President Trump pumped the brakes last week on a pledge to shut down an import tax exemption for cheap consumer goods from China, his latest last-second swerve in a global game of chicken playing out in the realm of international trade.
While the pause opens up another front in the president’s promised trade war, the delay on closing the so-called de minimis loophole has businesses scrambling to make preparations and policy groups scratching their heads over the chaotic start to Trump’s trade overhaul.
“We’re obviously not happy with this delay,” Nick Iacovella, vice president of the Coalition for a Prosperous America, a group that advocates for U.S. manufacturers, told The Hill.
Iacovella said the pause on stopping the de minimis rule, which allows goods worth $800 or less to come into the U.S. duty-free and with minimal inspections, likely represents an opening salvo in the trade war, with full implementation coming once all of Trump’s Cabinet picks are in place.
A Senate panel advanced last week the nomination of Howard Lutnick, CEO of Cantor Fitzgerald, to serve as Commerce secretary, teeing up a confirmation vote by the full chamber.
Once confirmed as expected by the GOP-controlled Senate, Lutnick will play a key role in both implementing Trump’s tariffs and overseeing their enforcement.
“With the de minimis decision, there’s a recognition that even though they want to move as quickly as possible, it’s really important to have your people in place,” Iacovella said. “When you come up with an action like prohibiting China from de minimis — which is absolutely the right policy move — you have to make sure it can be implemented properly … and enforced.”
Earlier this month, Trump ordered that “duty-free de minimis treatment … shall not be available” on the grounds that it provided cover for illegal shipments of drugs like fentanyl into the U.S. and helped to create “a public health crisis.”
But Trump yanked the order last week, pausing it until “adequate systems are in place to fully and expediently process and collect tariff revenue.”
The de minimis exemption is used by e-commerce companies like Amazon and Temu to avoid taxes on cheap consumer goods that are made in China and other countries and shipped to the U.S.
De minimis entries have spiked over the last decade, increasing to more than 1 billion in 2023 from 153 million in 2015, according to the Congressional Research Service.
But de minimis imports are a subcategory of a more wide-ranging exemption known as “Informal Entry” pertaining to shipments into the U.S. worth up to $2,500, which trade advocates say needs to be addressed to stop the flow of fentanyl.
“Unless formal entry is required for all commercial shipments, the daily flood of millions of small-value packages will still overwhelm inspection or even tariff enforcement,” Lori Wallach, director of the advocacy group Rethink Trade, wrote in a social media commentary.
Requiring formal entry for Chinese imports would mean that goods would no longer arrive in the U.S. in smaller packages processed by the U.S. mail or commercial carriers like UPS and FedEx but would likely arrive via shipping containers, where they could be processed by U.S. authorities.
“The stuff would be imported in shipping containers with full customs information (where goods are made, tariff codes, etc.) filed online two days [before] arrival to a U.S. port so [Customs and Border Protection] … can risk-assess and decide what to pull for inspection,” Wallach wrote, adding that the additional processing would likely “not boost prices significantly.”
Some economists disagree, arguing that the perceptible price increases that would result from ending the de minimis rule prompted Trump to keep it in place.
“Consumers would notice the cost of these tariffs … and would quickly realize that U.S. consumers, not foreigners, pay tariffs. Highly visible tariffs lead to a quick retreat,” UBS economist Paul Donovan wrote in a Monday analysis, contrasting the more upstream tariffs on steel and aluminum imports that were expected Monday from the White House.
Both Donovan and Wallach took note of the about-face that Trump has made on a number of his tariff proposals, notably on imports from Canada and Mexico, which figured prominently in his presidential campaign.
“Trump risks becoming the boy who cried tariff,” Wallach observed.
Halting drug trafficking has been a primary focus of Trump’s second-term trade strategy and the rationale provided for his latest trade proposals.
Trump cited fentanyl smuggling in his orders implementing new tariffs on Mexico and Canada under the International Emergency Economic Powers Act, a law that allows the president to immediately implement tariffs in response to apparent threats to national security.
“This is not a trade war — this is a drug war,” Kevin Hassett, chair of the White House Council of Economic Advisers, said of Trump’s tariff proposals on Canada and Mexico during an interview with CNBC last week.
“We’re really serious about going after fentanyl, and President Trump means it. There’s all this fentanyl shipping across the borders,” Hassett continued. “In the past, there have been caravans of people parading across our border, carrying drugs. The response from our neighbors has not been, ‘Hey, we’re going to help you stop this problem.’ Instead, it’s, ‘Go ahead and build a wall.'”
However serious Trump is about stopping the de minimis exemption, and however suited such a move would be to the task of stopping drug smugglers, the measure is already throwing into question some long-standing business models in the retail sector, trade experts told The Hill.
“A lot of e-commerce businesses have developed around the law,” Clark Packard, a research fellow in the Cato Institute’s trade policy department, told The Hill. “This is sort of a direct-to-consumer [business], you’re not warehousing a ton. [Orders can get filled] very quickly.”
Advocates also told The Hill that traditional thinking around trade is in the process of changing, a point that Trump made on the campaign trail while pushing tariffs.
“Free trade doesn’t exist in the real word,” Iacovella said. “If you’re in your microeconomics class, and you want to debate free trade and opportunity cost, that’s fine. But those are just theories that really do not apply to the real world, where you have a country like China that’s decided to use every tactic it can to overproduce and dump global supply.”
