How the Demise of De Minimis Has Impacted Temu and Shein

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The de minimis exception allows imported goods valued below a certain threshold to enter the U.S. duty-free and with minimal customs processing, with the current threshold being $800 per shipment for most goods coming from any country abroad. But the Trump administration has taken aim at the rule, arguing that criminals take advantage of it to import drugs and other illegal goods into the United States, and that it creates unfair competition for American companies. 

E-commerce platforms like Shein and Temu have built retail empires on top of the rule, offering quick and easy direct-to-consumer shipping, mostly from China. But this business model is ending. After a temporary suspension (and reinstatement) of the exception for Canada, Mexico and China in February, the administration abolished the exception entirely for China starting May 2. You can see the effects in our data. 

Tariffs drove down Temu’s net value score, while Shein’s continued to rise

Before the revocation of de minimus, consumers’ perceptions of value from Temu and Shein were moving in lockstep. But consumers’ rating of Temu’s net value bottomed out after the May 2 change.

The drop in net value isn’t universal, but has impacted key demographics in Temu’s audience. The discount e-commerce site’s net value improved by 4.2 points between Q1 and Q2 this year among Gen Z adults, but dropped 6.5 percentage points among millennials. Low- and middle-income consumers also see declining value in Temu, dropping 5.8 and 5.4 percentage points over the same time period, respectively.  

This is despite Temu’s efforts to warehouse inventory within U.S. borders, reassure customers that no additional fees are due on delivery and avoid raising prices. On the other hand, Shein hasn’t seen as much volatility in value perception. 

Both brands made nearly identical price increase announcements in late April, but while Temu struggled, Shein’s net value improved an eye-popping 15.4 percentage points among millennials and 14.3 points among high-income shoppers from Q1 to Q2 of this year. The latter group has increasingly shifted to discount brands to maintain their shopping habits in the face of higher prices elsewhere. 

While Shein has actually increased prices due to new tariffs, the brand still offers extremely competitive prices for the apparel industry, which has relatively high margins compared to other retail categories, and their core customer is dedicated to frequent apparel shopping. Temu relies on a more diversified inventory, and the necessary but limiting measure to only sell local inventory to U.S. customers diminished their advantage as an everything store. 

Still, when asked how they’re managing the financial burden of the new tariff policies, Morning Consult’s Tariff Tracker shows that 28% of U.S. consumers say they are considering buying the same number of products but trading down to cheaper alternatives. In the long run, Temu’s value perception should recover.

Loss of perceived value led to a drop in usage

It’s not just brand perception: consumer behavior is changing as well. Morning Consult’s weekly tracking data observed a significant drop-off in usage for both brands after the de minimis policy ended. This aligns with other data on daily active users of the e-commerce platforms.

Weekly users have been relatively stable, as both brands’ superfans have remained fairly consistent. The drop in infrequent users across May was more damaging. The four-week rolling average of the share of U.S. adults who shop at Temu monthly or less often dropped from 26% at the start of May to 18% at the start of June, before rebounding in July. The quick rebound is good news, as a longer-term drop in casual customers diminishes a brand’s opportunity to convert them to more frequent visits.

Net purchase consideration for Temu also dropped nearly 12 percentage points in May, but also saw a June rebound. This can certainly be partly attributed to a May drop in advertising spend from both brands, but the loss in the net value score indicates a longer-term issue for all importers considering raising prices. 

Dealing with the death of de minimis

While only China and Hong Kong have fully lost access to the de minimis exception to date, it is set to expire for all countries on July 1, 2027, as part of the One Big Beautiful Bill Act (OBBBA) that President Donald Trump signed into law in early July. As such, some of the workarounds companies have been using to keep costs down in the interim will not be viable long term. 

One example is shipping components or finished goods to warehouses in third countries like Canada, Mexico or Vietnam and fulfilling orders via de minimis-eligible shipments from there. Just last week, Vietnam agreed to a 20% tariff for their goods being exported directly to the United States, as well as a 40% tariff rate on “transshipments” from China passing through Vietnam on their way to the United States. 

While it is unclear how they will classify transshipments, this leaves actors like Shein that have sought to use warehouses in Vietnam to bypass U.S. tariffs, vulnerable to additional duties. We expect more such measures in other countries. And while there is some ambiguity around de minimis levels, which were negotiated with Canada and Mexico as part of USMCA (the successor treaty to NAFTA), we could still see attempts to close this loophole in the intervening period before the de minimis removal.

The demise of de minimis means that direct-to-consumer retailers like Temu and Shein will have to join other more traditional retailers in watching where the overall tariff rate lands, especially with China. Given the mercurial nature of Trump’s tariff policy thus far, importers are pinning their hopes on TACO: “Trump always chickens out.” With the reciprocal tariff pause now extended to Aug. 1, they have a little more breathing room. But with tariffs between the U.S. and China having gotten up above 100% once this year, we can bet they are not resting easy. For most retailers, increasing prices for consumers is a last resort, given the guaranteed detrimental impact on brand loyalty.