Temu to stop selling goods from China directly to US customers

TBA
May 6
5 min read

Updated: May 29

Temu to stop selling goods from China directly to US customers

As the U.S. cancels its de minimis exemption rule, tariffs and import taxes will be imposed on goods valued under $800.

In response, Chinese cross-border e-commerce platform Temu has announced it will stop directly selling China-imported goods to U.S. consumers through its platform. Sales in the U.S. will now be handled by local sellers, with orders fulfilled and shipped domestically within the United States.

In a statement, Temu said it has been actively recruiting U.S. companies to join its platform. “Now, all sales within the U.S. are handled by local sellers, with orders fulfilled within the country, helping local businesses reach more customers and grow their operations.”

What is the de minimis exemption rule?

The de minimis exemption is a U.S. trade rule enacted by Congress in 1938, intended to avoid the administrative costs associated with collecting small amounts of import duties. When an individual package shipped from overseas to the U.S. is declared at a value of $800 or less, U.S. Customs allows it to enter duty- and tax-free, under this “small-value exemption.”

The original goal of the policy was to simplify customs procedures, reduce the clearance cost of low-value goods, and facilitate personal online shopping or small-scale cross-border trade. But in recent years, large e-commerce platforms like Temu and Shein have used this rule to ship massive quantities of low-cost goods directly from China to U.S. consumers, bypassing tariffs and regulations. This has sparked discontent among the U.S. government and domestic businesses.

Critics of the de minimis rule argue that it creates unfair competition, harms U.S. manufacturing, and increases the risk of illegal smuggling and counterfeit goods. As a result, former President Donald Trump, upon taking office, actively pushed to cancel the exemption, aiming to impose taxes even on low-value packages.

Since returning to the White House in January this year, Trump has already imposed tariffs of up to 145% on Chinese imports. In April, he stated that if the new tariffs are combined with existing ones, the tax rate on some Chinese goods could reach 245%.

How will tax rates change after the exemption is canceled?

With the cancellation of the de minimis exemption, packages shipped from mainland China and Hong Kong to the U.S. — even those valued at $800 or less — will face a 120% tax rate or a fixed fee.

The fee initially starts at $100 and is expected to rise to $200 by early June.

E-commerce platforms Shein and Temu said in statements that “due to recent global trade rule and tariff changes,” their operating costs have increased, leading to price adjustments from April 25 and that they will announce further measures soon.

According to the U.S. Customs and Border Protection (CBP), goods within the exemption scope account for over 90% of all goods entering the U.S.

UK and EU considering review of small-package tariffs

Meanwhile, the United Kingdom has announced it will review low-value imports entering the country.

Currently, U.K. rules allow international retailers to ship packages valued under £135 without paying import taxes.Chancellor Rachel Reeves stated that these cheap goods are “undermining Britain’s high streets and U.K. retailers’ competitiveness.”

The European Union has also proposed canceling the exemption for packages valued under €150 — meaning that U.K. and EU consumers may soon face higher prices as well.

House prices fall in April as stamp duty changes kick in

According to the latest data from Nationwide, since the stamp duty adjustment in April, UK house prices have fallen 0.6% month-on-month, and the annual growth rate of house prices has also slowed. However, home prices are still 3.4% higher compared to the same period last year, with the current average price at £270,752.

Nationwide’s Chief Economist, Robert Gardner, stated that transaction volumes surged in March as buyers rushed to avoid higher stamp duty costs, and “the market may remain slightly subdued in the coming months.” However, with the possibility of further interest rate cuts, homebuying activity may rebound over the summer.

Starting April 1, 2025, the stamp duty exemption threshold for ordinary residential transactions will be lowered, cutting the tax-free threshold for residential property purchases from £250,000 to £125,000, meaning more property transactions will be subject to taxation.

In addition, the benefits for first-time buyers will also be adjusted:

The tax-free threshold will drop from £425,000 to £300,000;
The maximum property price eligible for the 5% stamp duty rate will decrease from £625,000 to £500,000;
If the property price exceeds £500,000, buyers will no longer qualify for any first-time buyer benefits and will have to pay the standard stamp duty rates.

The new policy means homebuyers will face higher tax burdens, particularly first-time buyers and those purchasing mid-priced homes.

Ashley Webb, an economist at Capital Economics, noted that April’s house price drop was the largest monthly decline since August 2023. Lowering mortgage rates will help boost housing demand in the coming months and offset the spending squeeze caused by U.S. President Trump’s trade tariffs, which may lead to rising housing costs.

The firm forecasts that UK house prices will rise 3.5% in 2025 and 4.5% in 2026.

Milkshakes and lattes could be covered by sugar tax

Under a new plan, the sugar tax currently applied to carbonated drinks could be extended to include prepackaged milkshakes and lattes. This means the UK may end its tax exemption for milk-based drinks, as well as non-dairy alternatives like oat or rice-based drinks, further expanding the scope of the sugar tax.

The sugar tax (formally known as the Soft Drinks Industry Levy, SDIL) is a tax on prepackaged drinks (such as those sold in cans and cartons in supermarkets). It applies to manufacturers and was introduced by the Conservative government in April 2018 to help tackle obesity.

Last week, the Treasury confirmed a proposal to lower the sugar content threshold from 5 grams per 100 millilitres to 4 grams before the tax applies. Government analysis estimates that about 203 types of prepackaged milk drinks (accounting for 93% of sales in that category) would be taxed unless they reduce their sugar content as proposed.

Milk-based drinks were initially exempted due to concerns over calcium intake. However, it’s now reported that young people obtain only 3.5% of their total calcium intake from these drinks, suggesting that “their health benefits likely do not outweigh the harm from excessive sugar consumption.”

According to statistics released in September 2024, the Soft Drinks Industry Levy has raised £1.9 billion since its launch in 2018, with HM Revenue & Customs (HMRC) collecting £338 million in revenue during the 2023–24 fiscal year.

In recent years, opposition has come from the soft drinks industry, pubs, and off-licences, with some arguing the tax disproportionately impacts low-income households while doing little to combat obesity. The government consultation will run until July 21.