Ending "de minimis" tariff exemption is one good thing in a bad deal

Closing the biggest loophole in tariff enforcement will be incredibly painful to consumers, but could help stem the fentanyl tide.

Feb 03, 2025

President Donald Trump’s tariffs go into effect Tuesday, which most economists and the stock market have determined to be a terrible thing for the U.S. economy. Punishing tariffs against China, and our neighbors Canada and Mexico are designed to get those countries to help stem the massive influx of fentanyl over our borders, which fuels a drug crisis hobbling many states. I am not against whatever measures the government deems useful in fighting our drug problem. I would wager that most of our readers know someone, even close to them, who have succumbed to an opioid addiction, or have had their lives negatively impacted by it.

U.S. Customs and Border Protection, Public domain, via Wikimedia Commons

According to a 2022 Congressional Joint Economic Committee analysis, the opioid epidemic has cost the U.S. economy over $1.5 trillion dollars per year since 2020, and the toll is rising. If you want to know a fast way to reduce costs in the public sector, fixing the fentanyl border problem is a target worth pursuing. Whether tariffs against our closest trading partners, and our largest retail imports, is the way to do it is worth arguing. But I guess we’re about to find out in real-time if it works.

Most companies dealing with tariffs can handle it pretty decently—they just add a column to a spreadsheet, or in the case of large retailers like The Home Depot, they change parameters in their AI data, and, boom, prices go up at the register. This will happen starting Tuesday. Everything is about to get more expensive.

And companies selling to Canada will face the same issues, in reverse, as Canadian retaliatory tariffs go into effect. There will be a dampening of cross-border sales of many products that are used every day, including construction materials. So, new home construction may slow, meaning existing inventories of homes in hot markets (like north of Atlanta) will not expand to meet demand, and home prices will go up, while sales volume decreases.

The number of little ripples and big waves caused by the tariffs are too numerous to cover, but as I said, we will all find out together in real-time how it affects our own finances, jobs, and retirement plans.

However, there’s one silver lining in the big bad tariff (which, by the way, is likely the biggest single across-the-board tax increase in the country’s history), and that’s the elimination of the “de minimis” exemption. But getting rid of the loophole is going to hurt, bad. Let me explain.

When you order something from Temu, Shein, Alibaba, eBay, or even Amazon (through it’s subsidiary Haul), those items which ship directly from China to you, if they have a value of under $800, are exempt from existing tariffs. They are typically not screened by CBP at customs clearing facilities. They simply come into the country and get delivered quickly to you. This ends Tuesday.

Goods shipped from Canada and Mexico will also no longer be covered by the $800 “de minimis” loophole. The exemption has been used by chemical producers and drug smugglers to bring fentanyl over our borders, without the scrutiny given to larger shipments, according to government sources and Trump’s order regarding Canada.

Drug trafficking organizations (DTOs) are the world’s leading producers of fentanyl, methamphetamine, cocaine, and other illicit drugs, and they cultivate, process, and distribute massive quantities of narcotics that fuel addiction and violence in communities across the United States. These DTOs often collaborate with transnational cartels to smuggle illicit drugs into the United States, utilizing clandestine airstrips, maritime routes, and overland corridors.

According to CBP, “de minimis” shipments have exploded since 2015, when the exemption limit was raised to $800 from $200 per shipment, and now top a billion shipments per year. On his way out, President Joe Biden curbed some of the exempted items, but it’s unclear if Trump’s order may supersede those rules.

The problem is that CBP doesn’t have near the staffing or capacity to screen the $4.7 billion of low-value exempted shipments from China, never mind shipments from Mexico and Canada. So those shipments will sit in a warehouse, indefinitely, until they are accounted for and screened. Effectively, they will stop.

Companies like Temu Alibaba and Amazon have seen this coming for a while, and have used the lead up time to build logistics stocks of popular products in the U.S. But if you get something on eBay from a Chinese seller, it may take a long—very long—time to get to you. That’s the bad news. The instant delivery economy for practically everything, good and cheap (or just cheap), is going to come to a screeching halt very soon. And yeah, it’s going to hurt, in ways we don’t fully know.

But the good news is that drug smugglers are going to have to find new ways to exploit our borders to get their materials into the U.S. And if the tariffs allow CBP to get a better handle on how smugglers—and Chinese chemical producers—have created complex supply chains involving Mexican and Canadian companies, then closing the “de minimis” loophole is worth the pain.

How long it will take to accomplish this, or if it can be effectively accomplished at all, is anyone’s guess. But the Trump administration is using the president’s big hammer to try. Trump’s stupid statements about “subsidizing” Canada aside, the good (possibly the only good) part of his tariff orders is dealing with the fentanyl supply chain, and beginning to stem the debilitating flow of dangerous drugs that have killed and harmed so many in this country.

As I wrote over the weekend, we are in a war. The CCP does not have America’s best interests at heart. Damaging our country using addictive drugs is not something they particularly want to end, though they have taken measures to stop certain chemicals from being shipped here. Instead, the drug runners have contracted with Chinese chemical companies to purchase the components to make fentanyl, and shipped those to Mexico (or Canada), where they can be combined into product and shipped to the U.S., exploiting the $800 “de minimis” exemption as one of the ways this is accomplished.

Remember China’s history. For years, the East India Company (England) sold opium to the Chinese people in the 19th century, and when the Chinese government banned the drug because it was making the people into addicts, the Royal Navy went to war to preserve the drug trade. Sure, it was a different time, but the East India Company, under color of the crown, knew exactly what it was doing. And the Chinese Communist Party knows exactly what it’s doing.

Trump’s tariffs might not last, because the economic pain they are going to create could be unbearable, and the good effects of beginning to stem the tide of fentanyl will take some time to be felt. But perhaps the one good thing, ending the “de minimis” exemption, will be a permanent effect of the basket of bad. For that, I will be grateful to Trump and his administration, if it saves lives and ends the multi-trillion dollar tyranny of our drug addiction problem.

STILL FOLLOWING. I can’t even begin to describe where the Vermont Northeast Kingdom shooting of Border Patrol agent David “Chris” Maland has led investigators. It’s just too weird to go there right now. I’ll just say that “killer vegan rationalist anarchists” was not on my bingo card.

I contacted the reporter at The Boston Globe who is working on the story, to ask how this really strange trip is going for him, but of course, it’s an active story so he can’t talk about it. When I have more time, I’ll go into more depth. But suffice to say, there’s more murders than just the one Border Patrol agent, including the slaying of a couple in Chester Heights, Pennsylvania. Stay tuned for more.

Ending "de minimis" tariff exemption is one good thing in a bad deal

Closing the biggest loophole in tariff enforcement will be incredibly painful to consumers, but could help stem the fentanyl tide.

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