Trump Pauses Tariffs On Small Chinese Packages Amid Logistics Challenges

In a move aimed at giving federal agencies time to implement necessary systems, President Donald Trump has temporarily halted the imposition of tariffs on small-value packages arriving from China. The executive order, issued on Wednesday, did not specify an end date for the pause but indicated that it would conclude once the Department of Commerce has established “adequate systems” to efficiently process and collect tariff revenue on these shipments.

John Lash, group vice president of product strategy at e2open, a supply chain platform, explained the rationale behind the pause, emphasizing the complexity of implementing tariffs on the enormous volume of small packages entering the U.S. “The volumes are absolutely incredible,” Lash said, noting that transitioning from an exemption system to one requiring full tariff filing was a complicated task, especially with many packages already in transit.

The decision to delay the tariff imposition comes after Trump’s decision earlier this week to raise tariffs on Chinese goods by 10%. Under this new policy, goods shipped through duty-free packages would be subject to not only the existing 25% tariff on many Chinese products but also the newly imposed 10% tariff.

This latest pause in Trump’s tariff policies follows a pattern of suspensions seen during his second term, including the suspension of tariffs on Mexico and Canada after the two nations addressed his concerns regarding border security and drug trafficking.

The U.S. Postal Service (USPS) has also been caught in the turmoil, initially announcing on Tuesday that it would no longer accept parcels from mainland China and Hong Kong. However, the USPS reversed this decision the following day and stated that it would collaborate with Customs and Border Protection (CBP) to develop a system for collecting the new tariffs.

“The speed at which these changes are being implemented has caught people off guard,” Lash said, acknowledging the challenges posed by the rapid policy shift.

The tariff exemption for low-value packages, introduced in 1938, was originally intended to streamline the flow of small shipments worth no more than $5—about $106 today. Over time, the threshold for tariff exemptions increased, reaching $800 in 2016. However, the explosive growth of cross-border e-commerce, largely driven by China, has undermined the effectiveness of the decades-old customs rule.

According to a report by the Congressional Research Service, Chinese exports of low-value packages surged to $66 billion in 2023, up from $5.3 billion in 2018. The U.S. has become a primary destination for these shipments, with over 1 billion small packages arriving through U.S. customs in 2023, a dramatic increase from 134 million in 2015. As of late last year, Customs and Border Protection was processing approximately 4 million small shipments daily, many of which originated from China via platforms like Shein and Temu.

Critics have long argued that the exemption allowed not only tariff evasion but also the importation of unsafe goods, such as counterfeit items and illicit drugs. On the other hand, proponents of the policy maintain that it has helped keep prices low for American consumers and small businesses.

The shift away from the de minimis exception has raised concerns about potential consequences, including higher prices and delivery delays. Experts caution that U.S. customs officials will be overwhelmed by the sheer volume of packages needing inspection, a challenge that could disrupt the current e-commerce model.

Neil Saunders, managing director at research firm GlobalData, noted the implications for companies like Temu, which has already expanded its U.S. warehousing operations in anticipation of the tariff changes. He added that the new tariff structure could encourage overseas sellers to shift towards bulk shipping methods, thereby altering the cross-border e-commerce landscape.

As the administration works to resolve these logistical hurdles, the future of U.S.-China trade, particularly in the realm of small-value packages, remains uncertain.