President Donald Trump’s new tariffs include a major change. A key trade loophole used by Chinese retailers like Shein and Temu is now suspended. Critics say this loophole also allowed fentanyl precursors into the U.S.
Trump’s executive orders took effect Tuesday. They placed tariffs on China, Canada, and Mexico. The orders also suspended the "de minimis" rule, which lets imports under $800 enter the U.S. duty-free. Mexico was given a one-month tariff pause after its president, Claudia Sheinbaum, agreed to deploy 10,000 troops to the border.
The de minimis rule was meant to reduce red tape. In 2015, the Obama administration raised the threshold from $200 to $800. Since then, shipments using this waiver skyrocketed by over 600%, surpassing 1 billion items in 2023, according to U.S. Customs and Border Protection.
Shein and Temu took full advantage of the rule. They flooded the U.S. market with cheap fashion, toys, and goods. A report from the Congressional Research Service found that by November 2023, the two companies controlled 17% of the U.S. discount market.
Their rapid rise hurt traditional retailers. Coresight Research reported that 15,000 U.S. stores are expected to close in 2025. That’s more than double the 7,323 closures in 2024. The last time closures were this high was in 2020, when nearly 10,000 stores shut down.
The loophole didn’t just impact retail. It was also tied to fentanyl smuggling. In 2023, nearly 75,000 Americans died from fentanyl overdoses.
A Reuters investigation revealed how easy it was to exploit de minimis. Reporters used it to import precursor chemicals for 3 million fentanyl pills. Overseas shippers got away with it by mislabeling the packages as electronics.
Trump’s tariff order on Canada addressed this directly. "The flow of illicit drugs like fentanyl to the United States through both illicit distribution networks and international mail – due, in the case of the latter, to the existing administrative exemption from duty and taxes, also known as de minimis," it stated.
Congress and past administrations have taken notice. Earlier this month, Biden’s outgoing administration proposed new rules. The changes would block de minimis treatment for Chinese goods under tariffs. They would also require shippers to list detailed tariff codes to help customs officers flag illicit goods.
Lawmakers worry the loophole has another dark side. They say Chinese companies used it to dodge scrutiny under the Uyghur Forced Labor Protection Act. That law is meant to block goods made with forced Uyghur labor from entering the U.S.