The closure of the ‘de minimis’ tariff exemption loophole at midnight on Friday marks a significant shift in US trade policy towards China. This loophole allowed low-value goods to enter the US without import fees, benefiting companies like Shein and Temu. The loophole, in place since the 1930s, saw a massive volume of goods enter the US, with over 90% of cargo shipments utilizing it, and 60% originating from China.

With the closure of the loophole, parcels under $800 will now face a 120% levy or a flat $100 fee, set to increase further in June. This move is part of Trump’s broader tariff strategy against China, citing unfair competition and the unchecked flow of deadly drugs like fentanyl into the US.

The impact on consumers is already being felt, with retailers such as Shein and Temu raising prices on goods. Shein’s prices have reportedly increased by significant margins, signaling potential price hikes for consumers. However, some companies, like Temu, have shifted to a local fulfillment model to maintain pricing stability for US customers.

While the White House aims to curb the flow of illicit substances like fentanyl, China argues that American consumers will bear the brunt of the tariff hikes. Chinese trade associations and government officials have criticized the US for its “hegemonic actions” and voiced concerns about increased costs for American shoppers.

Amidst this trade tension, Shein is reportedly reconsidering its London IPO, and JD.com has pledged to support Chinese exporters by purchasing billions of yuan worth of products for the domestic market. The ramifications of the loophole closure extend beyond trade dynamics, impacting companies, consumers, and the ongoing US-China trade war.