End of de minimis loophole means higher prices for overseas goods, experts say

The end of the de minimis tax loophole on Friday means that low-cost shipments to the U.S. are no longer exempt from import duties, a potential hit to consumers ordering goods from abroad.

Under the prior tax break, parcels containing goods worth less than $800 were not subject to tariffs, making many products from overseas, such as clothing and beauty products, a cheaper alternative to U.S.-made items.

Now, stepped-up duties apply to all online orders entering the U.S. That could lead to higher costs and longer delivery times given that customs agents must now inspect and process the shipments, experts said.

"This means that, when making e-commerce purchases from your favorite international sites that you didn't have to worry about paying duties on before — now you have to," Rathna Sharad, CEO and co-founder of FlavorCloud, a global logistics platform, told CBS MoneyWatch. "This increases the cost of common consumer goods, and it varies widely by category of product."

In her case, Sharad said the cost of the Korean beauty products she likes has already risen about 15%. "It's a massive change for U.S. consumers, and a big change for brands and retailers because they have to scramble to figure out their pricing strategies and what this means for them."

The White House on July 30 announced it would suspend the de minimis treatment, calling it a "catastrophic loophole" that provided a pathway for opioids "as well as other unsafe or below-market products that harm American workers and businesses" to enter the U.S.

The White house said in a statement to CBS MoneyWatch that the loophole was exploited by bad actors.

"Between 2015 and 2024, shipments that entered the United States under de minimis ballooned by over 900%," White House spokesperson Kush Desai said in a statement. "Thanks to President Trump's historic action, the days of criminal exporters and drug traffickers exploiting the de minimis loophole to flood our country with counterfeit goods, lead toys and illicit drugs like fentanyl are over."

The International Trade Administration, a federal agency, also cited statements from companies praising the move.

"The de minimis loophole has long provided an opportunity for some importers & retailers to avoid paying their fair share of U.S. duties," Gap said Friday. "These packages are also typically subject to minimal inspection, raising potential safety concerns for U.S. consumers. Closing this loophole strengthens our nation's supply chain integrity, improves consumer protection, and levels the playing field for all retailers."

Peter Navarro, Mr. Trump's senior counselor for trade and manufacturing, said on a call with reporters on Thursday that ending the exemption would generate up to $10 billion a year in tariff revenues, while also creating thousands of jobs.

According to a recent FlavorCloud analysis, a pair of lined slippers made in China and shipped to the U.S. that previously cost $30 when the de minimis exemption was in force will now cost $44.37, an increase of 51%. That figure factors in several U.S.tariffs on imports: a 12.5% levy on slippers; 20% duty on Chinese goods; and a 10% universal tariff on all imports, as well as a $2.62 merchandise processing fee to calculate the new price.

A nutritional supplement from Canada that formerly cost $37 will now run $60.17 with tariffs in effect, FlavorCloud also found. And a stainless steel water bottle from the U.K. that cost $15 when ordered online in the U.S. will see its price rise to $21.81 once tariffs are applied.

Additionally, a chef's knife from Japan that previously sold for $240 online could cost $298.49 after accounting for applicable tariffs, according to the same analysis.

To be sure, some foreign manufacturers could choose to absorb the cost of higher U.S. tariffs — which are typically paid by importers here at home — experts said.

"Because consumers want bargains, many companies may choose to bite the bullet and incur the increased import costs if they could remain competitive," said Augustine Lo, a partner at international law firm Dorsey & Whitney, while noting that abolishing the de minimis loophole amounts to a heavy burden on small and midsize businesses.

Indeed, for now tariffs have had relatively little impact on the rate of U.S. inflation, economic data shows, although forecasters note that it can take up to a year for levies to trickle into consumer prices.

Shoppers can take certain steps to avoid being hit with surprise costs when ordering goods online from overseas.

First, check a product's country of origin before making a purchase. U.S.-based sellers often ship goods from their warehouses abroad, which could greatly increase the cost of an item now that tariffs are being applied. More specifically, look for tariff surcharges listed as line items on companies' websites, and decide if the extra charges are worth the cost.

For example, if the imports duties on a particular good exceed its value, it may not be worth buying. At minimum, factor in such added costs into your budget while shopping, FlavorCloud recommends.

The bottom line is that the end of the de minimis loophole amounts to a major shift for consumers and businesses alike, according to Sean Henry, CEO and co-founder of Stord, an e-commerce fulfillment platform.

"It's a large change because over the last decade, de minimis has accounted for such a large portion of online sales," Henry told CBS MoneyWatch.

In 2024, U.S. Customs and Border Patrol processed $65 billion worth of de minimis packages.

"It was a way to allow international sellers a fast path, with no paperwork or customs duties, into the U.S.," Henry said. "It's like they were in the fast line at the airport and ran right through. Now, all of a sudden, those same packages are being put into general boarding, and it's going to slow everything down."