President Donald Trump‘s escalating trade war with China has claimed another victim as Temu has shut up shop on its direct-to-consumer U.S. sales.
The president’s latest move has targeted the “de minimis” exemption, a trade provision allowing packages under $800 in value to enter the U.S. duty-free. Temu—and rival Chinese retail giant Shein—had used the exemption to ship budget items into the country, to the delight of American bargain hunters.
Trump briefly closed the loophole in February, but the decision was reversed as chaos descended on customs officials, delivery firms, and online retailers.
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Packages sent to the U.S. from mainland China and Hong Kong valued at $800 or less will now face a 120 percent tax rate, or will be subject to a flat fee. The fee starts at $100 and is planned to rise to $200 in June.
Both Trump and former President Joe Biden have previously raised concerns about the undercutting of American businesses by Chinese-made consumer goods. An executive order, signed in April, justified the changes by citing concerns about the illegal importation of synthetic opioids like fentanyl. The administration claims that Chinese firms exploit the duty-free loophole to smuggle illicit substances into the country.
“These drugs kill tens of thousands of Americans each year, including 75,000 deaths attributed to fentanyl alone,” the order stated.
Experts, however, have expressed skepticism, noting the majority of fentanyl in the country enters through the southern border rather than through sharply discounted clothing and home goods.
The sudden policy shift has forced Temu to pivot away from direct-to-consumer sales. Instead, they will be operating a “local-to-local” fulfillment model. Shein has already responded by hiking the prices for its fast-fashion clothing by up to 377 percent.
“Temu’s pricing for U.S. consumers remains unchanged as the platform transitions to a local fulfillment model,” Temu said in a statement to The Daily Beast.
“All sales in the U.S. are now handled by locally based sellers, with orders fulfilled from within the country. The move is designed to help local merchants reach more customers and grow their businesses.”
The American Action Forum, a conservative policy think tank, warns the move could impose an additional $8 billion to $30 billion in annual costs on American consumers.
The National Foreign Trade Council, a pro-open trade association, expressed concern that the move could distract customs officials from more serious border security issues.
“[Customs and Border Protection] would need to hire and train new personnel,” they said, “costing the agency millions or causing them to move agents from the already overburdened southern border.”
