Americans could face ‘sticker shock’ as once-small tax exemption ends

By Brett Rowland
The Center Square

Americans could be in for a surprise when a nearly century-old trade rule that allowed shoppers to avoid President Donald Trump’s tariffs expires on Friday.

Those who have had an online order cancelled recently are already dealing with the consequences as countries around the globe figure out how to comply with the end of the exemption. Many foreign postal services temporarily paused shipments to the U.S. this week.

The de minimis duty exemption, which previously allowed goods valued at $800 or less to enter the country without paying duties or certain taxes, sunsets on Friday. The exemption helped online retailers, including Chinese-based Temu, Shein, and many others, as online shopping boomed over the last decade.

Phillip Magness, of the Independent Institute, said most U.S. consumers have never paid the tax before.

“Americans are likely in for a sticker shock from the new de minimis tariffs, or even substantial disruptions to mail order shipments from abroad,” he told The Center Square. “International carriers such as DHL and several postal providers have already announced they are suspending regular shipments to the United States due to the burdens imposed by tariff enforcement.”

On Thursday, after temporarily pausing shipping to the U.S., the United Kingdom’s Royal Mail said it would resume operations at an added cost through a Postal Delivery Duties Paid program.

“For goods (or gifts over $100), shipped via Royal Mail PDDP services, duties will be calculated according to the country tariff for the item’s country of origin (where an item was made),” the Royal Mail said.

The Royal Mail said it wants customers to “carry on” sending packages to the U.S., but items valued at more than $100 could see higher costs.

“There are some administrative fees associated with the new US requirements that will apply to goods and gifts,” it noted. “These fees will be clearly communicated, at the online checkout or at the Post Office, so you’ll know the total amount to pay before you complete your purchase.”

Magness said Democrats could pounce on the new tax.

“I suspect the Democrats will seize on this new tax due to its unpopularity, even if they previously supported it,” he said. “Past rhetoric often changes when it meets political reality.”

The suspensions apply to commercial shipments, not to items sent person-to-person.

As online shopping took off in the U.S., the number of shipments entering the U.S. claiming the de minimis administrative exemption increased by more than 600% from about 139 million in fiscal year 2015 to more than 1 billion in fiscal year 2023. De minimis shipments topped 1.36 billion in 2024, according to U.S. Customs and Border Protection.

Since 1938, the de minimis duty exemption let people avoid paying import tariffs and taxes on items of small value and reduced customs processing, including inspections. The limit was $200 for many years, but President Barack Obama bumped it up to $800 in 2016.

Former President Joe Biden’s U.S. Customs and Border Protection proposed tightening the rule days before he left office.

Trump first suspended the exemption in February, citing the dangers of letting packages from foreign nations cross without inspection amid the fentanyl epidemic. Trump paused that initial executive order until his Secretary of Commerce, Howard Lutnick, said systems were in place to “fully and expeditiously process and collect duties” on goods that would have qualified for the exemption.

Trump issued a new executive order ending the exemption at the end of July. In that order, the president said people were abusing it.

“For example, many shippers go to great lengths to evade law enforcement and hide illicit substances in imports that go through international commerce. These shippers conceal the true contents of shipments sent to the United States through deceptive shipping practices,” the executive order noted. “Some of the techniques employed by these shippers to conceal the true contents of the shipments, the identity of the distributors, and the country of origin of the imports include the use of re-shippers in the United States, false invoices, fraudulent postage, and deceptive packaging. The risks of evasion, deception, and illicit-drug importation are particularly high for low-value articles that have been eligible for duty-free de minimis treatment.”

Etsy, an online marketplace, encouraged its vendors to pre-pay tariffs.

“We strongly suggest you seek out a carrier that lets you pre-pay tariffs, duties, taxes, and other import fees at the time you purchase your shipping labels. This is known as Delivered Duty Paid, or DDP,” it said. “By using DDP shipping options you can calculate and present tariff-inclusive prices on Etsy, which will help alleviate confusion and create a more straightforward and seamless shopping experience.”

Prepaying the taxes “also eliminates the risk of your buyer refusing to pay a tariff after their item has already made the journey to its destination,” Etsy said.

The American Economic Liberties Project, a nonprofit group, said some concerns over the end of the de minimis exemption were overblown. The group noted that the exemption for goods from China ended in May.

“Given the majority of de minimis shipments came from China – up to 76% of such packages in recent years and more than 60% in 2024 – the lack of major disruptions when de minimis treatment was terminated for China four months ago suggests that the doomy warnings from large e-commerce firms and express shippers reflect their unhappiness about the end of this boondoggle, not a prediction of how the policy change will affect most of us,” the group said.