The Uncertain Future of De Minimis Tariffs for E-Commerce
A Crucial Moment for Small E-Commerce Businesses
The U.S. government's delay in suspending the de minimis tariff exemption has left small direct-to-consumer (DTC) brands in limbo. Originally set to take effect on February 4, 2025, the suspension of Section 321—which allows duty-free imports for shipments under $800—has been postponed, giving Chinese sellers like Shein, Temu, and Wish a continued cost advantage.
While this delay provides short-term relief for some brands that rely on cross-border fulfillment, it prolongs competitive disadvantages for U.S.-based businesses. Below, we explore the key challenges DTC brands face and potential strategies to navigate this uncertain regulatory environment.
Key Events: The De Minimis Tariff Timeline
- February 1, 2025: President Trump issues an executive order eliminating the de minimis exemption for shipments from China and Hong Kong, effective February 4.
- February 4, 2025: The policy takes effect, causing the United States Postal Service to temporarily stop accepting inbound packages from China and Hong Kong for a day.
- February 7, 2025: A second executive order is signed, pausing the elimination of the de minimis exemption to allow time for U.S. Customs and Border Protection (CBP) to implement systems for tariff collection.
- February 19, 2025 (current status): The exemption remains in place, but its unclear how long it will take the administration to develop a tariff collection system.
- Ongoing: The 10% tariffs on non-de minimis imports from China remain in effect, and further policy changes may still be introduced.
This back-and-forth policy shift has created uncertainty, making it difficult for DTC brands to plan long-term strategies.
Why This Matters for Small DTC Brands
Competitive Pricing Pressure from Shein, Temu & Wish
The de minimis rule has allowed low-cost foreign sellers to avoid import duties, enabling them to offer ultra-low prices on everything from fashion to electronics. With the delay, these platforms maintain their pricing edge over U.S. DTC brands, forcing local businesses to compete with duty-free products.
For small DTC brands, this means:
- More time to adjust to potential tariff changes, but continued pricing challenges from foreign competitors.
- Possibly lower margins if competing directly on price.
- Pressure to differentiate through brand identity, product quality, or value-added services.
Rather than focusing solely on price, some brands may explore alternative strategies such as premium positioning, bundling, or exclusive product offerings to retain customer loyalty and avoid direct price competition.
Uncertain Future for Tariff Changes & Supply Chains
While the China tariffs (10%) went into effect on February 4, the Canada and Mexico tariffs (25%) are paused until March, pending further neogitation. The lack of a clear timeline for de minimis suspension has created uncertainty for brands that rely on cross-border shipping and fulfillment.
- Some companies are moving inventory to U.S. warehouses in preparation for possible de minimis restrictions.
- Others continue to utilize cross-border shipping models while waiting for clearer policy updates.
- Adjusting supply chain strategies may take time, making early scenario planning a key factor.
Brands might evaluate whether securing warehouse space, diversifying supplier networks, or testing nearshoring options could provide resilience against future regulatory shifts.
The Logistics Shakeup: Preparing for Higher Costs & Delays
If de minimis is eventually suspended, small DTC brands reliant on just-in-time cross-border shipping could face higher costs, additional paperwork, and customs delays.
Key Changes to Consider
- Formal customs entries could be required for all shipments.
- Additional duty payments may need to be factored into cost structures.
- Brands may need to secure importers of record (IOR) and customs brokers.
Some brands might explore options such as storing inventory in the U.S., working with third-party logistics providers (3PLs), or evaluating alternative fulfillment models to mitigate potential disruptions.
What Small DTC Brands Can Do Next
Exploring Supply Chain Adjustments
If de minimis ends, DTC brands relying exclusively on direct-from-China shipping could be impacted the most. Some companies are already making adjustments, including:
- Relocating some inventory to U.S. warehouses to avoid potential shipping delays.
- Testing alternative fulfillment models, such as nearshoring or hybrid inventory management.
- Assessing customs and tariff compliance requirements in case regulatory changes are implemented.
Companies evaluating supply chain adjustments may want to factor in costs, operational feasibility, and the likelihood of long-term tariff policies before making large-scale investments.
Monitoring Pricing & Customer Demand Trends
Competing primarily on price may become more challenging for smaller brands, particularly against large-scale platforms that can absorb tariff costs. Some brands are focusing on:
- Enhancing brand positioning to emphasize quality, exclusivity, or sustainability.
- Using data-driven pricing models to adjust to market conditions.
- Leveraging customer retention strategies, such as loyalty programs or direct engagement.
Understanding customer behavior and tracking competitor pricing trends could help brands make informed adjustments without eroding profitability.
Tracking Regulatory Updates & Planning for Future Costs
Since there is no confirmed timeline for the de minimis suspension, staying informed will be critical for brands managing inventory and logistics.
- Some brands are actively working with logistics partners to ensure compliance if the rule changes.
- Others are holding off on major operational changes until more definitive policy guidance is released.
- The Commerce Department is still working on a tariff collection framework, meaning further delays or modifications to de minimis policies are possible.
Brands monitoring policy developments might want to plan for multiple scenarios, ensuring they have the flexibility to adapt quickly if regulatory changes are implemented.
Conclusion: Preparing for an Uncertain E-Commerce Landscape
The de minimis delay provides temporary relief but does not eliminate long-term regulatory risks for small DTC brands. While Shein, Temu, and other foreign sellers continue leveraging duty-free imports, U.S.-based brands may need to explore new strategies for supply chain resilience, pricing flexibility, and competitive differentiation.
Key Takeaways
- Regulatory uncertainty remains—brands should keep monitoring de minimis policy updates.
- Some companies are moving inventory into U.S. warehouses to mitigate future risks.
- Alternative pricing and brand positioning strategies may be worth exploring to maintain customer loyalty.
For now, DTC brands should stay informed, evaluate potential cost impacts, and consider supply chain adjustments based on their specific business needs.