Trump’s De Minimis Debacle: A Policy Misstep with Far-Reaching Consequences
Days after U.S. President Donald Trump abruptly ended duty-free entry for low-value Chinese goods, his administration was forced to put the order on hold. The reason? Over a million packages had piled up at New York’s John F. Kennedy International Airport due to unworkable implementation.
The "De Minimis" Rule: A Floodgate for Chinese Imports
The executive order targeted a little-known trade regulation called "de minimis," which allows merchandise valued under $800 to enter the United States duty-free and with minimal inspections. Exploiting this rule, online shopping has led to an explosion in the number of packages entering the U.S. duty-free.
In 2022, nearly 1.4 billion packages entered via de minimis, with over 90% originating from China. Direct-to-consumer retailers like Temu and Shein have become major beneficiaries of this loophole.
Trump’s Motive: China’s Role in the Opioid Crisis
Trump’s campaign promise to punish China for its alleged role in the synthetic opioid crisis motivated this policy change. US anti-narcotics officials claim Chinese chemical companies supply raw materials to Mexican cartels for the production of fentanyl, a deadly drug that has killed over 450,000 Americans.
Reuters investigations have uncovered how traffickers often exploit de minimis to route these chemicals through the United States.
The Rushed and Unworkable Rollout
Trump’s executive order, issued on February 1, imposed an additional 10% tariff on all Chinese imports and eliminated de minimis exemptions for low-value packages from China. The White House gave a mere three days for the policy to take effect.
This timeframe proved impossible for major parcel carriers, e-commerce platforms, the U.S. Postal Service, and U.S. Customs and Border Protection (CBP) to revamp their operations and implement tariff collection on millions of de minimis packages already en route from China.
The United States Postal Service: An Achilles Heel
USPS, which accounted for about 5% of total de minimis shipments last year, presents a particular challenge. Unlike private carriers with in-house customs brokerage divisions, USPS is not equipped to assess and process duties on packages from abroad.
Cindy Allen, former CBP official and CEO of Trade Force Multiplier, remarks that "USPS has absolutely no way to collect duty or pay duty to the government."
Consequences of the Rollback
The need to pay duties on millions of low-value packages each day risks disrupting a shipping system designed for fast parcel delivery. American shoppers may also experience delays in receiving their orders.
Moreover, critics argue that Trump’s order was geographically narrow, allowing manufacturers in China to circumvent the ban by producing goods in countries like Vietnam and Thailand.
The Path Forward
The Trump administration has tasked the Commerce Department with resolving the implementation issues. One option is to exempt USPS from the new rules, but this could exacerbate the problem of illicit goods entering the country through international mail.
CBP also faces the daunting task of recruiting additional personnel to inspect incoming packages. However, the administration’s focus on downsizing the federal workforce may hinder this effort.
Conclusion
Trump’s de minimis policy change was poorly planned and implemented. The lack of coordination and preparation led to chaos at shipping ports, highlighting the challenges of abruptly altering complex trade regulations. As the administration attempts to reinstate the ban, further disruptions are likely, especially given the circuitous nature of global shipping routes.
