Brilliant and Eminently Fair: “Reciprocal Tariffs”

President Donald Trump has imposed a 10% tariff on all imports from China, which became effective last week.

This broad tariff had the potential to impact over $450 billion worth of goods, impacting a wide range of consumer products including footwear, toys, gaming consoles, clothing, and electronic devices that has helped keep the Chinese economy afloat.

Legal Insurrection:

Now Trump has paused on his closing of the de minimis trade exemption, a provision commonly used by Chinese e-commerce companies Temu and Shein.

The order states that de minimis will be restored for small packages shipped from China, “but shall cease to be available for such articles upon notification by the Secretary of Commerce to the President that adequate systems are in place to fully and expediently process and collect tariff revenue” on those items.

Trump on Saturday suspended the exemption as part of new tariffs that include an additional 10% tax on Chinese goods. The nearly century-old exception, known as de minimis, has been used by many e-commerce companies to send goods worth less than $800 into the U.S. duty-free, creating a competitive advantage.

It was predicted that its removal could overwhelm U.S. Customs and Border Protection employees, as the mountain of low-value shipments already making their way into the U.S. would suddenly require formal processing.

Over one billion of such exemptions were granted in 2023, so the impact of this pause is significant.

Introduced in 1938, the so-called de minimis exception was intended to facilitate the flow of small packages valued at no more than $5, the equivalent of about $106 today. The threshold increased to $200 in 1994 and $800 in 2016. But the rapid rise of cross-border e-commerce, driven by China, has challenged the intent of the decades-old customs exception rule.

Chinese exports of low-value packages soared to $66 billion in 2023, up from $5.3 billion in 2018, according to a report released last week by the Congressional Research Service. And the U.S. market has been a major destination.

In 2023, for the first time, more than 1 billion such packages came through U.S. customs, up from 134 million in 2015. By the end of last year, Customs and Border Protection said it was processing about 4 million small shipments a day, many of which came from China through online retail platforms such as Shein and Temu.

Meanwhile, Trump plans to announce reciprocal tariffs on other countries next week.

Mr. Trump did not say which countries he would target with reciprocal tariffs. He said that tariffs on Japan were an option if the U.S. trade deficit with that country didn’t fall to zero. But he also claimed that the roughly $68 billion trade deficit could be eliminated by Japan purchasing more oil and gas.

Earlier this week, Mr. Trump indicated he had the European Union in his sights, saying that the bloc would “definitely” face tariffs and “pretty soon.” Mr. Trump has often criticized the European Union for charging a higher tariff on American cars that the U.S. does for European ones, as well as for running a trade surplus with the United States.

Mr. Trump floated proposals in both his first term and his 2024 campaign of making trade more reciprocal by matching the tariff rates that other countries impose on American products.

He has also said in recent days that he planned to impose tariffs on a variety of critical industries, like copper, steel, aluminum, pharmaceuticals and semiconductors. On Friday, he also said that tariffs on foreign cars are “always on the table.”

Savvy leaders are responding with good choices.

It looks like there are a lot of potential tariff options.