The tradewinds of change continue to swirl around the implementation of tariffs on goods from China, Canada, and Mexico, but it’s a good time to evaluate and prepare for potential ramifications.

President Donald Trump recently announced tariffs on imports from those three countries before quickly putting a 30-day pause on charges toward Canada and Mexico as further negotiations continue. While a 10 percent tariff on Chinese imports did go into effect, one of the biggest question marks affecting ecommerce revolves around the proposed closure of the de minimis loophole. 

Liz Adamson, head of ecommerce at Nile, provided us with a breakdown of how this might affect retailers and consumers moving forward. 

The De Minimis Rule

The de minimis rule allows international exporters to ship packages valued under $800 into the United States without incurring duties or undergoing customs inspections. This exemption facilitated rapid growth for companies such as Shein and Temu, Chinese-founded ecommerce companies specializing in low-cost consumer goods. The removal of this exemption for goods from China and Hong Kong means that products from those countries will now face additional costs and regulatory scrutiny for shipments into the US.

While President Trump initially eliminated the de minimis exemption on February 1, within a week, he had reversed his decision. According to Adamson, de minimis was temporarily reinstated primarily to prevent a logjam of goods in customs while ensuring that adequate protocols are in place to manage tariff revenue collection effectively.

“They were about to get super backlogged in the airports because everything being shipped from China will now have to go through the tariff and customs process,” Adamson said. “Temporarily reinstating the de minimis threshold will allow officials to get the whole process up to speed first, hopefully without initially delaying deliveries too drastically.”

Weighing Cost and Shipping Concerns

According to Adamson, the de minimis loophole allowed companies like Temu and Shein to pop up and flourish, because their products could be acquired at a cheap cost for American consumers. 

“Temu and Shein have leveraged the de minimis exemption to become powerhouses in the ecommerce space in the past couple years,” Adamson said.

According to a recent Congressional Research Service report on de minimis policies, Temu and Shein combined for about 17 percent of the US discount market in 2023 for items such as consumer goods, fast fashion, and toys. 

As a means to compete with Temu and Shein, Amazon created its own discount storefront, Amazon Haul, launching it in beta in November. The service, which also utilizes the de minimis loophole, specializes in fashion, home, lifestyle, electronics, and other products under $20 shipped direct from China within one to two weeks.

“The value proposition for customers of Temu, Shein, and Amazon Haul is the ability to buy really cheap goods if you’re willing to wait while it is shipped from China,” Adamson said. “That’s kind of the inverse of Amazon’s value proposition for the past several years, which has been, ‘We’re going to get it to you faster than anyone else can.’”

Temu and Shein essentially turned the Amazon model upside down, Adamson said. They discovered that as long as a product was cheap enough, people didn’t mind waiting one to two weeks for it to ship from China.

“People generally have been willing to wait a little longer if specific products were cheap enough,” Adamson said. “In light of additional tariffs and customs delays, however, now the question becomes: With things being a little more expensive and likely taking more time to arrive, will those factors prove to be game-changers?”

Plan to Diversify

There are already reports that Temu and Shein have begun raising prices and temporarily removing some products on their websites due to the new tariffs. Adamson said she does expect American consumers to feel the burden of additional cost in the short term. The main questions are how much and for how long?

Her advice for retailers? Diversify your operations as much as possible.

“I’ve been preaching for the last year that companies need to start diversifying their supply chain and manufacturing by looking at other places in Southeast Asia and getting away from these hot spots that are on the government’s radar,” she said. “China has been a country where we’ve had shaky relations, and so the smart thing to do is just make sure you don’t have all your eggs in one basket. You need to be creating plans with worst-case scenarios in mind as it relates to tariffs. Then, even if they don’t materialize, you’ll already be diversified and in a stronger position.”

A major question on everyone’s minds is whether the additional tariffs and eventual elimination of the $800 de minimis exemption will benefit Amazon. Will the expected price-point changes and added delays be enough to entice customers away from Temu and Shein? Adamson is not so sure.

“I don’t think Amazon.com itself is going to have a huge benefit, although I think it might shore them up just a little bit,” she said. “I think there’s still a market for the Amazon Haul consumers who, again, are willing to wait for the overseas shipments as long as the product is cheap enough.”

Since these changes were also discussed during the Biden administration, Temu and Shein have already made strides to prepare by slowly building warehouses and distribution systems in the US. Adamson expects the ecommerce giants to pivot and adapt.

“I think it will be painful for the next couple months, but I think everyone’s going to level out,” Adamson said. “I think in six months from now, we’ll have adapted and forgotten this happened—unless President Trump does something else. You never know, right?”

Nile Can Help

Things are continually moving fast in the Amazon advertising space, which can make it extremely difficult for advertisers to stay up to date on everything that affects their business. Nile Commerce provides expert help in navigating today’s ever-changing Amazon online ecommerce market. It’s what we do all day, every day. Please reach out to us for a free phone consultation. Let us help you figure out the best online strategies for your brand.