The Trump administration officially closed the de minimis loophole on Friday, ending a significant era of duty-free online shopping for U.S. consumers. This loophole made it possible to import goods valued at under $800 completely tariff-free. Due to that, direct purchases from foreign sellers skyrocketed. The equity case policy went into effect on July 1, 2022. Above all else, it breaks the online purchasing environment by imposing tariffs at a low dollar value on incoming packages.
This policy shift particularly affects how and where consumers purchase their goods. It impacts how quickly and cost effectively you can get those items. Closing the de minimis loophole will slow down low-cost shipments coming from outside our borders. So it’s no surprise that these shipments have soared in popularity with U.S. consumers over the last ten years. Last year, U.S. Customs and Border Protection (CBP) announced a shocking 31,000 percent increase in shipments falsely claiming this exemption. The number of shipments increased by 600% in that time!
Impacts on Online Shopping
The sudden tightening of the de minimis loophole is about to create a heap of new problems for American consumers. Packages that once arrived in as little as five to ten days are now delayed by as much as twenty days on their routes. This delay results from all the new administrative hoops that have been introduced. Now foreign postal services must calculate their tariff cost before sending any parcels to the U.S. This new requirement imposes a hefty burden on their logistics operations.
This new regulation couldn’t have arrived at a more precarious time, with online shopping booming exponentially. American consumers have long been avoiding US retailers by purchasing things like shoes and sunglasses directly from foreign manufacturers. These commodities have turned into hot alternatives through their shopping travels. That loophole—which has since closed—was a key driver of this growth, enabling consumers to escape extra costs while helping producers deliver.
“If you absolutely need something by a certain deadline, buy it well before,” – Henry Jin
The closure will be huge hit to revenue. According to projections, it would create another $10 billion in tax revenue from new tariffs on imports that used to come in duty-free.
Economic Implications
The financial ramifications of this closure go far beyond consumer frustration. Industry analysts believe the overall increased costs from enacting these tariffs will eventually pass the burden on to consumers and raise prices. Raymond Robertson, an economist, elaborated on the potential impact:
“It will significantly raise the transportation cost on top of the cost of the tariffs, which will ultimately raise prices for consumers.”
Most of these suppliers will look to reduce the pain by cutting wholesale costs. Experts agree that any relief they offer will be paltry. The new administrative burdens and transportation costs would likely offset this potential shift. This would ultimately be passed on to consumers through increased prices.
Broader Context
This trade policy change comes on the heels of a broader tightening of trade rules with a few specific countries. Recently, in May, that exemption expired for cargo coming from mainland China and Hong Kong. The recent changes signal a broader trend towards increased scrutiny and regulation of international trade practices that could reshape consumer behavior in the long term.
Gifts worth $100 or less would remain duty-free. Millions of consumers will likely reconsider their purchasing behaviors due to the added expenses associated with a third-party-charged product. Now, partial tariffs exist even for the previously exempt items. For starters, millions of Americans are considering all their options and drastically changing their spending behavior in response.
