De Minimis’: The Trade Perk Trump May End

President Donald Trump is considering significant changes to the “de minimis” trade exemption, a key trade perk, as tensions with China escalate. This move comes amid accusations of unfair trading practices and China’s alleged role in the fentanyl crisis affecting the United States

The de minimis exemption allows goods valued at $800 or less to enter the U.S. without paying duties or certain taxes. This threshold, one of the highest globally, was increased from $200 under President Obama’s administration1.Key points about the de minimis exemption:

1. Volume Increase: The number of shipments using this exemption has surged over 600% in the last decade, exceeding 1 billion items in fiscal year 2023.
2. Economic Impact: China exported $240 billion in direct-to-consumer goods benefiting from de minimis exemptions worldwide in 2024, contributing 1.3% to its GDP
3. Concerns: Critics argue that the exemption allows companies to bypass tariffs on Chinese products and evade customs inspections, particularly for goods produced using forced labor.
4. Potential Changes: Trump’s “America First Trade Policy” memo directs federal agencies to evaluate the financial impact and risks associated with importing “counterfeit items and illicit drugs” through de minimis.
5. Regulatory Proposals: U.S. Customs and Border Protection (CBP) has proposed rules that would add reporting requirements for low-value imports and make shipments subject to Section 301, 232, and 201 tariffs ineligible for the de minimis exemption.

The potential elimination of the de minimis exemption could significantly impact U.S.-China trade relations. Nomura estimates that abolishing the U.S. de minimis threshold would reduce China’s export growth by 13 percentage points and GDP growth by 0.2 points

As tensions rise, both countries face potential economic consequences. China has expressed willingness to continue dialogue with the U.S. to address differences and enhance collaboration. However, the outcome remains uncertain as the Trump administration weighs its options in the ongoing trade dispute.

Sources:
1https://www.usnews.com/news/world/articles/2025-01-23/factbox-de-minimis-the-trade-perk-trump-may-end-as-china-tensions-rise
2https://www.dlapiper.com/en-us/insights/publications/2025/01/cbp-proposes-rule-that-would-eliminate-section-321
3https://globaltaxnews.ey.com/news/2025-0292-us-customs-and-border-protection-proposes-rule-that-would-eliminate-duty-exemption-for-goods-subject-to-punitive-tariffs
4https://www.gdlsk.com/cbp-proposes-changes-to-regulations-for-de-minimis-shipments/
5https://www.whitehouse.gov/presidential-actions/2025/01/america-first-trade-policy/

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