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US to cut tariffs on low-value goods from China to as low as 30% US to slash tariff on small China parcels from 120% to 54%
(31 minutes later)
Executive order will offer to relief to Chinese firms Shein and Temu, but insiders say e-commerce ‘golden age’ is gone Cut in low-value ‘de minimis’ tariff marks further de-escalation of trade war and will benefit Shein and Temu
The US will cut the “de minimis” tariff for low-value shipments from China to as low as 30%, according to a White House executive order and industry experts, further de-escalating a potentially damaging trade war between the world’s two largest economies. The US has announced it is slashing the tariff on small parcels sent from mainland China and Hong Kong to the US from 120% to 54%, hours after Washington and Beijing agreed a 90-day pause in their trade war.
The order published late on Monday offers some relief to big Chinese e-commerce players Shein and Temu and follows a weekend deal between Beijing and Washington to unwind for 90 days most of the tit-for-tat tariffs imposed on each other’s goods since early April. Donald Trump signed an executive order more than halving the levy, which was brought in at the start of this month to close the “de minimis” loophole allowing low-value goods to be sent to the US without paying import fees.
While their joint statement after talks in Geneva did not mention the de minimis duties, the order signed by Donald Trump said levies for those direct-to-consumer postal shipments will be reduced to 54% from 120% for items valued at up to $800, starting on Wednesday. An alternative flat fee of $100 per postal package remains in effect, but a planned 1 June increase to $200 was cancelled. The exemption – taken from the Latin phrase for “of little importance” – had meant items sent from abroad via post valued at up to $800 (£606) were able to enter the US duty-free and with nominal inspections. It fuelled the rise of fast fashion companies sending goods from China such as Shein and Temu.
There are different rules for packages handled by commercial delivery firms such as UPS, FedEx and DHL, which shipped millions of Shein and Temu packages before Trump ended duty-free status for Chinese shipments valued less than $800. In February, the US president moved to close the loophole, imposing a tax of 120% of the value of any package coming from China or a flat fee of $100 from 2 May. That tariff will fall to 54% from Wednesday. The alternative flat fee of $100 will remain but it will not rise to $200 in June as planned.
The rate for those packages now defaults to the reduced US tariff rate of 30% from 145% for Chinese imports, two delivery experts told Reuters on condition of anonymity for fear of retribution. The announcement came after Trump hailed a “total reset” in relations between the US and China as the countries agreed to reduce their total tariffs on each other by 115 percentage points, to 30% and 10% respectively. “They’ve agreed to open up China,” Trump claimed at a press conference at the White House on Monday.
The 30% rate reflects the Trump administration’s decision to cut China’s “reciprocal” duty rate to 10% from 145%, plus a separate 20% duty related to the US fentanyl crisis. However, after the apparent trade war truce initially sent stocks soaring on Wall Street, futures pointed to a lower open on American stock markets on Tuesday as European shares rose only moderately.
The White House and the US trade representative’s office did not immediately respond to a request for clarification. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said: “Uncertainty over what happens after the 90-day pause will keep many companies in wait-and-see mode, delaying investment decisions until a more durable truce emerges.”
The trade representative, Jamieson Greer, told CNBC on Tuesday that the 10% global duty rate would probably remain in place to help rebuild the US manufacturing base. As part of the detente, China has reportedly removed a month-long ban on airlines taking delivery of Boeing planes, according to Bloomberg News.
Commercial shippers generally collect duties from sellers in China prior to shipment, but the US Postal Service is not set up to handle tariff collections. Four sources told Reuters most Temu and Shein shipments are handled by commercial carriers. Economists at Goldman Sachs have cut the chances of a US recession in the next 12 months to 35%, from 45%. They now forecast the US economy will grow by 1% during 2025, twice as fast as the 0.5% previously forecast, because of lower tariffs and the recent easing of financial conditions.
China exported $240bn in direct-to-consumer goods benefiting from de minimis worldwide last year, accounting for 7% of its overseas sales and contributing 1.3% of gross domestic product, according to Nomura estimates. The de minimis trade policy was introduced in the 1930s to allow travellers returning to the US to bring goods with them worth up to $5 without declaring them to customs. It has been the target of growing criticism from Democratic and Republican lawmakers.
Jianlong Hu, CEO of Brands Factory, a Chinese cross-border e-commerce consultancy, said a 54% tariff was still very high. Sign up to Business Today
“Sellers are probably taking a wait-and-see approach but in general I think it’s fair to say the boom times of small package delivery from China to the US, the golden age is already gone.” Get set for the working day – we'll point you to all the business news and analysis you need every morning
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The number of shipments entering the US this way ballooned in recent years, and more than 90% of all packages arrived via de minimis. Of those, about 60% arrived from China, led by direct-to-consumer retailers such as Temu and Shein.
Some have criticised it as a loophole that allows cheap Chinese products to flood in to the US and undercut American industries, while also serving as cover for smuggling in illegal drugs such as fentanyl.
The UK makeup brand Revolution Beauty said it “very much” welcomed the truce in the US-China trade war. Almost a quarter of the company’s sales were generated in the US market in the past year, with 60% of products sold in the US being manufactured in China.
A survey by Bank of America shows that 61% of fund managers expect a soft landing for the US economy, up from 37% in April, while the number of those predicting a hard landing has nearly halved to 26%, from 49%.