U.S. cuts China tariff on low-value goods
The United States is poised to significantly reduce the "de minimis" tariff on low-value packages from China, potentially lowering it to as little as 30%. This move is part of efforts to de-escalate the ongoing trade war between the two nations. Previously, shipments valued up to $800 were duty-free until former President Trump imposed a 120% levy. An executive order reduced this tariff to 54% following a U.S.-China agreement aimed at easing trade tensions.
Under the new policy, commercial shipments, which include those handled by carriers like UPS and FedEx, will now default to a 30% tariff on Chinese goods. This change is expected to benefit online retailers such as Temu and Shein, which have thrived under the de minimis rule and primarily use commercial carriers for their shipments. Last year, China exported $240 billion in direct-to-consumer goods under worldwide de minimis rules, accounting for 7% of its total overseas sales.
Despite the tariff reductions, the de minimis rule has faced bipartisan criticism from U.S. lawmakers who argue it allows China to evade tariffs and facilitates illegal drug shipments. The U.S. Postal Service also faces challenges in managing duty collections, and certain goods, including medical supplies, remain subject to high tariffs. A flat fee of $100 per package is still in effect, although a planned increase to $200 was canceled.
The tariff adjustments have positively impacted the stock market, with companies like Amazon and Meta Platforms seeing gains as investors express optimism about reduced costs and increased advertising spending from Chinese e-commerce platforms. However, the long-term effects of these changes will depend on the outcomes of ongoing trade negotiations and the potential for a more permanent agreement between the U.S. and China.
