The de mininis loophole, and what it means for French brands and U.S. shoppers, is so complicated that it gets an outline:
- What is the de minimis exemption?
- How will it affect Shein and Temu purchases?
- Why is closing this loophole for cheap Chinese goods a positive step?
- How is this new law, taxing Shein and Temu, similar to the one protecting booksellers in France?
- How could an expansion of this tax affect European retailers and U.S. shoppers?
- Conclusions
If you’re a Shein/Temu shopper, you’re probably all too aware of the end of the de minimis loophole, which means that purchases under an $800 threshold have previously been able to enter the U.S. without customs charges. The loophole? It’s going away — which means those cheap Shein tees aren’t going to stay so cheap. For some background, here’s PBS:
The goal was simple: The government would save the expense of processing a tariff fee that is lower than what it costs to collect it. Many other countries have similar exemptions, though the U.S. has one of the highest thresholds. “It doesn’t make sense to spend a dollar trying to collect 50 cents worth of tariffs or duties,” said Clark Packard, a research fellow at the Cato Institute, a public policy think tank based in Washington, D.C.
Beginning May 2, that same $12 shirt will not come with a customs duty of $100 per item, or 90% of its value. On June 1, that fee will just about double.
For the moment, this will primarily affect goods coming from Hong Kong and China (and note I said “primarily.”) So what does this all mean for European goods? It’s complicated.
Closing this loophole does some good
Fewer purchases from Shein and Temu — together the two retailers are responsible for an incredible 30% of packages entering the country through the loophole — is good for America and (many) Americans. Consider the environmental damage of incredibly fast fashion and accusations of forced labor against the retailers. Closing the de minimis loophole for cheap goods from China has been a bipartisan issue — in fact, House Democrats approached the Biden administration last year about doing it: “These imports threaten U.S. manufacturers, hurt union workers and local retailers, and expose American consumers to great risk by flooding the market with fake and sometimes dangerous imported goods.” (These are Democrats!)
Made in the U.S.A. and Fabriqué en France: More of both, please
I believe in buying goods that are Made in the U.S.A. just as much as buying goods that are fabriqués en France — and not just fake Made in the USA (meaning: assembled or finished here with imported materials) but grown here, designed here, harvested here, etc etc, ideally by unionized American workers enjoying high wages, good public schools, low home costs and as much vacation as they like. If Jason Kelce can do it — meaning start a T-shirt line using cotton grown in these United States — more companies can. The French have long accepted paying more for goods if it means higher wages, and more power, and more vacation, for French workers.
That’s a long view. For the smaller, more personal view: Trust me, as a small business owner who relies in part on materials produced in China and elsewhere, I understand all the apprehension (and in some cases devastation) around the tariffs. Laws like these have incredible force, for good and bad, which is why they should be wielded with care. I do not have the sense that these have been wielded with any level of care whatsoever — in fact, I believe that they have been wielded with a tremendous lack of concern for anyone. But I do hope in the narrowest possible view, taxing Shein and Temu will spur conversations around consumption and labor rights.
Shein and Temu have already warned that they will revise their pricing on April 25 — undoubtedly higher. The best case scenario is that this will give American retailers an edge, and encourage American buyers to shop locally. That’s all good, in a sea of uncertainty and bad.
Laws can change consumer behavior for the better (even if it hurts)
I can’t be cheerful about how it will undoubtedly curb the shopping habits of Americans with less money to spend. I’ve been there: After I was laid off last year, I didn’t buy a single piece of clothing for seven months, and when I did, it was at our local thrift stores. But I learned to live with it, and I was helped in this by my time in France: In my observations, I have found that the French shop seriously, infrequently, and for life. I don’t know what kind of inroads Shein and Temu have made there, but I hope, and expect, not many.
French shoppers often pay more, and buy less, and wear better clothes longer. In a perfect world, we might come to this conclusion on our own, but the French use laws like this one to protect its culture as well: There’s a reason why every little neighborhood in Paris still has its own independent bookstore, and that’s because Amazon, by law, can’t offer the same deals there that it can here. Laws have consequences. If you like independent booksellers, that’s a terrific one. Hopefully, closing the de minimis loophole will mean greater revenue for American-made brands, and a weaning off of hyper-cheap purchases that have possibly been made by people forced into labor. Good.
The sneaky way it could affect EU retailers
That said: Europe is not the same. Most workers there (with exceptions) have power, privilege, and rights Chinese laborers could only dream of. And while Chinese factories are certainly capable of producing world-class goods for elite brands (as TikTok has amply demonstrated), that’s not what we’re talking about with Shein and Temu: A round of Edam cheese, or Champagne, or Birkenstocks, or Italian olive oil would be just as affected (and just as taxed), should the loophole exemption end with EU goods as well.
Also, you’ll notice that the list of European goods above are made completely in their native lands: One of the big complications with the de minimis rules going into effect May 2 is that it applies to where the goods are produced, rather than where they’re shipped from. Lots of French retailers manufacture in China — so we might see jumps in costs from those brands as well. For example: Sézane makes 2/3s of its goods in Europe, but has factories in Asia (including China): “The rest are crafted [outside Europe] around the world, where we work with exceptional expertise: for example, silk and prints from China, and embroidery from India.”
Does that mean they’ll move that silk and print production out of China? Or will they just stop shipping to the U.S.? How will other French retailers, with less of a foothold in the U.S., handle this? For Sézane, I’d bet they’ll first raise prices or look at other facilities in Vietnam, for example. For others, certainly the latter.
Conclusions
What I think this will mean:
- A huge interest in producing clothes in the U.S., from root to shop: People are saying it’s going to take forever to ramp up, and for certain industries I’m sure that’s true, but I also think Americans are extremely inventive. I think the range of (truly) Made in the USA goods will expand hugely. I hope this will be good for the American worker.
- American shoppers at the lower end of the price spectrum will have fewer options at lower prices. I hope as many of them as possible will find new and better job opportunities because of Point #1 and earn more money, so they are able to buy high-quality goods made by fairly paid and protected workers. I also hope we will find a way to, together, shop less, and enjoy ourselves more.
- There has to be a balance between floods of cheap goods, and reduced opportunities for U.S. workers, with thoughtful global trade — selling meaningful goods at fair prices.
- People coming back from Europe are going to come back with their suitcases full to the point of bursting.
