The de minimis loophole — used by fast fashion giants to cheaply and quickly gain ground in the US — will officially close, assuming the Trump administration doesn’t reverse its latest decision.
Announced as part of Trump’s ‘Liberation Day’ tariffs rollout on 2 April, it’s just one way global trade is being reconstructed. Since its introduction in 1938, the de minimis exemption has enabled international companies to skip import taxes and customs inspections on shipments valued at $800 or less. Now, it’s set to end on 2 May, barring another reversal. The first elimination in February, announced as part of other tariff measures, was repealed after one week, as packages quickly piled up at US customs.
Large retailers have lobbied against the rule for years, claiming it creates an unfair advantage for foreign fast fashion companies shipping low-cost goods into the country without incurring additional fees, while US companies were held to different standards. To some, it’s been a long time coming. “Over the last few years, being in logistics, we always thought that de minimis would end,” says Maggie Barnett, CEO at LVK Logistics. “We just were waiting for the government to understand what they were giving away [with this loophole].”
The elimination of de minimis is ostensibly good for sustainability because it will prevent fast fashion giants like Shein and Temu from capitalising on the loophole for their ultra-cheap goods.
Some see the closure as a win for sustainable trade over fast fashion, preventing companies like Shein and Temu from capitalising on the loophole to easily gain ground in the US. “The de minimis trade exemption has allowed millions of dollars of cheap, poorly made fashion to flood into our country, undermining American manufacturers and American labour while harming our environment,” American Circular Textiles, an industry coalition, said in a release. The organisation is calling for the tariff funds to be used to support reshoring, onshoring and rebuilding incentives.
Resale platform Thredup said in a statement it applauds the end of the de minimis exemption, “a critical step in addressing the unsustainable flow of ultra-fast fashion into the US”. “We believe that making fast fashion more expensive will incentivise consumers to choose quality, durability and secondhand options. Thredup sees this policy as a significant win for both the environment and the future of sustainable fashion,” the statement reads.
But these giants are well-positioned to find alternatives, and as prices rise across the board in step with global tariffs, they could remain the most affordable option even without the loophole. It’s also a hit to the independent and emerging designers who relied on this clause to penetrate the US market, with these changes arriving at an especially tough time for retail. “This is not happening at a point when retail or fashion is particularly strong,” says luxury industry advisor Robert Burke.
Bottom of the barrel
Consumer confidence in the US is dropping thanks to incoming tariff hikes, meaning many will be looking for affordable options. “This is going to be across the board, with luxury goods as well, it could very well be an opportunity for fast fashion,” Burke says. Sky Canaves, principal retail and e-commerce analyst at market research firm Emarketer, agrees. “If these are still the lowest price options for consumers, they will still look to those brands,” Canaves says. They’re likely to seek out promotions and discounts, too, even among lower priced brands, in an attempt to get closer to where pricing used to be, she flags.
There’s also a chance that consumers will trade down, driving even more people towards fast fashion purchases, Burke cautions. Plus, he flags, when consumers are squeezed, they’re less likely to prioritise sustainability. “All of a sudden, the consumer is going to prioritise certain things, and sustainability might not be one of them.”
Barnett isn’t convinced. “The whole appeal of fast fashion has always been this perfect storm: it’s a trendy piece; it’s the lowest price; it’s available immediately,” she says. “It’s a spontaneous purchase.” There’s a psychological threshold that will break, Barnett expects, when the price jumps, adding that the shift from a $38 skirt to a $58 or $68 skirt is a big one. Not to mention that customs queues will likely stack up, undermining the immediacy of fast fashion purchases and the increasingly short-lived trends they subscribe to.
It’s a shift that will give consumers pause, particularly for a garment they’re only expecting to wear twice. Barnett anticipates that a consumer shift will follow — with sustainable upsides. “All of those impulse buys, people are going to start thinking twice,” she adds.
These ultra-fast fashion retailers have also been prepping to ensure their prices remain compelling. In March 2024, Temu began recruiting sellers with US-based inventory as part of a “half custody” model, with the goal of shifting half of its supply chain to the US. Shein is more vulnerable, Canaves says, given much of its inventory is still shipped from China, but it’s also been working to ramp up its US distribution.
The little guys
Brands that rely on shipping directly to US consumers from overseas will be challenged not just by price increases, but by the introduction of more complex paperwork, administrative processes and formal customs declarations once these items can no longer come in under the de minimis exemption, Canaves flags.
Sweden-based activewear brand Sisterly Tribe, which is currently growing its US business, is working with logistics partners and reviewing how to absorb or share the added costs. “Navigating these kinds of changes without a large team or financial cushion can be tough,” says founder and CEO Kristin Hars. “This is a particularly challenging situation for smaller, emerging brands that are bootstrapping or operating with limited resources.”
Brands could move operations to the US, but this is no mean feat. “Production in America is not easy to find, it is expensive and it will take years to absorb the production from these other countries in the US — if ever,” Burke says. American Circular Textiles also noted that sufficient options for critical components like buttons or cotton shirting do not exist in the US. “Heightened attention should be placed on raw materials supply chains for the domestic apparel manufacturers impacted by these tariffs,” it said in the release.
Sisterly Tribe, which currently fulfils all of its US orders from its Sweden warehouse, is considering this approach. “This won’t change our commitment [to the US], but it does require us to think more carefully about margins, shipping strategies and how we prioritise growth going forward,” Hars says. “In the long term, setting up a local warehouse in the US and fulfilling orders directly from there is likely the best solution. However, as a small-but-growing brand, managing inventory across multiple locations adds a layer of complexity that we need to approach thoughtfully.”
Waiting game
Experts are quick to flag that this is all speculative. February’s de minimis elimination pause illustrated the US Postal Service’s lack of capacity to handle all of the incoming packages under the formal customs declaration process. “I don’t know how we’re going to get there in one month, especially given all of the cuts in federal staffing that we’ve seen since then,” Canaves says.
Barnett expects that the ultra-high country-based tariffs will be negotiated down, but that the de minimis elimination will remain in place. “It has support on both sides of the house. Multiple bills have been attempted to become legislation from Democrats, from Republicans,” she says. “I don’t think there s gonna be too much pushback around that.”
The stakes are high, but the situational clarity is low. “You never know,” Burke says. “In two weeks, we might not even be dealing with this.”
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