By Aaron Rubin, founder and CEO of ShipHero
With the inauguration still over a month away, President-elect Donald Trump has already announced some of his plans regarding U.S. trade policy. This article breaks down a few of the most relevant changes to e-commerce and how brands conduct business.
Some proposed changes are near certainties, while others remain uncertain. Let’s delve into each, focusing on the certainties first.
No More Duty-Free Imports from China
Even before the 2024 election, President Joe Biden had indicated that Section 321, which allows e-commerce companies to import products duty-free if the shipment is less than $800, will no longer apply to goods from China. As a result, companies like Shein and Temu, which ship directly from China to the U.S., will lose this cost-saving advantage. Additionally, companies shipping from China to Mexico or Canada, storing items, and then shipping them to the U.S. will no longer avoid tariffs this way.
However, savings might still be feasible through shipping from other countries, which we’ll address soon.
Additional Per-Package Fee for Imported Goods
Secondly, an additional act is progressing through Congress to make importing goods stricter and more expensive. A $2-per-package fee will be added to items moving through U.S. Customs. Thus, brands will face not only regular tariffs but might also incur an extra $2 fee per package if shipping individually from China or via a Mexico- or Canada-based 3PL.
Section 321 Strategy is Going Away
The aforementioned changes will effectively end the current Section 321 procedure, saving brands on tariffs when shipping through Mexico or Canada to the U.S. Previously, savings could reach upwards of 20% compared to direct U.S. shipping. While no definitive date for this change is set, estimates suggest early February or March.
E-commerce businesses may face immediate higher fees unless they swiftly identify alternative solutions.
Alternative Approaches to Mitigate Costs
What's the alternative? There are two options, one faster to implement than the other.
Alternative No. 1
Utilize a U.S. warehouse and directly import goods into the U.S. This method will likely be faster and more cost-effective.
Alternative No. 2
Consider relocating manufacturing. Brands may retain the same manufacturer by moving operations to a different country. Many Chinese manufacturers have facilities in other countries. This way, brands can import into the U.S. and collaborate with the same suppliers, potentially benefiting from the tariff exemption if products don’t originate from China.
This option has its challenges due to some items not being easily manufactured outside China and less frequent, more costly trade lanes compared to China-to-U.S. routes.
Other Changes Affecting Trade
Navarro Appointed Senior Adviser on Trade and Manufacturing
Trump has stated he will impose additional tariffs on day one and has appointed Peter Navarro as a senior adviser on trade and manufacturing. Navarro previously served during Trump’s first administration and initiated the imposition of 25% tariffs. It's almost certain that additional tariffs proposed by Trump will be implemented. These tariffs likely hover around 10%, with implementation expected after February 20 or March 20, 2025, rather than on January 20, allowing time for more products to enter the U.S. before incurring additional costs.
Kash Patel Nominated as Director of the FBI
Additionally, the Trump administration has nominated Kash Patel as the new director of the FBI. Recall the TikTok saga from a year ago, where the U.S. aimed to ban TikTok for national security reasons. With the ban already passed, barring any court interventions, TikTok could be banned by January 20, 2025.
Patel perceives Temu as a greater security threat than TikTok. Hence, if the TikTok ban is enforced, Temu and potentially Shein might suffer similar outcomes, banning them from U.S. markets for national security reasons.
More to Come
Stay tuned for more updates. This isn’t the last of the changes in U.S. or global trade policy.