Buried inside Donald Trump’s executive order on China tariffs is one line that will disrupt the business models of companies like Shein and Temu. The de minimis exemption is part of why these products are so cheap — and without this exemption, your Temu orders will cost you more money.
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00:00A lot of stuff that we consume in the U.S. is made in China, whether that's clothing
00:05or shoes or electronics or furniture.
00:08Look around and check the labels and tags in your home.
00:12Maybe you're one of the 78 million monthly Timo users and have taken a chance on the
00:16$5 hoodies or the $12 drones on the site.
00:19You've probably already heard about this new round of tariffs that Donald Trump has
00:23imposed on goods the U.S. imports from China.
00:26But within the executive order, there's a change to a little-known law that could change
00:31the way we buy things online from sites like Timo and raise the price of Chinese goods
00:36for U.S. consumers.
00:37It's the shopping app at the top of the Google Play and Apple App Stores, Timo.
00:42It's everywhere and it's dirt cheap.
00:45Over the last few years, discount store Timo and ultra-fast fashion site Shein have gained
00:50massive popularity in the U.S. thanks to their bargain bin prices.
00:55$8 security cameras or $30 suits.
00:59But the items come from faceless sellers, with experts warning there's a high chance
01:04that child labor or forced labor is involved in manufacturing.
01:09Timo's slogan is, shop like a billionaire.
01:12And U.S. shoppers have become accustomed to waiting a little bit longer for their online
01:16purchases in exchange for low prices.
01:20Part of the reason these prices are possible is because of something called the de minimis
01:23exemption.
01:24Using the de minimis exemption, packages valued under $800 can enter the U.S. duty-free, meaning
01:31the importer doesn't have to pay import taxes.
01:34By shipping directly to consumers, companies like Shein and Timo don't need the vast
01:38warehouses that Amazon has.
01:41They don't need much of a footprint in the U.S. at all.
01:43The de minimis exemption has been around for nearly 100 years, but it's more relevant
01:48now than ever before.
01:50About a decade ago, the de minimis threshold was increased from packages under $200 to
01:55$800 after lobbying from companies like eBay and Etsy.
02:00The number of packages claiming the exemption has skyrocketed, from 139 million a year in
02:062015 to over 1.36 billion in 2024.
02:11Even Amazon has tried to get in on the action.
02:14Seeing competition from Timo and Shein, last November, Amazon launched a marketplace called
02:20Amazon Haul that's filled with cheap items you might see on Timo.
02:25One of the billion de minimis packages that came into the U.S. last year was my Amazon
02:29Haul order.
02:30I bought women's clothing, tech accessories, a neon lamp, and more, and all of that was
02:35just $27.
02:38Unlike typical Amazon Prime products, this order came to me all the way from China, and
02:43because of de minimis, entered the U.S. without me having to pay duties.
02:47Now that Trump has killed de minimis, all of those low-value packages showing up to
02:51our homes will get taxed, whether they're from Amazon or a small business based in China.
02:56And it's not just the new 10% tariff that would be added to my Amazon Haul order now.
03:02All the usual tariffs that the order was avoiding will now also be applied.
03:07My order would be subject to Trump's new 10%, plus the standard tariff that is assessed
03:13based on item categories, plus additional tariffs on Chinese goods that Trump introduced
03:18during his first presidency.
03:20It adds up quickly.
03:22As you can imagine, without the de minimis exemption, a lot of companies will need to
03:26rethink their business model.
03:28Shein and Timo don't have the vast warehouse and logistics operations that Amazon does
03:33in the U.S.
03:35Dropshippers' entire business model is beholden to cheap imports delivered directly to consumers.
03:41And as I've written previously, the writing has been on the wall for a while.
03:46The Biden administration last year suggested tightening the rules around de minimis,
03:50and now the Trump administration seems to have killed it.
03:54These ultra-cheap goods American shoppers have gotten used to
03:57suddenly might not be very appealing.
03:59It also will likely raise costs for small businesses that import components, supplies,
04:05and parts from China to make things domestically, which in turn is likely to raise prices for
04:11consumers.
04:12Trump's broader tariffs on China will touch a lot of industries.
04:16The tech industry relies heavily on China to build phones, gadgets, and gaming consoles.
04:22And China dominates in clean energy supply chains for things like solar panels.
04:27As we've seen this week, Trump treats tariffs like a political bargaining chip
04:31to get what he wants from other countries.
04:34This week, Trump attempted to impose tariffs on Mexico and Canada,
04:38but they were paused for a month pending increased border measures.
04:42Given Trump's track record, it's unclear if they'll happen at all.
04:46But tariffs are one of Trump's favorite policies, and it's likely we haven't heard the last of them.
04:53Late last night, USPS announced that they would not be accepting inbound packages
04:57from China and Hong Kong.
05:00This is, I think, very clearly related to the new broad 10% tariffs,
05:04but also the fact that they're getting now millions of packages a day from China.
05:10Customs has to inspect, levy the duties.
05:13This is a task that our workforce is not prepared for.
05:17So last night, USPS says we're not going to accept these anymore.
05:21This morning, they've reversed course and said, actually, we will accept them,
05:25and we're working on systems to make sure it's compliant with the new tariffs.
05:29But they don't have the system in place.
05:31And some experts actually told me that we probably will see delays with USPS.
05:37So it is, it's a big deal.
05:40It's a big deal.
05:40USPS is typically like the last mile carrier for packages that come from China, right?
05:46And then they get passed on to USPS.
05:48So there's a huge burden on the post office now.
05:52You know, they need to figure out what to do with all these things.