Closing Tax Loophole Can Give Trump a Win Against China

Another Way Trump Can Win Against China? Close The De Minimis Loophole

We can’t really grasp how much of a role geography has played in America’s global dominance of the last 100 years or so.

Until Sept. 11, 2001, our oceans had protected the mainland from any foreign attack.

We enjoy more arable land than Russia, even though it’s twice as large as us. We have "more miles of navigable inland waterways than the rest of the world combined."

In modern video game parlance, the United States' geography is OP.

But with the mass globalization of the last 20 years, some of those advantages have started to recede.

Many of the policies we created from a sense of invincibility and benevolence are long over-due for a 21st century revision.

President-elect Trump recently made clear that he will fulfill his campaign promise to promote and protect American businesses by imposing a new 10% duty on all goods coming to the United States from China, Mexico, and Canada.

But that still leaves open a loophole exploited by Chinese companies to undercut American businesses — and the president-elect should make it a priority to finally close it.

The de minimis tax exemption is a provision that allows imports valued under $800 to enter the United States free of any taxes or duties.

An outdated relic established nearly a century ago, the original intent of the exemption was to help American tourists avoid paying fees on souvenirs bought overseas.

Today, however, it's nothing more than a loophole used by Chinese-tied companies like Shein and Temu, whose impossibly cheap products can be exported to the U.S. without paying anything in additional taxes.

This leaves American companies, which must pay duties and taxes on their larger shipments coming from overseas, at a clear competitive disadvantage. And it leads to a market flooded with cheap and sometimes counterfeit and even dangerous foreign goods.

Data tracked by the Customs and Border Protection (CBP) reveals how massive a problem this has become.

In the first few months of fiscal year 2024 alone, more than 485 million de minimis shipments entered our borders; in total, they now account for 92% of all import transactions in the U.S. — a figure that CBP notes is "growing in epic proportions."

Now, we are seeing more American companies turning to the Shein and Temu model to capitalize on this broken system and bring more Chinese products to America on the cheap. Amazon, for instance, recently rolled out Amazon Haul — a storefront offering low-cost products shipped directly from China.

When Trump recently vowed his day one tariffs, he cited illicit drugs, particularly fentanyl, as a serious issue he aims to solve through these measures.

Likewise, closing the de minimis loophole will play in important role in curbing the flow of fentanyl and other dangerous products into the U.S., with the CBP calling de minimis shipments "a major pathway for illicit drugs."

In fact, 85% of packages seized by the CBP in 2023 for health and safety violations were small packages.

Due to their low-dollar value, these packages are subject to little security at the borders, making the loophole the perfect route for drug traffickers to exploit.

In response to this growing challenge for both the U.S. businesses and our nation’s security, labor unions, businesses associations, and bipartisan lawmakers came together to form the Coalition to Close the De Minimis Loophole.

Moreover, there are a series of bipartisan bills on the table in Congress aimed at closing this dangerous shipping loophole.

President-elect Trump should make it a day one priority to urge Congress to act on this issue to protect American businesses and consumers.

President-elect Trump has made it clear that a focus of his incoming administration will be to restore prosperity to American businesses.

With his second term as president, he can reshape the global trade landscape in a way that finally allows U.S. businesses to compete with foreign companies while also curbing the flow of illicit drugs.

We do ourselves and the world no favors by allowing bad actors to abuse our longstanding, pre-globalist policies.

Closing the de minimis loophole is essential for ending China’s exploitation of America’s trade policies.

Jared Whitley is a longtime politico who has worked in the U.S. Congress, the White House and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's reports — More Here.