On July 30, the White House released its executive order suspending the de minimis treatment for all foreign shipments of consumption goods. The previous de minimis policy, which allowed international shipments valued $800 or less into the U.S. duty-free, will be phased out on Aug. 28. Ranging from combating the fentanyl crisis to ameliorating “large and persistent” trade deficits, the administration offers myriad half-baked justifications for this costly change. Bogus pretext aside, this massive tax hike will spell disaster for millions of American households and businesses.
Defenders of the measure are rejoicing over the impact the executive order will have on Chinese “dropshipping” platforms like Shein and Temu. The administration has dismissed concerns over the potential impacts of these tariffs, claiming that “access to cheap goods is not the essence of the American Dream.” This reflects a complete and utter misunderstanding of the American Dream. The United States has been built on the promise of prosperity and abundance, where, by allowing free markets, the average American consumer can easily afford goods considered luxuries anywhere else in the world.
While American wealth is commonly measured in technical statistics such as Gross Domestic Product per capita, these measurements miss something important. Other measures bring American prosperity into clearer focus. For example, by creating a resilient supply chain fed by goods from all over the world, Americans spend considerably less of their income on food than anywhere else in the world.
The abundance that everyday Americans see in their grocery stores is the ultimate sign of prosperity. Such a sight left a lasting impression on then-Soviet leader Boris Yeltsin, making him realize Americans’ vastly superior quality of life. The variety that wowed Yeltsin in 1989 is dwarfed by today’s cornucopia, in which the U.S. imports double the amount of food it did back then.
Such a variety of products has an inherently democratizing effect. With free trade, rare cheeses, exotic fruit, spices and high-grade meats stop becoming luxury goods consumed only by the wealthiest Americans and become more attainable to the average consumer. This is the undeniable byproduct of a low- and no-tariff environment that has enabled direct-to-consumer distribution systems to thrive. The de minimis allowance has played a significant role in that.
If you are a Colombian immigrant, you are accustomed to consuming what is regarded as the best coffee in the world. In your local area, coffee bags retail from $13 to $21 in grocery stores, before taxes. However, most of the coffee with nationwide distribution has little to no traceability to its area of origin and will be sold for months after its roasting date (if it even displays the date), indicating lower quality and lack of freshness. However, you can find an online coffee retailer like Pergamino, which offers top-grade Colombian coffee from $17 to $27 (after taxes and shipping) with a promise of 3-day shipping after roasting for maximum freshness. In a week or so, your box of fresh high-grade coffee awaits at your door, for a small premium.
This operation would be completely upended with the new tariff regime. Under the executive order, international suppliers will have two options: either pay the tariffs as a percentage of the package value or pay a simplified flat fee that starts at $80 and can go as high as $200 per package, depending on the effective tariff rate of the country of origin. Suddenly, the $17 bag of Colombian coffee could cost you a whopping $97. Justifiably, you go back to the lesser-quality option that you could find at the grocery store, which will also likely be higher in price (and probably not from the U.S.). The same will happen with numerous popular foreign goods, which will now only be attainable with deep pockets or international travel.
Simply put, protectionism is the enemy of free enterprise and American prosperity. Lower-income Americans have gained unprecedented access to global markets through the de minimis exemption. Reversing course and telling Americans to embrace government-mandated scarcity is a recipe for poverty and mass misery.
Juan Londoño is the chief regulatory analyst at the Taxpayers Protection Alliance.