower-priced products.

The change is also creating logistical headaches that could feed into higher costs. Whereas some of these items were being shipped to Mexico or Hong Kong and then shipped into the U.S. in smaller parcels, companies are now consolidating their orders and looking to warehouse them so they could be brought into the country under a single set of paperwork, says Nick Ovanessian, an account executive at the freight forwarder OEC Group.

Others are trying to spread out the tariff hit by unloading goods at bonded warehouses and taking goods as needed, Ovanessian says. The result is that prices for warehousing are skyrocketing as everyone scrambles for limited space.

How much of these costs is passed on to consumers isn’t clear, but Khandelwal doesn’t expect exporters to absorb it all. Many exporters are hitting pause as they think about their next steps.

The change could also result in delays, especially for goods to clear customs. The Customs & Border Patrol, already overwhelmed, now will be tasked with scrutinizing a mountain of small-value packages.

“The timing of this change couldn’t be tougher, with peak season already straining fulfillment networks,” says Ann Marie Jonkman, vice president for global industry strategies at the supply-management firm Blue Yonder. “Added clearance steps for low-value shipments will increase the risk of port congestion, delivery delays, and cost pressure just as demand spikes for the holiday buying season,”

Analysts’ advice to consumers: Shop early and look for deals. Some retailers could end up with too much inventory as they try to adjust for the shifts in trade policy.