Elimination of "de minimis"-rule come tuesday - Trading ideas

[frommi]

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Starting February 4, 2025, the U.S. government will implement a 10% tariff on products imported from China, citing concerns over immigration and opioid trafficking. This action effectively eliminates the de minimis exemption for Chinese imports, meaning that all goods from China, regardless of value, will be subject to this tariff.

elpais.com

This policy shift is expected to impact Chinese e-commerce platforms like Temu and Shein, which have previously benefited from the de minimis rule to ship low-cost goods directly to U.S. consumers without incurring tariffs.

m.economictimes.com

In summary, while the de minimis exemption is currently still applicable to Chinese imports, it will cease to apply starting February 4, 2025, when the new tariffs take effect.

 

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The de minimis rule is a provision in U.S. trade law that allows imports below a certain value to enter the country duty-free, without being subject to customs tariffs or fees. This exemption helps streamline the process for low-value shipments and reduces administrative costs.

Key Points of the De Minimis Rule:

1. Threshold Value:

   • Under current law (as of 2025), goods valued at $800 or less are exempt from tariffs, duties, and certain customs processes.
   • This applies to most shipments, including goods bought from international e-commerce platforms like Temu or Shein.

2. Simplified Customs Process:

   • For qualifying goods, there’s no need to file detailed customs declarations, and they can move through customs more quickly.

3. Not Global:

   • The rule applies to most countries, but there are some exceptions. For example, products from certain countries or regions, such as those under tariffs, may not qualify.

4. Purpose:

   • The de minimis rule was designed to facilitate trade and reduce costs for low-value imports, which is especially beneficial for small businesses and e-commerce platforms.

5. Impact of Ending the De Minimis Rule:

   • If the de minimis rule no longer applies to specific countries (like China, starting February 2025), even small packages from those countries would incur tariffs, making goods more expensive and potentially slowing down delivery times due to customs clearance.

I am trying to process this information and thinking about which businesses are impacted. 

 

Long side: BTI,MO, maybe small american businesses? (which ones and why?)
Short side: PDD,AMZN?, companies/influencers using drop shipping?

Edited February 2 by frommi

[frommi]

Since it also hits canada, cross border e-commerce is dead?

[DooDiligence]

Won't be the first time this guy's run a business into the ground.

[TwoCitiesCapital]

I think you'll have time to see how the markets react vs fundamentals. 

 

After all - nominal earnings contracted on the S&p 500 for 2-years and it still went up. Real earnings are even scarier. Plenty of time to position fundamentals vs the market psychology. 

 

The short-term response doesn't have to match fundamentals. You'll have the opportunity to see how the market reacts, how companies fundamentals are impacted, and make your bets accordingly after-the-fact. We don't have to pay the guessing game on Monday which presupposes that 1) markets are rational and 2) that markets know the impacts of the policy changes

Edited February 3 by TwoCitiesCapital

[Blake Hampton]

Wouldn’t there be logistical challenges in eliminating de minimis? That’s a lot of packages.

[frommi]

2 hours ago, Blake Hampton said:

Wouldn’t there be logistical challenges in eliminating de minimis? That’s a lot of packages.

Yes, from what i know its around 3 million packages a day or a billion each year. Will be interesting how that gets handled. Its possible they just don't  let anything through that is undeclared.

Edited February 3 by frommi

[Intelligent_Investor]

This is gonna be bad for Amazon, but probably a lot of large retailers with store brands as well. From my understanding most store brands are also just stuff imported from China with store branding slapped on.

Edited February 6 by Intelligent_Investor

[Castanza]

Long-term wouldn't this be a positive from a (non-slave wage) labor perspective? Seems like it will mostly target these Chinese companies that stand up seemingly overnight and flood the markets with cheap knockoff versions of whatever. Temu etc.