Temu halts China-to-US shipping after de minimis loophole closes

Temu, the fast-growing Chinese e-commerce platform, is pivoting its U.S. operations in response to a major policy shift that shuts down a long-standing trade loophole. The company announced it will now operate through a "local fulfillment model," transitioning all American sales to domestically based sellers and warehouses. This marks a significant change in how Temu does business in its most lucrative overseas market.

The End of the De Minimis Loophole

At the heart of the change is the closure of the de minimis exemption—a U.S. trade rule that had, until now, allowed foreign sellers to ship packages valued under $800 into the country duty-free. Temu and its rival, Shein, heavily relied on this exemption to flood the U.S. market with ultra-cheap goods, bypassing import taxes and customs fees.

Originally enacted in 1938, the de minimis rule was intended to streamline customs processes by exempting low-value imports from duties. Over time, especially after threshold increases, it became a linchpin of cross-border e-commerce. Last year alone, more than one billion packages entered the U.S. under this rule.

But critics—across both the Trump and Biden administrations—argued that the rule was being exploited. They claimed it undercut American businesses, overwhelmed customs officials, and enabled the smuggling of illegal goods, including synthetic opioids like fentanyl. President Trump’s recent executive order officially closed the loophole, reinstating duties and taxes on low-value goods from China.

A Strategic U.S. Pivot

Temu’s response has been swift. Rather than withdrawing from the market or passing on hefty price hikes to consumers, the company says it will maintain current prices by relying on a network of U.S.-based sellers and fulfillment centers. "All sales in the US are now handled by locally based sellers, with orders fulfilled from within the country," Temu confirmed in a statement.

The company has been actively recruiting American businesses to join its platform, positioning the change as a growth opportunity for local merchants. While the long-term impact on pricing remains to be seen, this move could help Temu sidestep tariffs while maintaining operational speed and affordability.

Rising Costs, Shrinking Margins

Still, the economic implications are significant. Chinese e-commerce giants had previously benefited from ultra-low shipping costs and avoided duties entirely, giving them a price edge over American competitors. With the de minimis rule gone, packages from China now face taxes as high as 120%, with flat fees starting at $100—doubling to $200 in June.

Analysts warn that, even with local fulfillment, the shift could squeeze margins and eventually drive up prices. The American Action Forum estimates that ending the exemption could cost U.S. consumers between $8 billion and $30 billion annually.

Global Ripple Effects

The U.S. is not alone in reassessing its trade exemptions. The UK and European Union are also moving toward ending duty-free thresholds for low-value imports. UK Chancellor Rachel Reeves has signaled a review of the current £135 tax-free limit, citing unfair competition with British retailers. Similarly, the EU is considering scrapping its €150 threshold.

These international moves suggest that the era of untaxed, direct-to-consumer imports may be drawing to a close across Western markets, further pressuring Chinese e-commerce firms to rethink their global logistics and pricing models.

What’s Next?

While U.S. consumers may not immediately feel the impact, the convenience and ultra-low prices that fueled Temu’s rise are likely to evolve. Border checks could become slower and more complex. Experts caution that the crackdown on de minimis may do little to stop drug trafficking, which primarily occurs through land borders, while placing added strain on Customs and Border Protection (CBP) resources.

For now, Temu is playing defense with a bold shift in strategy. Whether its new local model can sustain the growth and bargain pricing that made it a household name in online shopping remains to be seen.