It’s starting.
The de minimis exemption, which allows parcels of goods worth $800 or less to come into the United States duty/tariff free, expired for made-in-China goods on Friday May 2nd 2025 at 12:01 AM ET.
Which means things just got very real for brands who make their stuff in China, and until now had shipped anything under $800 direct to US customers duty/tariff free.
“So what? I never bought any of that cheap junk off Shein or Teemu anyway.”
Me neither. But here’s how this is now affecting a company like Spier & Mackay, who warehouses their goods in Canada and ships over the border to many of their customers in the United States. It doesn’t matter that an item is not shipping direct from China (like Teemu and Shein’s business model.) If the item is made in China (current baseline tariff of 145%), and is sent over the border by a private delivery company like DHL, UPS, or Fed Ex, then it’s now subject to all tariffs, baseline and add-ons depending on category of good and composition…
Pre tariff: Spier Half Canvas Red Label Suit – $253.30
Post tariff: Spier Half Canvas Red Label Suit – $683.91
Pre tariff: Spier Blake Stitched Cap Toe Shoes – $188
Post tariff: Spier Blake Stitched Cap Toe Shoes – $507.60
“Whatever. I don’t shop at Spier. Besides, didn’t the rest of the world’s tariffs get paused?“
Sort of. Right now there’s a baseline 10% on the rest of the world until July 9th. That’s when the original so-called “reciprocal tariffs” (full list here) are scheduled to go into effect. And while the de minimis exemption remains in place for the rest of the world for now, the executive branch has said they plan on cancelling the exemption for other countries when “systems are in place to collect duty revenue” with few exceptions.
If that happens, prices may significantly jump on imported direct to consumer goods such as:
- Shoes made in Colombia (scheduled reciprocal tariff: 25%)
- Suits made in Bulgaria (scheduled reciprocal tariff: 20%)
- Watches made in Switzerland* (scheduled reciprocal tariff: 32%)
- *most Swiss watches are over $800, therefore subject to tariffs/duties regardless.
“Well I’ll just buy my stuff at brands that don’t ship to my door from over the border. So this de minimis nonsense won’t apply to me.”
A pair of Made in Colombia DTC sneakers
Good call. But the domestic based retailers are running out of pre-tariff stuff. Yes they rushed in extra in the hopes that trade deals get done by July 9th. The problem is it usually takes a long time (average of 18 months) to do a trade deal. And there are a lot of deals that need to be done. Additionally, now that the de minimis exemption has expired, where do you think all the people who shopped that way are gonna shop? Don’t underestimate that number. According to CNN, “more than 80% of total US e-commerce shipments in 2022 were de minimis imports,” whether from China or somewhere else. It’s a supply/demand shock happening in a supremely compressed time frame.
“Meh. I’ll just buy less. We all buy too much crap anyway.”
That’s a noble strategy. And yes, it’s agreed we all consume too much. But in the final quarter of 2024, personal consumption expenditures accounted for almost 68% off GDP. Or as US Bank puts it: “Healthy consumer activity is the primary economic growth driver.” That’s a huge percentage of the overall economy. So the risk is a severe pullback in that area will slow or destroy growth JUST as tariffs cause price inflation. That’s the literal definition of Stagflation, which is a particularly nasty boogeyman who very much keeps economists up at night. It boxes the Federal Reserve in because they can’t lower interest rates to spur growth, as lower interest rates can inflame inflation. We all learned that in the backwash of the pandemic.
Money. It’s a gas.
The concern is that the expiration of the de minimis exemption is somehow a preview of what’s to come this summer when the 90-day pause expires. Of course the reciprocal tariffs are a different policy, but they all live under the administration’s trade strategy, and they’re being implemented by the same people.
If (and it’s a big if) the proverbial economic “canary in the coal mine” is named De Minimis, then the bird just crapped its feathers, and there’s barf all over its beak.
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