The US’s latest taffic adjustment is reversing course (at least, a little) on one of this administration’s more controversal tax changes: The tariff on small packages coming from China worth $800 or less has been lowered to 54%, from 120%.
This change removes the more onerous taxes from particularly inexpensive packages, potentially helping smaller US businesses avoid some of the larger cost impacts of the new tariffs.
Granted, the 54% tariff is still a big cost increase for these types of packages. Prior to May, any package under $800 wasn’t taxed at all.
The De Minimis Exemption Is Back… Sort Of
Since 1938, the “de minimis” exemption meant that no duties would be imposed at all on these small packages.
The Trump administration changed that in early May, when they eliminated this exemption entirely, making small $800-or-less packages subject to the exact same duties that had just soared due to the US-China trade war.
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While 54% tariffs are definitely more workable for many companies in comparison to 120% tariffs, most small US operations that had previously relied on the de minimis exemption will likely continue to struggle with the additional tax burden. These tariffs will directly impact package carriers but are expected to be passed on to the buyers (and likely passed in turn to the consumers who purchase the final product).
Is the US-China Trade War Turning a Corner?
The latest adjustment comes alongside the reveal of a new 90-day pause on tariffs between the US and China. Well, aside from a base 30% import tax rate.
It’s potentially a positive sign, since it indicates that Trump might be rethinking his “more and more tariffs” strategy. However, it’s definitely a sign of continued uncertainty when it comes to the tax budget for companies everywhere, and uncertainty tends to be bad: It pushes businesses and consumers alike towards saving their money rather than put it back into the economy.
Even a positive change might get reversed with the next top-down decision, and in this case, we already know when the 90-day pause on tariffs will end.
How Will Businesses Adjust?
The new de minimis adjustment still requires a 54% tariff, although this can be swapped out for a flat fee of $100 per package. A proposed flat fee increase to $200 was set to take effect in June 1 but, with the latest changes, this has been cancelled.
We’ve previously covered what to expect from the tariff hikes: Higher consumer prices, more shipping delays, and a shift in business models as companies that used to outsource either shift to a US-based supplier, shut their doors, or tighten their margins while increasing prices.
It’s a tough time to be a dropshipper, unless you’ve been operating with massive margins or you already source from the US. Even ecommerce companies based outside the US are shifting to US suppliers, if the changes Temu has announced are any indication. The new tariff pause and the lower 54% de minimis duties might help make some decisions easier, but they won’t change the overall trajectory set by all the new international taxes we’ve seen in the past couple of months.
