Foreign Retailers Give up on US as Tax on Small Parcels Starts

Some foreign retailers have given up sales to US customers as a tariff exemption for small parcels ended on Friday (May 2).

Other companies have adopted a wait-and-see attitude and see if there are workarounds, especially if the tariff rate can be reduced.

The removal of “de minimis” – duty-free treatment of e-commerce packages worth less than $800 – for products originating from China and Hong Kong exposes those goods to tariffs of 145% on most Chinese goods after US President Donald Trump moved last month to close the trade loophole.

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British beauty products retailer Space NK has paused e-commerce orders and shipping to the US “to avoid incorrect or additional costs being applied to our customers’ orders”, the company said in a notice this week.

It is not alone. Understance, a Vancouver-based company that sells bras and underwear manufactured in China, told customers in an Instagram post that it would no longer ship to the US due to the tariffs, saying it will resume once there is clarity.

“We’re going from zero to 145%, which is really untenable for companies and untenable for customers,” Cindy Allen, CEO of Trade Force Multiplier, a global trade consultancy, said.

“I’ve seen a lot of small to medium-sized businesses just choose to exit the market altogether,” she added.

120% tariff or $100

Import charges can vary depending on shipment methods. For goods handled by the US Postal Service the tariff will be 120% of their value, or $100 per package. The amount is due to increase to $200 in June, according to implementation guidance from US Customs and Border Protection.

Players willing to continue to access the US market are forced to hike their price tags.

Oh Polly, a British clothing retailer, has increased prices in the US by 20% compared to its other markets, and may have to consider further price increases because of the higher tariffs, said managing director Mike Branney.

Singapore-based fast-fashion giant Shein sought to reassure customers in a post on its US Instagram account, saying: “Some products may be priced differently than before, but the majority of our collections remain as affordable as ever.”

Shein sells clothes mostly manufactured in China, and the US is its biggest market.

Temu, the international arm of Chinese e-commerce giant PDD Holdings, prominently featured products already in US warehouses on its website, labelled ‘Local’, and a pop-up informed customers there would be no import charges for local warehouse items.

But items imported before the May 2 change will eventually run out. Both Shein and Temu have slashed their US digital advertising spending in the past weeks as they prepared for the change that is likely to hit their sales.

Loophole used to smuggle fentanyl

De minimis was initially introduced to smooth online shopping and boost international trade, but it became the target of bipartisan criticism due to its role in facilitating smuggling of fentanyl ingredients from China and fuelling a surge in imports of cheap clothes, toys, and furniture made in China through online platforms like Temu, Shein, and Amazon Haul.

De minimis has also been a channel for counterfeit goods. In 2024, de minimis shipments accounted for 97% of the intellectual property infringement-related cargo seizures made by Customs and Border Protection.

Without de minimis, sellers of goods made in China have to provide US customs with more detailed information about where each component of their product is made, an increased administrative burden that, along with the huge tariff cost, is dissuading small retailers.

UPS CEO Carol Tome said this week that many of the delivery firm’s small to medium-sized business customers source 100% of their goods from China.

US online marketplace Etsy said in a notice to sellers earlier this month that it was making it easier for them to clarify the country of origin of their products, as tariffs are applied based on where a good is made rather than where it is dispatched from.

While disruptive to e-commerce, the end of de minimis treatment of Chinese goods could give a boost to retailers less reliant on e-commerce or on Chinese manufacturing.

Fast-fashion retailer Primark, which sells clothes to US customers only through its stores across the country, not online, said it could benefit from the change.

“With prices going up from this part of the trade, I wonder if some Americans might start going back to shopping centres to find value there,” George Weston, CEO of Primark owner Associated British Foods, told Reuters on Tuesday.