Biden is cracking down on Shein and Temu by closing a loophole that makes their cheap goods exempt from tariffs

President Joe Biden would no longer exclude these “de minimis” imports from tariffs under a proposed rule released Friday to tax all imports if they’re covered under Sections 201 or 301 of the Trade Act of 1974, or Section 232 of the Trade Expansion Act of 1962.

Importers mainly from China have used the de minimis exemption for shipments of $800 or less to flood the U.S. market. The number of these shipments has jumped from 140 million annually to over 1 billion a year, according to a White House statement.

The action comes at a delicate moment for the world’s two largest economies. The United States has tried to lessen its reliance on Chinese products, protect emerging industries such as electric vehicles from Chinese competition and restrict China’s access to advanced computer chips. For its part, China has seen manufacturing and exports as essential for driving economic growth as it has struggled with deflation following pandemic-related lockdowns.

Because of the existing exemption, it is harder for the U.S. government to block the importation of fentanyl and synthetic drug content that are banned. The government also stressed that Chinese e-commerce sites have abused the exemption to sell cheap clothing and textiles to U.S. consumers, possibly harming domestic workers and companies.

The loss of the exemption could be a blow to Chinese companies such as Temu and Shein that compete by keeping their prices low and might now have to face additional scrutiny. The government said its Section 301 tariffs currently cover about 40% of U.S. imports, including 70% of textile and apparel imports from China.

The proposed regulatory changes would also include new standards for de minimis shipments, such as a 10-digit tariffs classification number and details on the person claiming the exemption.