Trump abruptly axes obscure US trade rule after dubbing it a ‘catastrophic loophole’ — and it could end up costing Americans $10.9 billion

Lynlee Brown, a partner in the global trade division at the accounting firm EY, told CNBC that the change is going to "cause a bit of pandemonium. [1]"

Here’s why the end of the exemption is sending retailers into a panic — and why you could soon be paying more for certain retail goods.

How Trump’s executive order affects retailers

Since 2016, the de minimis exemption allowed goods to enter the U.S. duty-free (without import taxes), as long as the value of the items were under $800. This trade rule was originally expected to come to an end in July 2027, but Trump’s decision to end what he called a "catastrophic loophole" has sent retailers scrambling to change their earnings projections.

For example, retail giant Tapestry — which owns fashion brands such as Kate Spade and Coach — has already projected that the end of the de minimis exemption will result in a $160 million hit to its profits. Nearly 15% of the company’s sales used to be covered under de minimis, and those sales will now be subject to a 30% tariff.

Shares in the company fell nearly 16% on the day that Tapestry reported the hit to its profits.

While Trump's executive order may cause retail businesses to struggle, the White House believes it will shine a light on the cheap and sometimes unsafe goods entering the U.S. tariff-free. The White House also claims the de minimis exemption gave an advantage to drug smugglers, as fentanyl and other deadly drugs were reportedly brought into the country in shipping containers that contained cheap goods which were not subject to border inspection [2].

However, while the executive order seems to take direct aim at retailers like Shein and Temu, the impact of the order may disrupt supply chains in many industries that rely on the ability to bring in cheap items or products from overseas.

The U.S. Customs and Border Patrol reports that prior to the executive order, it processed over four million de minimis shipments coming into the U.S. on a daily basis, with 60 percent of these shipments coming from China [1].

Many companies adjusted their supply chains to work around the de minimis exemption by using bonded warehouses to bring in inexpensive goods in bulk. These warehouses allow companies to import and store goods in the U.S. without paying tariffs up front — then, as customers make their orders, small amounts of the imported goods could be removed from storage and “cross” the U.S. border, where the goods were processed as duty-free since they are below the $800 limit.

CNBC reports that 1.36 billion shipments came in under the exemption in 2024, up from just 134 million in 2015. While major retailers might be able to take the hit from Trump’s executive order, independent businesses that sell on marketplaces like eBay, Shopify and Etsy are raising the alarm, claiming they won't be able to afford the added costs and still turn a profit.

“This is devastating on so many levels and millions of small businesses worldwide are now having their careers, passions and livelihoods threatened,” said Blair Nadeau, a Canadian bridal accessories company owner who does the majority of her business with U.S. customers.

What consumers can do to keep costs down

With the end of the de minimis exemption, American consumers are also expected to pay the price.

According to Pablo D. Fajgelbaum and Amit Khandelwal of the National Bureau of Economic Research, Trump’s executive order could cost U.S. consumers $10.9 billion, or $136 per family. The report also found that minority and low-income consumers who rely on cheap imported goods would feel the biggest impact from the loss of de minimis [3].