August 29, 2025 • 8 mins
The loophole that has allowed packages worth less than $800 to enter the United States tariff-free has ended after nearly 90 years. It's a major change for small businesses, shippers and consumers, and several European postal services have suspended deliveries of parcels to the US as a result. Our Trade Tsar Brendan Murray joins host Stephen Carroll to discuss the ramifications.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carol and
this is Here's Why, where we take one news story
and explain it in just a few minutes with our
experts here at Bloomberg.
Speaker 2 (00:20):
We are terrifing all the deminimous imports. We are going
to set a level, and it will be a global level.
Speaker 1 (00:28):
The administration is doing away with Deminimus, which also I
think will impact small companies much more dramatically than the
large ones.
Speaker 2 (00:37):
So it will be very challenging environments.
Speaker 1 (00:39):
Unless we have clarity in this question, we will have
to suspend the shipment of goods via the postal networks
from Germany into the US. By name, it might be
a small matter, but in reality it's a huge change
for American consumers and those who sell goods to them
from abroad. As part of his reshaping of mobal trade,
(01:00):
US President Donald Trump has closed what was known as
the Deminimus exception that allowed packages worth less than eight
hundred dollars to be shipped into the US without filling
out customs paperwork or paying duties. Four million of these
parcels used to enter the US every day, and the
effects of closing the loophole are being felt far from
America's borders. Postal services and Europe and elsewhere have suspended
(01:23):
parcel deliveries to the US as they tried to figure
out how to adapt. So here's why a big tariff
problem comes in small packages. Bloomberg's trades are Brandon Murray
joins me. Now for more Brandon, First of all, what
was the history of the dominimus exception in the US.
Speaker 2 (01:40):
The history dates back to the nineteen thirties when it
was a big nuisance for the government to try to
process goods that were coming into the country, so they
just made the dominimous exception very low. It was around
a dollar and it stayed that way for many decades
until about the nineteen ninety With the onset of e commerce,
(02:03):
the government saw it less of a nuisance and more
of an opportunity.
Speaker 1 (02:07):
Okay, so that threshold then raised as far as eight
hundred dollars before it was abolished. What sort of effect
does this change, this abolition of this exemption mean? What
kind of businesses are most affected by us?
Speaker 2 (02:18):
Well, this loophole that's existed for many years now became
so wide that something like one point three billion packages
were coming into the US every year. These are smaller items.
Their value, as we've said, had to be under eight
hundred dollars, and there was just a lot of them,
and there was they were very hard to process for
(02:40):
the Customs Agency. Many of them came through the mail,
and many of them were from merchants that were some
small businesses, but others, you know, were the big e
commerce companies like Shean and Temu from China. That really
led to a flood of these goods coming in and
it no longer was an opportunity. It became a threat
(03:04):
to the American economy.
Speaker 1 (03:05):
Yeah, indeed, and that's certainly how Donald Trump has framed
this change as well. And we were warned that this
was coming quite a few months ago.
Speaker 2 (03:13):
Now.
Speaker 1 (03:14):
I've talked about the disruption from European postal services as
a result of this. Why haven't delivery service has been
better prepared for this?
Speaker 2 (03:22):
Well, Like a lot of things that President Trump has
done in his second term, this came very quickly. Even
a couple months isn't enough time for dozens and dozens
of postal services around the world to sync their systems
up with the US Customs Agency to be able to
meet the requirements. Some of those requirements mean that the
(03:45):
tariff on the item has to be paid by the sender.
So if you go into a post office in Sweden
and you want to send something that's over one hundred
dollars to someone in the US, you now have to
fill out the paperwork that clears what that item is
and you have to pay the tariff for it there,
and that postal service has to transmit that transaction to
(04:09):
the US agency for it to be legitimate and it
can go ahead. And what those postal services have said is,
we don't have the mechanisms set up to do that now,
and therefore we're suspending the packages that would qualify now
to the US, which has the potential to lead to
(04:29):
a lot of piling up of goods that otherwise would
be flowing into the US, and.
Speaker 1 (04:33):
It could potentially have huge damages to all the businesses
that are selling smaller and lower value packages to consumers
in the US. What does the new normal look like
both for the shoppers in the US who are trying
to buy things from abroad, but also for all these
companies that are used to shipping there.
Speaker 2 (04:48):
Well, it depends on how long it takes for the
US Customs and Border Protection Agency to get these systems
up and running. They have brought on board some companies
deal with these kinds of transactions, private individual vendors who
can do this for them, but it's nowhere near the
amount of help that's going to be necessary to deal
(05:10):
with these something like four million packages a day on average,
so it could be weeks or even months before we
see the flow of these goods returning to any kind
of way that looks normal, but that doesn't do anything
to eliminate the paperwork that's necessary and the cost of
the tariff that has to be paid. So what we're
(05:33):
going to see and you'll see companies in the US
that will be welcoming this. The main street shops that
would want to sell, say yarn, don't have that competition
anymore from overseas. So there are some benefits to this
to the US economy, according to the Trump administration, but
there'll be a lot of hiccups along the way.
Speaker 1 (05:54):
Of course, it's not just the US that has this
sort of exemption for small packages as well. Are other
countries looking to make similar changes.
Speaker 2 (06:00):
So the US is eight hundred dollars Deminimus is very
generous by international standards. It's something like one hundred and
fifty euros in your area. I think it's around thirty
Canadian dollars for Canada. And countries are looking at this
and saying, maybe this is number one, a way to
(06:21):
raise revenue like the US is raising. And number two,
what happens when all of these cheap goods made in
say China, start flowing in our direction. What's that going
to do to our main street businesses. You've seen some
grumblings here in the UK that say this is a
threat to the high street boutiques, that if these goods
(06:43):
are allowed to flood into the UK there could be
some threats to local businesses. So there has been some
pushback by countries that are saying, you know, Demnimus had
its day, but maybe it's time we end it and
bring all this under the scrutiny of the customs and
border patrol agencies that protect countries from the abuse of
(07:04):
the system.
Speaker 1 (07:04):
Thinking more broadly about this, is this the end of
easy international shopping online.
Speaker 2 (07:11):
It's probably not the end of easy international shipping, but
it's probably the start of a period where it's not
so cheap and easy and accessible anymore. A lot of
those goods that would have come through under deminimus i e.
No tariff attached to it. They came via airplanes via
(07:31):
air cargo, which is a very expensive way to move goods.
But the calculation now might not work to send it
via air cargo, and they're going to shift to ocean cargo.
Ocean cargo is obviously much slower, it's cheaper, but it
will take three weeks to make it across the Pacific
from Asia to the US or Asia to Europe rather
(07:54):
than ten hours on an airplane. So this could be
the beginning of the end of cheap and fast items
delivered to your doorstep. It's going to go slower and
it's going to costume more.
Speaker 1 (08:05):
Okay, when people be watching out for that with interest,
I'm sure Brandon Murray our trades are. Thank you very much.
For more explanations like this from our team of three
thousand journalists and analysts around the world, go to Bloomberg
dot com slash explainers. I'm Stephen Carroll. This is here's why.
I'll be back next week with more. Thanks for listening.
Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carol and
this is Here's Why, where we take one news story
and explain it in just a few minutes with our
experts here at Bloomberg.
Speaker 2 (00:20):
We are terrifing all the deminimous imports. We are going
to set a level, and it will be a global level.
Speaker 1 (00:28):
The administration is doing away with Deminimus, which also I
think will impact small companies much more dramatically than the
large ones.
Speaker 2 (00:37):
So it will be very challenging environments.
Speaker 1 (00:39):
Unless we have clarity in this question, we will have
to suspend the shipment of goods via the postal networks
from Germany into the US. By name, it might be
a small matter, but in reality it's a huge change
for American consumers and those who sell goods to them
from abroad. As part of his reshaping of mobal trade,
(01:00):
US President Donald Trump has closed what was known as
the Deminimus exception that allowed packages worth less than eight
hundred dollars to be shipped into the US without filling
out customs paperwork or paying duties. Four million of these
parcels used to enter the US every day, and the
effects of closing the loophole are being felt far from
America's borders. Postal services and Europe and elsewhere have suspended
(01:23):
parcel deliveries to the US as they tried to figure
out how to adapt. So here's why a big tariff
problem comes in small packages. Bloomberg's trades are Brandon Murray
joins me. Now for more Brandon, First of all, what
was the history of the dominimus exception in the US.
Speaker 2 (01:40):
The history dates back to the nineteen thirties when it
was a big nuisance for the government to try to
process goods that were coming into the country, so they
just made the dominimous exception very low. It was around
a dollar and it stayed that way for many decades
until about the nineteen ninety With the onset of e commerce,
(02:03):
the government saw it less of a nuisance and more
of an opportunity.
Speaker 1 (02:07):
Okay, so that threshold then raised as far as eight
hundred dollars before it was abolished. What sort of effect
does this change, this abolition of this exemption mean? What
kind of businesses are most affected by us?
Speaker 2 (02:18):
Well, this loophole that's existed for many years now became
so wide that something like one point three billion packages
were coming into the US every year. These are smaller items.
Their value, as we've said, had to be under eight
hundred dollars, and there was just a lot of them,
and there was they were very hard to process for
(02:40):
the Customs Agency. Many of them came through the mail,
and many of them were from merchants that were some
small businesses, but others, you know, were the big e
commerce companies like Shean and Temu from China. That really
led to a flood of these goods coming in and
it no longer was an opportunity. It became a threat
(03:04):
to the American economy.
Speaker 1 (03:05):
Yeah, indeed, and that's certainly how Donald Trump has framed
this change as well. And we were warned that this
was coming quite a few months ago.
Speaker 2 (03:13):
Now.
Speaker 1 (03:14):
I've talked about the disruption from European postal services as
a result of this. Why haven't delivery service has been
better prepared for this?
Speaker 2 (03:22):
Well, Like a lot of things that President Trump has
done in his second term, this came very quickly. Even
a couple months isn't enough time for dozens and dozens
of postal services around the world to sync their systems
up with the US Customs Agency to be able to
meet the requirements. Some of those requirements mean that the
(03:45):
tariff on the item has to be paid by the sender.
So if you go into a post office in Sweden
and you want to send something that's over one hundred
dollars to someone in the US, you now have to
fill out the paperwork that clears what that item is
and you have to pay the tariff for it there,
and that postal service has to transmit that transaction to
(04:09):
the US agency for it to be legitimate and it
can go ahead. And what those postal services have said is,
we don't have the mechanisms set up to do that now,
and therefore we're suspending the packages that would qualify now
to the US, which has the potential to lead to
(04:29):
a lot of piling up of goods that otherwise would
be flowing into the US, and.
Speaker 1 (04:33):
It could potentially have huge damages to all the businesses
that are selling smaller and lower value packages to consumers
in the US. What does the new normal look like
both for the shoppers in the US who are trying
to buy things from abroad, but also for all these
companies that are used to shipping there.
Speaker 2 (04:48):
Well, it depends on how long it takes for the
US Customs and Border Protection Agency to get these systems
up and running. They have brought on board some companies
deal with these kinds of transactions, private individual vendors who
can do this for them, but it's nowhere near the
amount of help that's going to be necessary to deal
(05:10):
with these something like four million packages a day on average,
so it could be weeks or even months before we
see the flow of these goods returning to any kind
of way that looks normal, but that doesn't do anything
to eliminate the paperwork that's necessary and the cost of
the tariff that has to be paid. So what we're
(05:33):
going to see and you'll see companies in the US
that will be welcoming this. The main street shops that
would want to sell, say yarn, don't have that competition
anymore from overseas. So there are some benefits to this
to the US economy, according to the Trump administration, but
there'll be a lot of hiccups along the way.
Speaker 1 (05:54):
Of course, it's not just the US that has this
sort of exemption for small packages as well. Are other
countries looking to make similar changes.
Speaker 2 (06:00):
So the US is eight hundred dollars Deminimus is very
generous by international standards. It's something like one hundred and
fifty euros in your area. I think it's around thirty
Canadian dollars for Canada. And countries are looking at this
and saying, maybe this is number one, a way to
(06:21):
raise revenue like the US is raising. And number two,
what happens when all of these cheap goods made in
say China, start flowing in our direction. What's that going
to do to our main street businesses. You've seen some
grumblings here in the UK that say this is a
threat to the high street boutiques, that if these goods
(06:43):
are allowed to flood into the UK there could be
some threats to local businesses. So there has been some
pushback by countries that are saying, you know, Demnimus had
its day, but maybe it's time we end it and
bring all this under the scrutiny of the customs and
border patrol agencies that protect countries from the abuse of
(07:04):
the system.
Speaker 1 (07:04):
Thinking more broadly about this, is this the end of
easy international shopping online.
Speaker 2 (07:11):
It's probably not the end of easy international shipping, but
it's probably the start of a period where it's not
so cheap and easy and accessible anymore. A lot of
those goods that would have come through under deminimus i e.
No tariff attached to it. They came via airplanes via
(07:31):
air cargo, which is a very expensive way to move goods.
But the calculation now might not work to send it
via air cargo, and they're going to shift to ocean cargo.
Ocean cargo is obviously much slower, it's cheaper, but it
will take three weeks to make it across the Pacific
from Asia to the US or Asia to Europe rather
(07:54):
than ten hours on an airplane. So this could be
the beginning of the end of cheap and fast items
delivered to your doorstep. It's going to go slower and
it's going to costume more.
Speaker 1 (08:05):
Okay, when people be watching out for that with interest,
I'm sure Brandon Murray our trades are. Thank you very much.
For more explanations like this from our team of three
thousand journalists and analysts around the world, go to Bloomberg
dot com slash explainers. I'm Stephen Carroll. This is here's why.
I'll be back next week with more. Thanks for listening.
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