In recent years, Chinese online retail platforms like Temu and Shein have exploded onto the global stage, captivating Western consumers with ultra-low prices on everything from fashion to gadgets.
Shein, founded in 2008, and Temu, launched in 2022 by PDD Holdings, have disrupted traditional retail by offering fast fashion and bargain-basement deals shipped directly from China. By 2024, Shein reportedly generated over $45 billion in revenue, while Temu quickly became one of the most downloaded apps in the U.S., boasting millions of daily users.
However, their meteoric rise in markets like the United States, Europe and the United Kingdom has been fueled by a controversial trade loophole known as the “de minimis” exemption, which critics argue has given them an unfair advantage over domestic competitors.
The de minimis rule, derived from the Latin phrase meaning “about minimal things,” is a customs provision designed to facilitate small-scale, low-value imports by waiving duties, taxes, and extensive inspections. In the United States, the threshold was raised from $200 to $800 per shipment in 2016 under the Trade Facilitation and Trade Enforcement Act, ostensibly to ease administrative burdens on customs officials for personal imports.
Similar rules exist in other Western markets: the European Union sets a €150 (about $165) limit for VAT exemptions on imports, while the UK, post-Brexit, maintains a £135 (about $175) threshold for duty-free parcels.
For platforms like Temu and Shein, this exemption became a cornerstone of their business model. By breaking down orders into individual packages valued under the threshold, these companies could ship goods directly from Chinese factories to consumers without incurring tariffs – often 10-25% on apparel and electronics – or undergoing rigorous customs checks.
This “direct-to-consumer” approach bypassed the costs faced by U.S. retailers like Gap or H&M, who import in bulk via containers and pay full duties. In 2022, for instance, Gap paid $700 million in import taxes, while H&M paid $200 million; Temu and Shein paid none.
Temu and Shein’s strategy involved leveraging China’s vast manufacturing ecosystem, where low labor costs and subsidies already kept production expenses minimal. By exploiting de minimis, they avoided additional tariffs imposed during the U.S.-China trade war, such as those under Section 301 of the Trade Act of 1974, which targeted Chinese goods with duties up to 25%. Shipments were sent via air or express mail in small parcels, often containing just one or two items, ensuring each fell below the $800 cap.
This tactic enabled aggressive pricing: a $5 dress on Shein or a $10 gadget on Temu undercut competitors like Amazon or Walmart, who must comply with U.S. import regulations. The result was explosive growth. In fiscal year 2023, the U.S. received approximately 1 billion de minimis parcels valued at $54.5 billion, with China accounting for about $18.4 billion in such exports to the U.S. By 2024, this surged to over 1.36 billion shipments, averaging more than 4 million packages processed daily under the exemption, with 92% originating from China or related hubs like Hong Kong.
In Europe, similar dynamics played out. Shein’s European sales reportedly hit €8 billion in 2023, while Temu expanded rapidly across the EU. The UK’s “de minimis” equivalent allowed tariff-free imports under £135, prompting reviews amid complaints from British retailers. A BBC investigation highlighted how Shein and Temu warned that tariffs would raise prices, echoing U.S. concerns. Critics, including U.S. lawmakers like Rep. Mike Gallagher (R-WI), labeled this “an unfair advantage,” arguing it enabled Chinese firms to “build empires” by dodging oversight.
The de minimis loophole’s exploitation has had multifaceted repercussions. Economically, it distorted competition. U.S. retailers faced higher costs, leading to job losses and store closures – Forever 21 cited “materially negative” impacts from Shein and Temu’s tariff evasion. A 2025 report from the Information Technology and Innovation Foundation (ITIF) noted that closing the loophole could boost U.S. retailers by leveling the playing field.
Beyond economics, security and ethical issues loomed large. The sheer volume of parcels – China’s de minimis exports to the U.S. and Hong Kong rose 176% from 2022 to 2024 – overwhelmed U.S. Customs and Border Protection (CBP), making inspections impractical. This facilitated the influx of counterfeit goods, products made with forced Uyghur labor in Xinjiang, and fentanyl precursors, exacerbating the U.S. opioid crisis. Environmentally, the model promoted disposable “fast fashion,” contributing to waste – much of it ending up in landfills shortly after delivery.
In the EU and UK, concerns mirrored these: reports of cancerous substances in Shein products and unfair competition prompted calls for tighter rules. A 2025 Nikkei Asia article detailed how the loophole’s closure in the U.S. rippled to Europe, forcing price hikes and supply chain shifts.
Bipartisan pressure in the U.S. mounted, culminating in the Trump administration’s actions. In February 2025, an executive order suspended de minimis for Chinese shipments, imposing tariffs up to 120% or flat fees on packages from China and Hong Kong. By May 2025, the exemption was fully ended for these origins, affecting platforms reliant on the model. Legislation like the Closing the De Minimis Loophole Act aimed to eliminate it entirely for Chinese imports under $800.
The fallout was swift. Temu’s daily U.S. users halved by June 2025, while both companies raised prices—some items doubled overnight. Shein and Temu conceded market share, with app rankings plummeting as consumers shifted to U.S. department stores like Nordstrom. Temu pivoted to “local” products and closed warehouses, while Shein warned of higher costs. In Europe, analogous reviews led to potential VAT hikes, with the UK considering tariffs amid similar complaints.
While the de minimis exploitation undeniably gave Temu and Shein an unfair edge – enabling predatory pricing at the expense of Western jobs, safety, and ethics – its closure raises questions about consumer impact. Prices on these platforms have risen 20-50%, potentially inflating costs for low-income shoppers. However, proponents argue this corrects market distortions, fostering sustainable retail and reducing hidden societal costs like fentanyl smuggling.
Ultimately, the saga underscores the tensions in global trade: “free trade” often isn’t free when loopholes allow state-subsidized giants to dominate. As of August 2025, with de minimis largely shuttered for China, Western markets may see a resurgence of domestic players, but at the price of higher bargains. The long-term winner? A more equitable playing field, provided enforcement remains vigilant.