Biden's de minimis move risks weakening Harris' campaign

Just days after the Democratic lawmakers urged US President Joe Biden to exercise his executive powers to end a tariff "loophole", his administration announced new actions to clamp down on the "abuse" of "de minimis" shipments, in particular from Chinese e-commerce platforms. These consignments over the last ten years had increased from about 140 million to one billion, making it challenging to block illicit synthetic drugs such as fentanyl, the White House readout asserted.

It is despite the proponents spurned the likelihood of any loophole in the exemption or that these low-value shipments contained fentanyl, citing screening of the "de minimis" imports by the Custom and Border Protection (CBP). All imports, regardless of value, are in fact rigorously monitored by the CBP for anti-forced labour compliance including the Uyghur Forced Labor Prevention Act and to enforce trade laws vis-à-vis intellectual property rights.

Leading industry groups have also rejected such propositions. National Foreign Trade Council (NFTC) - whose board includes Amazon and Walmart - in its letter to the Biden administration in March said there was no evidence that illegal drugs were prevalent in "de minimis", alluding to CBP data that showed 99% of fentanyl seizures occurred across areas, which were not a major channel for "de minimis", and estimate only 3% of fentanyl doses in 2024 would come through air cargo. A CBP official last year too dismissed the "misconception" that the "de minimis" was a "loophole" and these cargoes were not screened.

In its recent report, the Drug Enforcement Agency has also acknowledged "Fentanyl (mainly sourced from China and India, which is becoming a "major source country" for illicit chemicals) manufactured by the Mexican cartels is the main driver behind the ongoing epidemic of drug poisoning deaths in the United States." The Department of Homeland Security's own data, which states 89% of all seizures in the cargo environment this fiscal year through July originated as "de minimis" shipments including 72% of health and safety seizures of prohibited items, further reveals the low-value packages are scrutinised at arrival in the US.

The administration's intent to "work with Congress" for key reforms including exclusion of "de minimis" shipments, covered by the Section 301, Section 201 or Section 232, as well as argument that the exemption is resulting in a flood of low-value products such as textiles and apparel into the US market duty-free unveils the flipside of the coin: curbing China's clothing exports to the US.

Inexpensive items like $5 t-shirts and $10 sweaters and dresses and digital advertisements by Chinese e-commerce platforms have benefited consumers and the US ad and shipping industry. As 70% of textiles and apparel imports from China are already subject to the Sections 301 tariffs, an imposition of duties on Chinese low-value goods will directly hit the US importers and consumers who, per the US government's last year report, absorbed these costs and loved the torrent of ultra-cheap clothing.

The new rule risks firing back given it would wreak havoc on American consumers and businesses by triggering higher prices of everyday products like bags, dresses, toys and shoes from Chinese online marketplaces and fast fashion companies at a time when spiking inflation is set to become a burning issue in the presidential campaign.

In a recent debate with Donald Trump, US Vice President Kamala Harris panned his rival's plan to hike tariffs on all imports from 10% to 20% and slap 60% or more on Chinese goods for they would hurt the working families, characterising it as "Trump's sales tax". With the administration's new actions contradicting Harris' condemnation of Trump's tariffs, the Democrats have given a tactic endorsement to the former president.

If enacted, the new rule could cause a drop in Harris' approval rating, which has just edged past Trump. It's politically an unwise decision in an election year, as according to the NFTC, the average price of "de minimis" package could double from $50, in case it "were to be eliminated or significantly degraded", suggesting that American consumers would bear the brunt.

Over the years, "de minimis" has encouraged competition among e-commerce giants and delivered cheaper clothing, electronics and other home products to Americans. Purging of exemption will impact the revenues of Chinese firms; it could derail growth trajectory of the US ad industry while culminating in an estimated $8 billion to $30 billion in additional annual costs to American consumers other than harming small businesses and provoking retaliation.

Biden's intent to crack down on Chinese e-commerce companies could inspire other countries to make changes in their "de minimis" policies, undermining American exporters' competitiveness; they will add to the sufferings of the US low-income communities and small businesses, who could take the Democrats aback in the November election.

Rather than aggrandising threats to American consumers and attracting their wrath by levying sweeping tariffs on "de minimis" shipments, the Biden administration should focus on staving off the challenges, being faced by the US citizens, to circumvent their angst later this year that would help Harris' prospect to become the first ever woman president in the US history.