The start of September saw the institution of new rules for how goods purchased from overseas are taxed, with the previous exemption for anything costing under $800 being eliminated. It was something that had been discussed for years but now it’s the law and it means both suppliers and consumers are likely to do things differently going forward.
For those vendors, both foreign and domestic, who had been selling low-cost products, including apparel, fashion accessories and home goods, it’s the end of their business model. With merchandise now being subjected to the same tariff rates as more expensive goods, shoppers will be expected to pay more -- sometimes much more -- and that could mean they won’t be making the purchase at all.
And for those who think this is just impacting direct-export factories in China and elsewhere in Asia, think again. Many independent retailers have been bringing in goods under the former de minimis rules for their stores and websites. E-commerce sellers who operate on platforms like Etsy are also likely to be hit by higher costs.
There is also the added element of the process of paying for these duties. Some international shipping companies have suspended service to the U.S. until they can figure out procedures for passing along these additional costs to buyers. And those consumers, suddenly hit with having to pay additional taxes on their purchases, either at the time they place their order or when they receive it, may decide it’s no longer worth it and cancel their orders.
Temu and Shein, two online sellers that were started in China but subsequently moved their bases elsewhere, were generally acknowledged as the biggest recipients of the former de minimis regulations. Each was estimated to be selling billions of dollars’ worth of goods into the American market each year, accounting for tens of millions of orders each month.
The two companies have said their businesses have been cut back substantially because of the changes in tariff rates but each has vowed it will remain in the U.S. market, setting up manufacturing and wholesaling operations here as well as bringing in product from countries with lower tariff rates. Those are still works in progress and it’s tough to forecast what will ultimately happen to these two sellers as well as others that boomed over the past few years.
Only one thing is certain: American consumers, whether they are buying imported goods carrying higher duties or domestic made product that is more expensive to make in the first place, will end up paying more. It’s another byproduct of the new era of tariffs that continues to ricochet throughout the U.S. consumer products business.