SCOTT SIMON, HOST:
A head-spinning week for the economy - President Trump's tariffs hitting just about every nation and every industry. Here's something that got less attention. The president also moved to close a popular loophole known as the de minimis rule. It allows millions of U.S. shoppers to buy products - everything from shoes and underwear to lamps and tools - directly from retailers in China and Hong Kong. Till now, you could make those purchases without paying import taxes. That's about to change. NPR's Brian Mann has been following this. Brian, thanks for being with us.
BRIAN MANN, BYLINE: Hi there, Scott.
SIMON: How big is closing this loophole?
MANN: Well, Scott it's huge, really, in two ways. First, it's going to affect a lot of American consumers who've come to rely on big Chinese e-commerce firms like Shein and Temu for a lot of low-cost products. As you mentioned, this is everything from fast fashion to toys and tools. These companies have built global brands marketing on social media platforms, like Instagram and TikTok, where influencers celebrate when their packages arrive.
UNIDENTIFIED TIKTOKKER: Check out my latest Shein haul. Ballet flats are trending, and this quilted pair has a great cushion sole. I never thought I would wear chunky sneakers, but these neutral...
MANN: Yeah, Scott, for the last decade U.S. shoppers fell in love with these companies. Direct-to-consumer international shipments explode to around $54 billion in sales last year - roughly 4 million packages coming every day.
SIMON: What's going to change with Trump's new executive order?
MANN: So under this de minimis rule, shoppers who place orders worth under 800 bucks - and you can get a lot of low-cost dresses or office supplies for that amount - they haven't, until now, been hit with duties or taxes. And they also get their packages really fast because they haven't had to wait for the usual customs and inspection process. But under the president's executive order, that's going to come to a screeching halt May 2. Every package will now face a tariff of 30%. Eventually, anything consumers order in this way is going to face a minimum fee of 50 bucks. And remember, if you're buying...
SIMON: Wow.
MANN: ...A $2 t-shirt or a $10 skirt, that amount of tax is a huge markup. And, Scott, one thing that's interesting here - a study published last year predicts this change is going to cost Americans more than $10 billion a year in higher prices, with much of that burden hitting lower-income shoppers.
SIMON: If buying directly from Chinese and Hong Kong retailers is so popular in America, why change the rule?
MANN: You know, that's a great question. And a lot of President Trump's tariffs have obviously been controversial, but this move actually has broad bipartisan support, backing from a bunch of different public safety and industry groups. And they have really two arguments. First, they say, this has been unfair competition - all these cheap, untaxed goods, flooding American markets, pricing out U.S. manufacturers. Second, government officials believe a lot of illegal stuff, including street fentanyl. The drug is coming across the border hidden in these packages. I spoke about this with Kimberly Glas. She heads the National Council of Textile Organization (ph). That's a trade group that supports U.S. clothes makers.
KIMBERLY GLAS: And it's regrettably facilitated fentanyl and other illicit products, like forced labor products, to our front doors, on our steps, babies' products that are failing to meet FDA standards.
MANN: Now, I should say, these big e-commerce companies, like Shein and Temu, say they do have ethical supply chains and quality control. But what we know is that this change, it's going to be a huge blow to their business model.
SIMON: Brian, this executive order only affects shipments from China and Hong Kong. What about products that are sold directly from other countries?
MANN: Yeah. So for now, shoppers can still buy directly from retailers shipping from other countries like Bangladesh, India and Vietnam. But the Trump administration has signaled that it plans to close these de minimis loopholes in the months ahead for the entire globe. They're phasing this in slowly, because it turns out it's a big challenge for U.S. Customs and Border Protection to process and tax all these millions of packages. Scott, Trump actually tried to close this loophole back in February, and at that time, his team said they just weren't ready. Now White House officials say they have systems in place to manage this change, but some of the experts I've been speaking to think we could see big bottlenecks as retailers and shoppers adapt to these new rules.
SIMON: NPR correspondent Brian Mann. Thanks so much.
MANN: All right, Scott. Thank you. Transcript provided by NPR, Copyright NPR.
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