He rightly planned to exclude China from the de minimis rule, then waffled

By Herbert Rothschild

It’s rare that people write to challenge me about a column. I wish more of you would. I trust you know by now that I don’t think I have all the truth on any topic, and also that, despite trying very hard, I can make factual errors and omissions that should be pointed out.

After my column last week on NATO membership and its implication for peace in Ukraine — I regard it as an obstacle that I’m glad President Donald Trump removed — I did get three criticisms. Two, I regret, were manifestations of the knee-jerk partisanship that at the start of the column I urged my readers to eschew. They assumed that, because I expressed agreement with two things Trump has done, I must be a Trump supporter, and they told me how terrible he is and chastised me. This despite my saying in the column that we have to resist him on many fronts.

Like these two, many readers/listeners first try to ascertain which political camp the writer/speaker is in and then, if they are in the “wrong” camp, quit paying attention or register only what they expect. So, we stay in our siloes.

But the third pushback I received was very welcome. It was from a person more versed in Russian history than I and a frequent visitor to Ukraine. Because he is a government employee and requested some anonymity, I’ll use his initials, D.C. He pointed me to some relevant documentation of which I was unaware. We had an excellent exchange and narrowed what initially seemed a large area of disagreement.

Ultimately, our difference came down to whether Russia will refrain from taking all of Ukraine unless Ukraine has the protection NATO membership would afford. D.C. is certain it won’t. I’m not that sure — Russia didn’t occupy all of Georgia after its invasion in 2008 put an end to NATO membership for that former Soviet republic. At any rate, Ukraine can’t be admitted to NATO while it’s at war, and there is little prospect that the U.S. will risk World War III for Ukraine.

I’m very grateful to D.C. He deepened my knowledge and sharpened my thinking. I would appreciate more such engagement with my readers.

Now to the subject that, last week, I promised to write about — the de minimis rule regarding packages shipped here from overseas. That rather arcane subject made the news on Feb. 5 when Trump announced he would exclude China from the trade rule.

The Latin term de minimis applies to the valuation of packages. Packages under a certain declared value enter the U.S. duty-free and with minimal customs processing. Packages over that minimum are subject to regular duties and tariffs, which vary with the product and the country of origin, plus inspection. The de minimis rule makes it much easier and cheaper to ship directly from an overseas supplier to a customer here.

Until March 2016, the de minimis valuation of a package was $200. Then, President Barack Obama raised it to $800. According to the U.S. Customs and Border Protection, the impact was immediate and enormous. In 2016, we imported 255 million de minimis packages. By 2020 it had reached 636 million. In 2023 it was 868 million and last year it was 1.3 billion. Total declared values were $9.2 billion in 2016 and $54.5 billion in 2023. Whether those declared values were lowballed is an issue in itself.

According to the Congressional Research Service, between fiscal 2018 and fiscal 2021, about 67% of U.S. de minimis imports, valued at $228.3 billion, were from the People’s Republic of China. I couldn’t find more recent data, but that nation-of-origin mix probably didn’t change significantly. In one year, from 2022 to 2023, U.S. Treasury tariff revenue declined $12.3 billion, most of which was in effect a subsidy to China’s exporters.

The Wall Street Journal ran a story last June about the impact of de minimis on Amazon. It has been taking such a beating from the low-cost e-platform Chinese retailers Temu and Shein that it decided to close some warehouses here and build them in China. Thanks to de minimis, it’s cheaper to send a package from Hong Kong to Tulsa than from Nevada to Tulsa.

To fully understand why that is, and to see another way in which U.S. taxpayers have been subsidizing China’s ability to undercut U.S. firms, one has to understand the rules of the Universal Postal Union, a U.N. agency of which the U.S. Postal Service is a member. One of UPU’s purposes is to ensure uniformity in international postal rates. Included are the rates nations charge to deliver foreign packages from their port of entry to their final destination. The UPU sets those rates, called “terminal dues,” very low for certain countries. Unfortunately, China, the second largest economy in the world, has been getting the same low rates as Gabon and Botswana.

So, U.S. Postal Service is losing money on every package it delivers from China, losses which it has to make up from its American customers. In 2015, before the maximum limit was raised, it lost $5.1 billion. In 2024 it lost $9.5 billion.

Because packages entering under de minimis avoid inspection, they are a conduit for contraband. It is the primary way fentanyl has been entering the U.S. from China, and that was the primary reason Trump gave for his change of policy.

The Coalition for a Prosperous America, which represents domestic producers — mainly manufacturers, but also farmers and ranchers — applauded that change but called for a complete end to the exemption from tariffs. CPA Chairman Zach Motti said, “The de minimis loophole is fundamentally incompatible with a secure trade policy that prioritizes national and economic security. . . . [It] overwhelms our ports, rewards bad actors, and cripples U.S. manufacturers and producers who have to compete against a flood of untaxed imports. If we are serious about reindustrializing America and securing our supply chains, we must close this loophole for all countries — not just China.” 

Regrettably, we can’t depend on Trump to pursue thoughtfully even the good policies he initiates. Shortly after Feb. 5, he put on hold China’s exclusion from the de minimis rule. Who knows why? Maybe Xi Jinping promised to make Melania even richer. We can only hope Trump eventually follows through.

Herbert Rothschild’s columns appear Fridays. Opinions expressed in them represent the author’s views. Email Rothschild at [email protected].