On Friday, the United States ended the nearly century old “de minimis” exemption, which allowed items worth less than $800 to be shipped to the country duty free, without paying any tariffs. The exemption ended for Chinese goods in May, but now the exemption is closed for the rest of the world. The changes were announced via executive order on July 30th, but just took effect on Aug 29th.
In advance of the official termination date, several European countries, as well as Australia, India, Japan, South Korea, Taiwan, Thailand, New Zealand, and Mexico announced suspensions of U.S.-bound shipments because of the pending changes and the lack of guidelines given on how to deal with them. (Some have since resumed service.)
The service suspensions are resulting in many U.S. customers being notified that their orders are being cancelled and refunded, due to foreign postal services not having systems in place to process tariffs or pay them to U.S. Customs and Border Protection.
Alison Layfield, vice president of product development at ePost Global, said:
“In essence, the Trump administration is now asking foreign mail carriers to act as import tax collectors on behalf of the U.S. government — something they aren't set up to do or may be refusing to do. Why would a foreign post collect from a local business for a foreign country’s customs? It’s not something that anyone has done before.”
How much are the tariffs?
- Moving forward, a global baseline of 10% will be in effect, with country-specific tariffs layered on top (30% for China, 50% for India, 40% for Brazil, etc).
- For the first six months, importers can opt to pay a flat-rate duty of $80 to $200 per package shipped from foreign postal agencies.
- Steel, auto imports, and copper face 50% tariffs, and there are special exceptions for products like GPUs.
Are the tariffs legal?
Not according to a federal appeals court in Washington DC, which ruled on Friday that President Trump overstepped his presidential powers when implementing global tariffs. The court said in the 7-4 ruling that:
“[U.S. law] bestows significant authority on the president to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax.”
The ruling added that many of Trump's steep tariffs are “unbounded in scope, amount and duration,” and “assert an expansive authority that is beyond the express limitations” of the law his administration has leaned on.
The court's decision will likely mean that the supreme court will have to rule on whether President Trump (or any U.S. President moving forward) has the legal right to unilaterally upend U.S. trade policy.
Despite the ruling, the tariffs are still in effect. The court said the ruling would not take effect until October 14th, but even then, there's no guarantee that the Trump Administration will abide by it.
President Trump wrote on Truth Social:
“If allowed to stand, this Decision would literally destroy the United States of America. At the start of this Labor Day weekend, we should all remember that TARIFFS are the best tool to help our Workers, and support Companies that produce great MADE IN AMERICA products.”
His statement about “literally destroying the United States of America” feels a bit hyperbolic. Wouldn't it just mean that things simply go back to where they were a few days ago?
Anyway… it's going to be an interesting holiday shopping season. That's for sure.