The Hindu: Published on 29 August 2025.
Why in News?
The U.S. has decided to end the duty-free imports of low-value goods (de minimis exemption) effective August 29, 2025.
Earlier, goods worth up to $800 per person per day could be imported without paying duties.
Now, all such imports — textiles, toys, cosmetics, electronic accessories, etc. — will face tariffs based on the country of origin.
This is expected to disrupt postal and courier services worldwide and affect global e-commerce supply chains.
Background: What is the De Minimis Rule?
Origin: 1930 Tariff Act (Section 321) — initially allowed tourists to bring souvenirs duty-free.
1990s: Became a trade facilitation tool to reduce costs for businesses and consumers.
2016: Congress raised the limit from $200 to $800, massively increasing the volume of exempt goods.
Imports under de minimis rose from 134 million (2015) to 1.36 billion (2024).
Major beneficiaries: Chinese e-commerce giants like Shein, Temu, and several small-value exporters.
Reasons Behind the U.S. Move:
Trade Deficit Reduction: To curb the U.S. trade gap with countries like China.
Targeting China: Over 50% of de minimis imports came from China.
Preventing Counterfeit & IP Theft: To stop the influx of fake or pirated goods.
Revenue Concerns: Huge loss of tariff income due to high import volumes.
Protecting Domestic Industry: U.S. retailers and manufacturers felt undercut by ultra-cheap imports.
Economic & Business Impact:
Global E-Commerce Platforms: Major hit to Chinese retailers like Shein and Temu.
Logistics & Couriers: More customs checks → delays in shipments.
Consumers: Prices of imported low-cost goods (clothes, toys, accessories) will rise in the U.S. market.
Small Businesses: Will face higher costs, squeezing margins.
Welfare Loss: A study by NBER suggests welfare could fall by $11–13 billion, disproportionately affecting lower-income consumers.
International Context:
EU Parallels:
Ending the €150 duty-free threshold.
Imposing handling fees (€2 for individuals, €0.5 for warehouses).
Aimed at controlling illegal & unsafe imports (mostly from China).
Universal Postal Union (2019): U.S. forced reforms to raise international postal rates, arguing Chinese exporters were benefiting unfairly.
Global Shift: Both U.S. and EU are tightening rules, signaling a pushback against cheap Chinese e-commerce dominance.
Implications for Global Trade:
Erosion of WTO Principles: Countries are bypassing multilateral trade systems, preferring unilateral/bilateral measures.
Trade Fragmentation: Strong economies setting their own rules weakens global cooperation.
Rise of Protectionism: Signals a broader trend of protecting domestic industries against globalization pressures.
Strain on Multilateralism: Growing evidence of WTO and post-war trade order weakening, as even founding members like the U.S. undermine it.
Key Takeaways:
- The U.S. decision marks a protectionist turn in trade policy.
- It directly challenges China’s e-commerce supply chains and global dominance in low-value goods.
- Consumers and small businesses will bear the brunt in the short term.
- The move reflects a larger collapse of global trade consensus, with major powers prioritizing domestic economic security over multilateral trade liberalization.
