‘De minimis’ exemption for shipments worth $800 or less now has ended
Shares of Etsy Inc. and eBay Inc. have been down sharply over the past week, with analysts pinning the moves on the Trump administration’s closure of a trade loophole on Friday.
The “de minimis” exemption has made it possible for shipments worth $800 or less to avoid tariffs and U.S. Customs and Border Patrol scrutiny. It was ended in May for shipments from China, hurting e-commerce companies Shein and PDD Holdings Inc.’s (-1.34%) Temu, and the loophole now has gone away for all other countries, as well.
President Donald Trump rolled out an executive order targeting de minimis treatment on July 30, specifying that the exemption would end at 12:01 a.m. Eastern time Friday.
Trump’s order is “removing a key channel for low-value cross-border shipments,” Cantor analysts said in a report, and Etsy (-1.43%), eBay (-1.70%) and Shopify (SHOP -0.06%) “likely have notable direct exposure.” They noted that Etsy and eBay have underperformed the Nasdaq Composite Index (-1.15%) over the past week. As of Thursday’s close, Etsy shares are down 14% over the past five trading sessions, while eBay has dropped 6% and Shopify is down 1%. The Nasdaq is up 1% over the same period.
“Over the medium term, supply diversification from domestic sellers should mitigate the impact on demand,” the Cantor analysts wrote.
Etsy has offered a guide to its sellers as the de minimis exemption comes to an end, promising to “continue to share updates over the next few months that make it easier to facilitate cross-border transactions and incorporate the cost of tariffs into your shop operations.” The chief executive for eBay, Jamie Iannone, said during an earnings call on July 30 that the company is “not immune to the increased costs from tariffs” but believes it is “relatively resilient from that perspective, more so than others.”
The overall impact to the U.S. economy of eliminating the loophole is “likely to be limited,” Evercore ISI analysts said in a note. Shipments claiming the de minimis exemption were valued at $65 billion in the past fiscal year, amounting to around 2% of total U.S. imports.
While postal carriers for a number of countries have announced they’re temporarily suspending shipments to the U.S. due to operational uncertainty around the new policy, the Evercore analysts noted that Customs and Border Patrol data show that more than 90% of de minimis packages are carried by private express carriers and logistics providers, who are “not indicating any disruption when the policy takes effect.”
“The move will have an impact on some consumers who will now bear at least a share of tariffs as well as the higher administrative costs associated with processing smaller packages for tariff collection,” the Evercore analysts said. They noted that a recent study found that both high- and low-income households have taken advantage of the de minimis exemption, but that “low-income households benefit disproportionately as a share of their income.”
In addition, Evercore’s team noted that all existing tariffs now will apply to packages under $800, except during a six-month transition period when there will be an option of paying either a percentage rate equal to the country-specific tariff or a flat fee ranging from $80 to $200 that scales with the country’s tariff rate.
Peter Navarro, Trump’s senior counselor for trade and manufacturing, predicted on Thursday afternoon that ending the de minimis loophole “will save thousands of American lives by restricting the flow of narcotics and other dangerous and prohibited items, add up to $10 billion a year in tariff revenues to our Treasury, create thousands of jobs and defend against billions of dollars more lost in counterfeiting, piracy and intellectual-property theft.”
Navarro also criticized foreign postal carriers that have suspended shipments to the U.S.
“Foreign post offices need to get their act together when it comes to monitoring and policing the use of international mail for smuggling and tariff-evasion purposes,” the Trump adviser told reporters during a briefing. “We are going to help them do that, but at this point, they are vastly underperforming express carriers like FedEx (-0.29%), DHL (-0.36%) and UPS (+0.24%) .”
The Alliance for American Manufacturing is among the organizations praising Trump’s move.
“Closure of the de minimis loophole is an important step forward, but there’s still more work to be done in leveling the playing field for U.S. manufacturers,” AAM President Scott Paul said in a statement. He said the loophole hurt American manufacturers and was “exposing American consumers to illegal, counterfeit and toxic products.”
