The biggest threat to Chinese e-commerce sites

• Even with new relief from the China trade deal, the end of the loophole damages the business models of sites like Shein and Temu, which depend on tariff-free entry to deliver low costs for consumers.
• Packages from other countries might face the same fate: The House tax bill also proposes a complete repeal of the loophole worldwide by 2027.

Flashback: Direct-to-consumer packages from China worth $800 or less were previously excluded from tariffs, a loophole called the "de minimis" exemption.

• The president eliminated this policy, then reinstated it, then scrapped it, raised the tariff rate, then tripled it, then cut it in half, all in the last four months.

What's new: Effective Wednesday, low-value packages from China are subject to a 54% tariff, down from the 120% rate in place since May 2.

• Alternatively, carriers can pay $100 per package, a flat fee that was supposed to, but will no longer, increase to $200 next month.

The intrigue: The era of tariff-free, cheap goods from China is likely over, even if the ultimate duty rate changes. It threatens the primary appeal of goods from Chinese e-commerce sites: They are cheap.

• That has long been a boon for American consumers, who will likely see costs spike across a slew of purchases affected by other trade policies.
• In the wake of the news, Temu stopped shipping products from China to the U.S. and is now only selling items stocked in U.S. warehouses.

"If they are selling $10 tchotchkes crap, then they have two options: Start insourcing fulfillment in the U.S., which Shein and Temu are pivoting to do, or you just pass the cost on to the consumer," says Brendan Heegan, founder of the shipping logistics firm Boxzooka.

• "If you're getting a toilet bowl brush off Temu for $7.99 and now it costs $12.99, in my mind, that's still cheap."

What to watch: The attack on the business model of Chinese e-commerce sites is increasingly global, as other nations consider following America's lead.

• The European Union proposed scrapping a similar exemption by 2028 two years ago. Analysts expect that officials will eliminate it sooner to avoid an influx of low-cost goods, as Chinese e-commerce sites redirect attention to their market.
• The U.K. said last month it would review its own treatment of low-value imports that are excluded from tariffs.

The bottom line: Trump has publicly called out the exemption as one that has undercut Main Street, although some domestic small businesses that depend on the de minimis exemption are also being hit hard.

• "De minimis is a big deal. It's a big scam going on against our country, against really small business and we've put an end to it," Trump said earlier this month.