aIn a chaotic week of flip-flop’s tariff policy, cheap clothing from China is almost certain to face a sudden price hike soon, which could spark concern among first-fashion retailers and encourage consumers to look for other alternatives.
As part of a global tariff policy package announced last week on “Freeing Day,” Donald Trump has signed an executive order that ended tax exemptions for low-cost goods to enter the United States from China and Hong Kong. Packages under $800, known as the “de-minimis” rule, are not subject to taxes or duties on the product and are minimally inspected at the border.
As conceived as a way to allow Americans to bring low-cost goods back to the US from overseas, fast fashion giants like Sheen and Temu used rules to send low-cost e-commerce purchases to the US at a small cost.
Alon Rotem, chief strategy officer at Thredup, an online thrift store, welcomed the executive order.
“With the surge in fast fashion, this is something we’ve really supported to create an unfair competitive advantage,” he said.
Ending the De-Minimis rules has been a target for bipartisan lawmakers in recent years as the value of goods entered the US under the rules has skyrocketed from $5.5 billion in 2023 to $66 billion in 2023, according to a Congressional report. According to a briefing from the US International Trade Commission, nearly two-thirds of the regulations’ packages were shipped from China and Hong Kong.
Thredup has promoted laws to end the De-Minimis rules via American Circular Textiles. Other members include RealReal, Reformation, and H&M.
“This change has come,” says Derek Lossing, founder of Cirrus Global Advisors, a global logistics company. “Maybe it’s going to catch consumers with surprises, but ultimately it’s not catching the brand significantly with surprises.”
Some companies have already begun diversifying their production outside of China. Others have evolved their business models and started stocking more in the US, driving some production here, and fulfilling orders domestically, losses added.
Trump first announced the change in the rules in February, but repeated it to give border agents a way to deal with the influx of so many packages that require wider testing.
It is currently expected to take effect on May 2nd. The package will then be subject to a tariff rate of 30% or $25 per item, rising to $50 on the item on June 1st. When China responded with retaliatory tariffs this week, Trump fought back, tripling the fees for previously exempt packages to 90% or $75, rising to $150 on June 1.
“Everyone pulls up their pants and braces them for impact,” said Jason Wong, who works at Temu’s Product Logistics in Hong Kong. “We know it’s going to be a mess.”
Wong said one plan would be to further promote it to Europe, as well as Australia. Australia has its own de-minimis rule that items under $1,000 can enter the country without tax or customs duties.
“We know that demand from the US and North America will be significantly reduced,” he said.
Shein and Temu did not respond to requests for comments about the shift to the business model in response to future rules changes.
Threadup executive Rotem said the rules change will create openings for consumers to consider other options, such as buying second-hand clothing. He acknowledged shoppers’ interest in sustainability, but he said it was a secondary decision on consumer prices.
“All of a sudden, if Ultra Fast Fashion is around 30% more expensive, it really makes the value proposition much more appealing to resale,” he said.
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Some retail experts warned that changes to the rules might not block consumers from options like Shein or Temu, as many of their items are cheap to begin with.
“We’re committed to providing a great opportunity to help you,” said Jason Goldberd, chief commerce strategy director at Publicis Groupe, a global telecom company. “Even with customs duties, the price of the product remains attractive.”
Rotem said he saw the promise in the shift. “We will never perfect this, but advances in public policy that encourages resale are what we are trying to support.”
For now, changes to the rules of minimission remain intact, but anxiety and confusion have also risen amidst fluctuations in policies and wild markets. On Wednesday, Trump ordered a 90-day freeze on tariffs, but kept the 10% flat rate in place, then raised China’s tariff rates.
“Based on the lack of respect China has shown to the global market, I am by this raising the tariffs charged to China by the United States to 125% and immediately taking effect,” Trump wrote.
On Friday, China responded by increasing the tariff rate to 125%. Officials said they would not raise any further tariff rates.
Wong, who works at Temu Logistics, said there have been so many changes to the policy.
“I don’t know how long this de-minimis will last,” he said, adding that consumer backlash could lead to yet another policy change.
Goldberg repeated the feelings, calling them “dynamic situations.”
“Tomorrow might be different,” he said.
