The shipping rule squeezing small businesses

Thuy Huynh has sold French antiques on Etsy for more than a decade and earned a five-star rating. She imported merchandise under the “de minimis” exemption, which allowed small-value packages to enter the United States duty-free. But when that exemption ended last summer, it threw Huynh’s business plan into uncertainty.

“There was a time I was thinking I might not be able to do business anymore,” Huynh said. “Everything became more expensive than it should be.”

She knows the tariff rates on her packages, but she doesn’t know the added fees and can only guesstimate the total amount she will ultimately pay for each shipment. Her packages are often stuck in long processing queues. Additionally, she never knows when the rules might change.

“It’s not fair that small businesses have to deal with that,” Huynh said. “Bigger businesses can stay in business and they can handle that. But small businesses don’t have a lot of money overhead to cover all of those fees.”

The Trump administration formally ended the de minimis exemption in August 2025 because it said the loophole allowed drug traffickers to smuggle dangerous fentanyl into the country in uninspected packages. The move also aligned with President Donald Trump’s goal of leveling the playing field in international trade, since other countries’ de minimis rules were far less generous. But analysts say that confusion over the new rules and increased costs are disproportionately affecting small business owners while also raising prices for consumers with the tightest budgets.

The de minimis rule has been a boon for small businesses since its passage just before World War II. In 1930, the protectionist Smoot-Hawley Tariff Act significantly raised import duties, triggering retaliatory tariffs from abroad and slashing U.S. exports to Europe by more than 60%. Eight years later, amid concessions that the tariffs had likely worsened the Great Depression, Congress passed the de minimis rule to exempt low-value goods.

“It was about facilitating trade,” explained Martin Palmer, co-founder of Hurricane Commerce and a logistics expert. “Why would you spend $1 to collect 50 cents?”

The original 1938 de minimis rule exempted goods from import duties if they were valued at less than $1 (about $23 in today’s money). In 1994, legislators increased the limit to $200, then to $800 under the Obama administration.

The limit reset daily, so importers could keep up their inventories without having to pay tariffs and without having to file extensive, confusing paperwork. Growth was particularly strong in the e-commerce sector, with shop owners bringing in antiques, medicines, artwork, auto parts, electrical components, and more. Large foreign companies like Shein and Temu—ultra-low-cost clothing and household retailers located in China—shipped low-value packages to individual customers who each had a daily $800 limit.

But the Trump administration argued that behind that growth was a dangerous wave of drug smuggling and foreign opportunism. The opioid crisis, contributing to the drug overdose deaths of roughly 80,000 Americans in 2024, gave Trump the authority and the justification to terminate the exemption under the International Emergency Economic Powers Act, which he had already used to justify many of his tariffs.

About 92% of all cargo entering the United States in recent years did so under the de minimis exemption, according to U.S. Customs and Border Protection. That amounted to roughly 4 million packages per day. Packages shipped under the de minimis rule faced minimal inspection due to the enormous volume of shipments.

Most of these shipments arrive in U.S. airports, where Andrew Renna, assistant port director for cargo operations at New York’s JFK Airport, said there’s limited capacity to process them.

“There is no physical way if I doubled or even tripled my staffing that I could look at a significant percentage of that,” he told CBP investigators. “We’ve encountered shipments that have been declared as footwear and jackets, but found smuggled beef, pork, and poultry animal products instead.” Another officer described finding an AK-47 receiver hidden in a block of chocolate.

High costs for shoppers

The de minimis rule also opened the door to trade practices that Trump, who wants to promote U.S.-based manufacturing, has described as unfair and predatory. While cheap Chinese imports cornered the U.S. market for low-cost household items, China did not offer a de minimis exemption to U.S. exporters and has long charged high tariffs on U.S. goods. Many believed that ending the de minimis exemption could help level the playing field.

Last year, with de minimis eliminated and other import restrictions in place, the U.S. trade deficit with China fell to $202 billion, down from about $295 billion in 2024. In an April address to Congress, the White House touted the drop as a policy success and a boost for trade fairness.

Still, many economists worry a falling trade deficit isn’t necessarily a good sign.

“Trade is fair already if people voluntarily agree to do it,” said Anne Bradley, vice president for academic affairs at the Fund for American Studies. “Is [this policy] really going to level the playing field? No, I don’t think it is. I think it’s just going to make trade more expensive.”

A Yale study predicted cost hikes of $163 per household after the end of de minimis, or about $13 billion across the entire economy. The burden falls heaviest on low-income consumers who are more reliant on cheap imports than other Americans. Nearly three-quarters of the packages shipped to low-income ZIP codes fell under the de minimis exemption, according to the same study.

Many large companies like Temu and Shein adapted quickly to losing the de minimis rule by opening distribution centers inside U.S. borders, a project they had already started before the Trump administration’s decision. The companies could absorb at least part of increased tariff costs with lower per-item handling costs, and they could leverage other tariff strategies exclusive to large, consolidated shipments.

But small businesses aren’t able to make such hefty adjustments so easily.

Unlike Temu and Shein, “Little Jack Jones, who’s trying to make something out of his garage, [hasn’t] got that facility to come up with a solution,” said Palmer from Hurricane Commerce. “Jack Jones is sitting there thinking, ‘I might as well pack up and go home.’”

Will the policy decrease drugs shipments?

Some analysts warn that it’s hard to determine whether ending de minimis accomplishes the president’s goal of halting drug smuggling through mislabeled or deceptive packages.

Although Customs and Border Protection has reported significant increases in the amount of drugs and drug paraphernalia it agents have seized, it’s unclear whether this is attributable to a higher rate of shipment or if it represents fewer drugs crossing the border. There’s also no way to measure the quantity of drugs crossing the border undetected. And since statistics on drug overdoses and deaths are delayed by about two years, it’s too early to tell if these numbers may be declining as a result of Trump’s policies.

Drug users will find a way to get drugs, Bradley said, even if they aren’t smuggled in through traditional methods. She blames the sharp uptick in deadly fentanyl on legislation that made weaker opioids more difficult to obtain. And she worries the end of de minimis will only lead to creative smuggling alternatives.

“It’s very hard to construct a scenario where tariffs are going to stop that,” Bradley said.

The future of de minimis

After Trump announced the end of de minimis in the United States, the European Union fast-tracked a similar plan to end de minimis for its 27 member countries. Bradley said one side will eventually have to back down on tightening trade restrictions.

“The end game is a loss of wealth, a loss of dynamism, a loss of growth, a loss of jobs,” Bradley said.

Although the Supreme Court ruled many of Trump’s tariffs unconstitutional in February, justices specified that the ruling did not affect the president’s authority to rule on de minimis. Since then, many companies have filed new lawsuits challenging Trump’s trade restrictions. The U.S. Court of International Trade is hearing a case in which plaintiffs argue the end of de minimis amounts to an unconstitutional tariff that caused undue hardship, including layoffs and warehouse closures.

Meanwhile, for Huynh’s small business, it’s a waiting game. Although the base tariff rate is 15% for most goods imported from Europe, Huynh estimates she’s paying about 40% of the value of her packages between tariffs, broker fees, and collection fees.

“It’s frustrating for me because I don’t see anything [Trump] has done for small businesses,” Huynh said. “We don’t really know for sure if it’s going to get better or not. We’re just going to hold out hope.”