Amid a steady stream of new trade policies in President Trump’s first three months in office, there is one that Andy Musliner, who owns a small toy business in Maryland, can get behind.
That’s the ending of a duty-free loophole for cheap goods from China.
Mr. Trump this month scrapped a provision that had allowed packages imported into the United States from mainland China or Hong Kong to avoid tariffs and other customs requirements if they were valued under $800. The loophole previously faced bipartisan scrutiny from lawmakers and pushback from the Biden administration, in part over concern that it was enabling fentanyl to flow into the United States unchecked.
It allowed the fast-fashion giants Shein and Temu, which rely on Chinese vendors, to gain significant market share in recent years by evading tariffs on low-value products shipped directly to consumers.
Mr. Musliner’s company, InRoad Toys, has been crushed by the rise of these Chinese e-commerce giants, he said. His business, in Crofton, Md., sells road tape for toy cars — which is, as it sounds, tape that looks like a road — all of which is manufactured in bulk in China and shipped in containers to the United States. His business was booming, with double-digit sales growth several years in a row. That came to an end in 2023, when Temu’s popularity in the United States exploded after the company’s high-profile Super Bowl commercial.
Mr. Musliner’s sales suddenly plummeted. American customers started to buy Temu’s knockoffs of a similar roll of road tape for $1.50, far cheaper than his $9 product. Within months, his revenue fell 30 percent.
“No amount of cost cutting is going to get me to that price point,” he said. “I manufacture in China, I import my goods, I sell them on Amazon for a price that takes into account all of those costs.”
Ending the loophole — known as de minimis — for goods from China could level the playing field for small consumer brands that say they are being undercut by Temu and Shein’s business model. Mr. Musliner said he was encouraged when the Biden administration proposed reforms to the provision last year and even more pleased when the Trump administration moved to end it altogether.
But small-business owners who may otherwise have reason to celebrate now face a dilemma. Any potential benefits of scrapping the shipping workaround are being outweighed by Mr. Trump’s sky-high tariffs on Chinese goods, offering little immediate relief. Mr. Trump has imposed a tariff rate of at least 145 percent on imports from China and a base-line 10 percent tax on dozens of other trading partners.
“If we are privileged enough to start getting more business because of less competition, then we’ll have to manufacture more to meet that need,” Mr. Musliner said. “But guess what. That will cost more money, which we won’t have.”
Top Trump administration officials are set to meet with their Chinese counterparts in Switzerland this weekend, in what will be their first formal meeting about trade since Mr. Trump imposed tariffs at triple-digit levels last month. On Friday, Mr. Trump suggested he was open to dropping the tariffs to 80 percent, though even that level could be too high for many importers, particularly small businesses.
Jyoti Jaiswal, who lives in Syosset, N.Y., designs handmade crafts and clothing mostly made in India, which she sells through her family-run business, OMSutra. She said competition from companies that imported goods cheaply into the United States from China had been a challenge, forcing her to discontinue certain products. Shein and Temu, in the last few years, have chipped away at her sales of crafted sheets, scarves and jewelry, she said. Customers have opted for similar products, despite lower quality, offered at a fraction of her prices.
With the dominance of these fast-fashion retailers in mind, Ms. Jaiswal called the end of de minimis for China a “fair trade policy.”
But Mr. Trump’s suite of other tariffs is taking center stage for her, too. A 10 percent tariff on imports from India is already in effect, and the threat of a higher 26 percent tax on the country still looms, once Mr. Trump’s 90-day pause on reciprocal tariffs ends in July. Ms. Jaiswal has paused some business activity, including an upcoming introduction of a new collection of scarves and travel products.
“It’s very hard for us to plan things and say what would be the pricing for those products, whether we would be able to market them or not,” Ms. Jaiswal said.
On Thursday, Mr. Trump announced a framework for a trade agreement with Britain, but deals with India and other countries have yet to be negotiated or completed.
Shortly after Mr. Trump’s order closing the de minimis exemption for China took effect, Temu said it had stopped shipping products from China directly to customers in the United States. Instead, all of its U.S. orders will be shipped from local warehouses in America, signaling a fundamental shift in response to the new taxes on low-value Chinese imports.
Not all small businesses stand to gain from the end of the shipping loophole. And unlike major retailers such as Temu, many are unable to quickly rearrange their supply chains.
John Arensmeyer, the chief executive of the Small Business Majority, an advocacy group, framed changes to the provision as part of broader frustration among small businesses about the Trump administration’s tariffs. Some business owners, who have relied on the duty-free exemption to import small products that they sell in the United States, or components of products, have bemoaned the new taxes on low-value imports, he added.
For businesses that depend on de minimis, the challenge is amplified by Mr. Trump’s 145 percent tariffs on Chinese goods, which now apply to previously tax-free imports.
“Now, all of a sudden, losing that is an even bigger impact than if they had lost it last year,” Mr. Arensmeyer said.
Small e-commerce vendors who sell products on popular online marketplaces are bracing to bear the brunt of the fallout, in the United States and overseas. Cori Kyle, who lives near Vancouver, British Columbia, and whose Etsy jewelry business is her main source of income, said she was preparing to halt all sales to U.S. customers. The de minimis closure is likely to make her items too expensive for Americans to buy; since the original lockets come from China, they are now subject to high tariffs. The bulk of her sales may soon be cut off.
Still, for American mom-and-pop retailers that have seen their sales dented by Shein’s and Temu’s inroads into the U.S. market, the policy change has the potential to be a boost.
For Mike Gray, the hit from competition with Chinese e-commerce platforms started to appear about five years ago in the “decimation” of his electric bike business. Mr. Gray owns Sourland Cycles, a bike shop in Hopewell, N.J., and 20 percent of his sales used to come from e-bikes. But as Shein and Temu grew in popularity, customers started to gravitate toward e-bikes shipped cheaply into the United States through de minimis. His e-bike sales fell to roughly 5 percent of his overall sales.
“It took a big chunk,” Mr. Gray said. Many of the cheaper e-bikes experience brake malfunctions and lack parts, he said, but the low prices have lured customers to e-commerce sites nonetheless.
Mr. Gray said he hoped the Trump administration’s closing of de minimis for China lasted. He called the change a “silver lining” that could level the playing field, at least slightly.
But for now, Mr. Gray is squarely focused on figuring out how to price his bikes as manufacturers start to raise their prices by different amounts, citing tariff-driven cost increases. Ibis, a bike manufacturer, added a 5 percent tariff fee, or more than $120, to one of its mountain bikes last week, Mr. Gray said.
“It’s hard to put that in perspective and think about it,” he said of the effect of the de minimis change, “when you’ve got all this uncertainty around prices.”
