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Americans who love to shop online for a bit of retail therapy are about to have a bad time.
Way back in the 1930s, lawmakers created the de minimis exemption, allowing small packages to enter the US duty-free in order to "avoid the expense and inconvenience" of regulating them. The growth of e-commerce prompted regulators to raise the minimum value of packages exempt from tariffs to $800, ushering in a boom for online retail. Today, 92% of all packages entering the US fall under this exemption, or roughly 4 million shipments per day.
But back in May, President Trump closed this loophole for packages shipped from China—and today, it has ended for packages shipped from everywhere else, forcing companies to either pay a flat fee or pay the tariff rate for the package’s country of origin.
Small business and direct-to-consumer brands have been scrambling to adjust to the new reality, and will likely be forced to raise prices to absorb higher costs. That means tariff inflation is finally on the way, and economists warn these higher prices could make for a very expensive Christmas shopping season for American consumers.
As for stocks, analysts anticipate the new regulations will be a serious blow to UPS, FedEx, and DHL, which shipped a good chunk of the 1.36 billion de minimis packages sent to the US in 2024. Retailers like Tapestry and Lululemon will be hurt by higher costs of shipping goods, while Etsy, eBay, and Thredup could gain ground as online shoppers search for second-hand and domestic alternatives. But the biggest winner of them all is Amazon, which should benefit from its economies of scale and grow into an even greater force in the e-commerce world.—MR