By Aaron Rubin, founder and CEO of ShipHero
With the inauguration still over a month away, President-elect Donald Trump has already announced some of his plans regarding U.S. trade policy. This is a breakdown of a few of the ones most relevant to e-commerce and how brands do business.
Some of the proposed changes are near certainties, and some are still uncertain. Let’s discuss each of them, covering the certainties first.
No more duty-free imports from China
Even before the 2024 election, President Joe Biden had said that Section 321, which allows e-commerce companies to import products duty-free if the shipment is less than $800, is going away for goods from China. So that means the Sheins and Temus of the world, which ship from China directly to the U.S., will no longer be able to take advantage of that savings. This is also true for companies that ship items from China to Mexico or Canada, store them there, and then ship to the U.S. one package at a time. This was a great way not to pay tariffs and lower your cost of goods sold (COGS), but it’s almost certain that option is going away.
However, you might be able to still save by shipping from other countries; we’ll address that in a minute.
Additional per-package fee for imported goods
Second, there’s an additional act going through Congress to make importing goods even more strict and expensive.
For example, a $2-per-package fee would be added to these items moving through U.S. Customs. So, not only will brands have to pay normal tariffs, but they might also need to pay $2 additional per package if they ship their goods one package at a time. This would apply to any packages direct from China or through a Mexico-based or Canada-based 3PL.
Section 321 strategy is going away
The above changes would effectively end Section 321 as we know it now, which allowed brands to save on tariffs when shipping through Mexico or Canada to the U.S. The savings could often be upwards of 20% versus shipping directly to the U.S. There is no definitive date set for when this change will take effect, but estimates would indicate early February or early March
This means e-commerce businesses don’t have time to figure out an alternative approach. Brands may be stuck paying higher fees when these changes go into effect until an alternative solution can be found.
Alternative approaches to paying more
What’s the alternative? There are two options. One is a bit faster to implement than the other.
Alternative No. 1
Use a U.S. warehouse and bring your goods directly into the U.S. It’ll be faster and cheaper.
Alternative No. 2
Look to move your manufacturing. Brands can stay with the same company but move to a different country. Many Chinese manufacturers have facilities in other countries. This will allow brands to import into the U.S. and work with the same suppliers. However, if the products are not coming from China, they should still be able to take advantage of the tariff exemption.
This option could be more difficult as manufacturing for some items is not easily moved outside of China and because the trade lanes are not as frequent and inexpensive as China-to-U.S. routes.
Other changes affecting trade
Navarro appointed senior adviser on trade and manufacturing
Trump has stated he will impose additional tariffs on day one. He also just appointed Peter Navarro as senior adviser on trade and manufacturing. Navarro worked in a similar capacity during Trump’s first administration and is the person who added the 25% tariffs to begin with.
With this appointment, it is almost a certainty that additional tariffs Trump has proposed will be implemented. The tariffs will more than likely fall somewhere around 10%, and estimates indicate they will go into effect after Feb. 20 or March 20, 2025, rather than on Jan. 20 as Trump has promised. This allows time to get as many products into the U.S. as possible before those tariffs are enforced, and you’re billed for the additional costs.
Kash Patel nominated as director of the FBI
Additionally, the Trump administration has picked Kash Patel as the new director of the FBI.
If you remember the whole TikTok saga from about a year ago, the U.S. is trying to ban TikTok for national security reasons. (TikTok’s parent company, ByteDance, is based in China.) This is still an ongoing issue in Congress and the courts. The ban has already been passed, and assuming that the courts don’t intervene, TikTok could be banned by Jan. 20, 2025.
From a national security standpoint, Patel has already said he believes Temu is more of a security risk than TikTok. This means that if the TikTok ban is enforced, there’s a very good chance Temu and even Shein could suffer the same fate and be banned from the U.S. in the interest of national security.
More to come
Stay tuned for more updates to come. This is definitely not the last of the changes the U.S. or the world will see when it comes to trade policy.