SHEIN, Temu benefit as Trump reduces tariffs on Chinese parcels
What's the story
The United States has announced a major cut in tariffs on small parcels from China and Hong Kong.
The tariff has been slashed from 120% to 54%, following a 90-day pause in the trade conflict between Washington and Beijing.
The decision was taken by President Donald Trump, who signed an executive order to reduce the tariff, which was initially imposed to address the "de minimis" loophole allowing low-value goods to enter the US without import fees.
Trade dynamics
Impact of de minimis loophole on US-China trade
The de minimis loophole, which comes from a Latin term meaning "of little importance," allowed foreign items worth up to $800 to enter the US without duties and with minimal inspections.
This exemption greatly benefited fast fashion companies such as SHEIN and Temu that bring in goods from China.
In February, Trump addressed this loophole by levying a 120% tax on packages from China or a flat fee of $100 ($76) starting May 2.
Trade relations
Tariff reduction and its implications
The tariff will drop to 54% from Wednesday, while the flat fee of $100 will stay the same. It won't increase to $200 in June as originally intended.
The announcement comes after a "total reset" in US-China relations, with both countries agreeing to cut their tariffs on each other by 115% points, to 30% and 10%, respectively.
Trump said at a White House press conference that "they've agreed to open up China."
Policy criticism
Concerns over de minimis trade policy
The de minimis trade policy, which permits travelers returning to the US to bring goods worth up to $5 without customs declaration, has drawn growing criticism from lawmakers on both sides of the aisle.
Over the past few years, shipments entering the US through this method have skyrocketed, with over 90% of all packages arriving through de minimis.
About 60% of these packages came from China, mostly from direct-to-consumer retailers like Temu and SHEIN.