Tariffs and Impact

• The Trump administration has lowered the tariff on low-value shipments (under $800) from China and Hong Kong from 120% to 54%, as part of a temporary trade truce.

• The de minimis exemption, previously used by Chinese e-commerce giants like Temu and Shein to avoid tariffs, has been effectively nullified by the new policy.

• Imports under $800 will now face either a 54% tariff or a $100 flat fee per parcel, with exporters choosing the payment method; the planned increase of the fee in June has been scrapped.

A day after announcing a temporary trade truce with China which significantly lowered tariffs, the Trump administration has gone a step further, cutting tariffs on low-value shipments from China. The levy is still high – 54% – but it had been 120%.

The executive order cuts the tariff on what is known as the “de minimis” tariff on shipments from China, including Hong Kong. The de minimis exemption previously allowed companies to avoid tariffs and customs inspections if the retail value was less than $800.

Chinese retailers Temu and Shein used the exemption to ship cheap goods directly to U.S. consumers without paying the extra tax.

This exemption significantly benefited fast-growing e-commerce companies like Shein and Temu, whose business models depend on shipping low-cost products directly to U.S. consumers from Chinese warehouses.

However, critics argued that this loophole gave foreign companies an unfair advantage over domestic retailers, who must comply with tariff and tax regulations. By bypassing duties, Chinese sellers could undercut American brands on price, often dramatically.

Starting May 14, imports from China and Hong Kong that are priced under the $800 threshold will be subject to either the 54% tariff or a flat $100 fee for each parcel. Exporters can decide whether to pay the tariff or flat fee. The White House said previous plans to double the $100 fee starting in June are no longer being considered.

Key takeaways

• Tariffs boost second-hand market: Thrift, consignment, and second-hand stores are thriving amid global tariffs, as their merchandise originates from consumer donations rather than international manufacturers.

• ThredUp sees financial gains: Online consignment retailer ThredUp reports benefits from tariff policies, with stock prices rising since the U.S. administration’s tariff announcements.

• Thrifting tips for newcomers: Experienced shoppers recommend planning ahead, budgeting carefully, inspecting items for quality, and being willing to leave if nothing appealing is found.

There’s one segment of the U.S. retail economy that isn’t worried about tariffs. In fact, tariffs on imported goods just may be good for business.

Thrift stores, second-hand stores and consignment stores – whatever they are called – don’t rely on factories in other countries. Their merchandise comes from other American consumers, either in the form of donated items or consigned products, in which the store and the consumer share the money.

“Resale is a rare industry that benefits from the administration’s global tariffs,” Alon Rotem, chief strategy officer at online consignment and thrift store ThredUp, told the Financial Times. “Everything we sell comes from the closets of Americans, so everything we sell is immune.”

ThredUp is a consignment store, a publicly-traded for-profit enterprise, has already benefited from the tariffs. The company’s shares have rallied since President Trump announced the tariffs on April 2.

 Most second-hand stores are operated by churches and other non-profit organizations. One of the largest is Goodwill Industries, where shoppers say you can get lightly-used designer clothing and dinnerware for pennies on the dollar – if you know what to look for.

If you’re new to thrift store shopping, regular “thrifters” offer these tips:

• Plan ahead: Visit some stores in your area before going shopping. 

• Make a budget: Even though items cost less, you can still spend a lot of money if you get carried away.

• Inspect items closely: Look for signs of wear, damage, or stains.

• Be ready to walk away: If you aren't finding what you want, don't hesitate to leave.

Key takeaways:

• Historical figures suggest that tariffs aren't helpful to U.S. Amazon sellers and e-commerce merchants elsewhere, despite China's dominance on the platforms.
• Chinese sellers have overtaken Americans as the majority of top-performing sellers on Amazon and have made big gains on Walmart Marketplace.
• Chinese e-commerce merchants have advantages that American sellers don't and they will likely hike prices to make up for the tariffs.

President Trump's tariffs aim to boost American businesses, but if history is the judge, they won't be helpful to the country's Amazon sellers.

"Despite promises that tariffs will help American businesses, historical evidence shows they simply make products more expensive for American consumers while failing to shift market share to domestic sellers," said Ben Donovan, analyst at e-commerce consultancy Marketplace Pulse, in a blog post.

Donovan pointed to a 2019 study in the Journal of Economic Perspectives, which found that when the first Trump administration placed tariffs on $283 billion of imports, the costs were "almost completely passed through into U.S. domestic prices."

The study also said that 2018 tariffs caused companies to reroute around $165 billion in trade a year through workarounds, such as shipping through other countries.

"These supply chains were reconfigured rather than repatriated while the underlying marketplace dynamics continued to evolve in favor of Chinese sellers," Donovan said.

The study came years before the dominance of Chinese merchants on U.S. e-commerce platforms.

Chinese sellers overtook Americans on Amazon in 2024, accounting for more than half of top 10,000 sellers by revenue, according to Marketplace Pulse.

On Walmart Marketplace, Chinese sellers now account for around 28% of active merchants, up from less than 1% at the start of 2021, Marketplace Pulse said.

Donovan said that Chinese sellers have advantages that tariffs won't fix.

"Many are either manufacturers themselves or have a closer proximity to manufacturing than American businesses," he said. "They benefit from Chinese government support through export subsidies and tax rebates."

"And they’ve become increasingly sophisticated in marketplace operations through years of platform experience," he added.

Key takeaways:

• Nearly a quarter of Americans are scrapping plans for major purchases, including buying a home, and nearly a third are delaying purchases.
• Americans are avoiding homebuying at a time when sales are slowing and prices have flatlined.
• There may be deals if a decline in homebuying lowers home prices.

Tariffs are causing Americans to scrap big ticket purchases, presenting opportunities for those with deeper pockets.

The tariffs are harming housing markets in a few ways, including sending mortgage rates seesawing and boosting construction costs.

Now, more than half of Americans are cancelling or delaying major purchases, such as homes and cars, because of the tariffs, according to a April 10 to 14 survey by real-estate brokerage Redfin.

Some 39% of survey respondents also said they were much less likely to make a major purchase this year.

“Consumers are tightening their belts because they are rightly nervous about their job security and the prospect of paying more for everyday expenses," said Redfin economics lead Chen Zhao in a statement.

A decline in Americans buying homes could benefit prospective homebuyers looking for a better deal.

"There are some potential silver linings for homebuyers: the drop in demand could cause home prices to stay flat, or even fall, and there’s some chance mortgage rates could drop in the next few months,” Zhao said.

Homes have been selling at their slowest pace in six years, with homes typically staying on the market for 47 days, the longest period of any March since 2019, Redfin said.

Home values have only risen 0.2% in March, a month of typically strong growth, and prospective homebuyers now have 19% more homes to choose from than a year ago, according to a report from real-estate website Zillow.

Zillow's home price forecast has also turned negative, predicting that home values decline 1.9% in 2025.

"Buyers — especially first-timers without equity to pour into their down payment — continue to struggle with affordability and now are facing even higher levels of uncertainty," said Zillow Chief Economist Skylar Olsen in a statement. "A turbulent economy likely weighs more heavily on first-time buyers than more firmly established sellers."

Still, there are strong real-estate markets in the Northeast and Midwest, where homes available for sale still remain well below prepandemic 2019 levels, even though "there's growing softness and weakness right now in many pockets of the Sun Belt," said Lance Lambert, co-founder and editor and chief of industry publication ResiClub, in a newsletter.

Lambert said Zillow's negative forecast may be too bearish, considering there are other reputable forecasts still predicting home prices to rise in 2025 as of March, including Fannie Made predicting a 1.7% increase and Wells Fargo saying home prices will rise 3%.

As tariffs potentially make imported Chinese goods more expensive, several American manufacturing sectors could see opportunities to expand and fill those gaps.

It's important to note that a direct, one-to-one replacement across all categories is complex due to existing supply chains, cost structures, and the sheer scale of Chinese manufacturing. However, certain industries in the U.S. appear to be well-positioned for growth:

1. Consumer Goods:

• Textiles and Apparel: While much of this industry moved offshore decades ago, there's a renewed interest in "Made in USA" for quality and potentially faster turnaround times. Companies focusing on niche markets, sustainable practices, or higher-end goods could expand. For example, some smaller American textile mills are investing in modern equipment to compete.

• Furniture: American furniture manufacturers, particularly those focusing on customization and solid wood construction, could see increased demand as the price gap with imported furniture narrows.

• Appliances: While large-scale appliance manufacturing often involves global supply chains, some American companies specializing in premium or niche appliances might find a more level playing field.

2. Industrial Goods and Equipment:

• Machinery: The U.S. has a strong history in producing industrial machinery. As companies look to diversify supply chains and potentially bring some production back to the U.S. ("reshoring"), domestic machinery manufacturers could benefit.

• Aerospace and Defense: These sectors already have a significant manufacturing base in the U.S. and are less price-sensitive than consumer goods. Increased focus on domestic sourcing could further strengthen these industries.

• Automotive Parts: While the automotive industry has complex international supply chains, there could be opportunities for American manufacturers of specific components, especially if tariffs make imported parts significantly more expensive.

3. Technology and Electronics:

• Semiconductors: There's a significant push to increase domestic semiconductor manufacturing in the U.S. due to national security and supply chain resilience concerns. Initiatives like the CHIPS Act aim to incentivize this growth.

• Specialized Electronics: Niche areas of electronics manufacturing, particularly those requiring high precision or with defense applications, could see more domestic production.

Factors to Consider:

• Cost Competitiveness: Even with tariffs, American manufacturers may still face challenges competing on price with some Chinese goods, especially in high-volume, low-margin products. Automation and advanced manufacturing techniques will be crucial for improving cost-competitiveness.

• Supply Chain Adjustments: Building entirely new domestic supply chains can be time-consuming and expensive. Many American manufacturers rely on some imported components.

• Skilled Labor: Ensuring a sufficient supply of skilled manufacturing workers in the U.S. will be vital for any significant reshoring or expansion of domestic production.

• Government Incentives: Policies that support domestic manufacturing through tax breaks, research and development funding, and workforce training can play a significant role.

Examples of Potential Areas:

• Outdoor Equipment: American companies producing high-quality camping gear, sporting goods, and outdoor furniture could capitalize on increased costs of imported alternatives.

• Tools and Hardware: Domestic manufacturers of hand tools, power tools, and hardware could see a resurgence.

• Specialized Industrial Components: Businesses that produce specific industrial parts and components for various sectors might find new opportunities.

It's important to remember that the impact of tariffs and the extent to which American manufacturers can step in will depend on various factors, including the specific tariffs imposed, the responsiveness of American companies, and broader economic conditions. However, the scenario does create a potential window for growth in several U.S. manufacturing sectors.

Key Takeaways:

• Tariff Response: Amazon has reportedly canceled orders for products made in China and other Asian countries following President Trump's tariff announcement, suggesting a move to reduce tariff exposure.

• Vendor Impact: The sudden cancellations have left some vendors, particularly those with already manufactured goods, facing financial burdens and the need to find alternative buyers.

• Direct Import Shift: The canceled orders appear to be "direct import orders," where Amazon acts as the importer and typically pays tariffs, potentially shifting the tariff burden back to vendors if they choose to import the goods themselves.

E-commerce giant Amazon.com Inc. has reportedly canceled purchase orders for a variety of products manufactured in China and other Asian nations, according to a Bloomberg report.

This move suggests the company may be proactively seeking to mitigate the impact of anticipated tariffs announced by President Trump earlier this month.

The canceled orders reportedly span multiple vendors and include items such as beach chairs, scooters, and air conditioners. 

Sources indicate that the abrupt halt to these orders followed President Trump's April 2nd announcement of planned tariffs on goods from over 180 countries and territories, including key manufacturing hubs like China, Vietnam, and Thailand.

Significant risks

The sudden nature of the cancellations has led vendors to believe it is a direct response to the looming tariffs. While an Amazon spokesperson declined to comment on the matter, the company acknowledged the potential risks associated with international trade disputes in its annual report released in February.

The report specifically noted that "China-based suppliers provide significant portions of our components and finished goods."

It remains unclear how widespread these order cancellations are and the total range of products affected.

Amazon's not alone

It's not just Amazon that's threatened by the tariffs. 

So-called "fast fashion" websites Shein and Temu could also find themselves facing blowback as the trade war escalates.

Known for a vast selection of ultra-cheap goods and less-than-stellar delivery speeds, the sites have taken a big bite out of the U.S. discount market, $5.3 billion according to a recent Congressional Research Service report -- about 17% of the market. 

Trump's 125% tariffs are likely to be quickly reflected in Shein and Temu's sales. More significantly, they're guaranteed to make it harder for consumers to find the super-cheap items they've become accustomed to.

Whether the higher prices and smaller inventories of Chinese goods help domestic U.S. manufacturers remains to be seen. 

In brief ...

• 🇺🇸 President Trump announces a blanket 10% tariff on all imports, with much higher rates for key trade partners like China, Europe, and Japan.

• 📊 Tariffs framed as a “reciprocal” response to what Trump says are unfair foreign trade practices.

• 💬 Trump brands the move “Liberation Day” for U.S. trade, vowing it will “make America wealthy again.”

In a fiery announcement Wednesday, President Donald Trump unveiled a sweeping new trade policy, imposing a 10% tariff on all imported goods, with even higher rates targeting specific countries. Trump dubbed the moment “Liberation Day” for U.S. trade policy and said the new tariffs would restore economic power to American industry and workers.

“It can’t get any simpler than that,” Trump said as he outlined a plan for reciprocal tariffs that would mirror—or exceed—the duties imposed on U.S. goods by other nations.

Holding up a chart, which he said was too windy to place on an easel, Trump read off a list of countries and the new tariffs his administration will enforce. Among them:

• China: 34%

• European countries: 20%

• Japan: 24%

The president described the increases as a “discounted reciprocal tariff,” saying the U.S. was showing restraint out of kindness but could go higher if provoked.

“This will make America wealthy again,” he declared, echoing themes from his prior campaigns and trade wars. The announcement signals a return to Trump's aggressive use of tariffs as a tool to reshape global commerce—a strategy that has historically sparked both praise and criticism from economists and international allies alike.

The policy is expected to trigger strong reactions from global markets and foreign governments, as well as raise questions about how it could affect inflation, supply chains, and consumer prices in the U.S.

Financial markets sank after the announcement. Shares in some of the biggest U.S. technology and consumer firms fell late. Nike slid 6%, Apple fell 5% and Amazon dropped 4%.

Further details on implementation timelines and exemptions are expected in the coming days.

Car insurance rates could rise rapidly if President Trump slaps tariffs on Canada and Mexico.

Assuming a 25% tariff on the countries, costs for full-coverage car insurance would rise 60% faster in 2025, according to research from insurance-comparison website Insurify.

That that would be an average cost of $2,502 a year for full-coverage car insurance after tariffs by the end of 2025, instead of $2,435, which represents an 8% climb versus 5%.

Insurify said tariffs on Canada and Mexico would boost car insurance rates because the U.S. imports steel and aluminum to make car parts.

“As the price of replacement parts increases, premiums will have to increase accordingly,” said Daniel Lucas, carrier relations manager at Insurify, in the report.

Canada and Mexico supplied around 35% of U.S. steel imports in 2024 and Canada supplied around half of aluminum imports, Insurify said.

The U.S. also imports around 32% of its auto parts from Canada and Mexico.

Supporters of tariffs say they will force automakers and repair shops to buy more U.S.-made parts, which would strengthen domestic manufacturing.

But Insurify said it will take time to move to more U.S. manufacturing and car insurance rates would still increase in the short term.

And parts such as wire harnesses, seat trims and armrests are entirely made abroad because they’re too expensive to make in the U.S., Insurify said, citing Wolfe Research, a New York-based financial research firm.

“All these factors can add to the cost of a claim — more expensive parts, lower domestic supply, and a longer supply chain that adds to rental costs, since vehicles take longer to repair,” Lucas said.

How would tariffs affect car insurance rates in U.S. states?

New York state would be particularly hit hard.

Insurify said full-coverage auto insurance costs would be $4,293 a year in New York, with $110 of the increase coming from tariffs.

Without tariffs, Insurify said car insurance rates would remain flat or decrease in five states: Vermont, New Hampshire, Hawaii, New Mexico and Idaho.

But with tariffs, Insurify said rates would increase in every state.

Email Dieter Holger at dholger@consumeraffairs.com.

President Trump's tariffs are uncertain after they were paused for Canada and Mexico, but a negotiating window remains open until they go into force for China on Feb. 10.

Tariffs are effectively taxes on imports into the U.S., which imported around 36% of consumer goods in 2022, according to the World Bank.

Despite uncertainty, 49% of Americans say they will buy less and 40% will switch to cheaper brands if tariffs raise prices, according to a survey of 1,022 adults by coupon service Smarty.

And half of those surveyed said they will switch to secondhand or local alternatives if tariffs raise prices.

“This research shows that the imposed tariffs will lead to shifts in consumer spending habits this year, with nearly half of US consumers planning to buy less frequently and or switch to cheaper brands if prices continue to increase," said Vipin Porwal, founder of Smarty. "Other consumers are likely to start stocking up on items like clothes and electronics before tariffs take effect, while a large percentage are considering to delay any major purchases for new homes and vehicles.”

What purchases will Americans hold off on if tariffs increase prices?

Cars, appliances and furnture are the purchases respondents said they were the most likely to hold off on because of tariffs.

Automakers with plants in Mexico and Canada could see tariffs slapped on imported vehicles and costs passed onto consumers, if tariffs in those countries go back on the table.

Some 24% of respondents said they would pause buying a car if prices spike up from the tariffs.

"While consumers need to keep buying their daily essentials, we could see a wide swath of Americans simply holding off buying the things they don’t need until seasonal sales discounting provides some relief," Porwal said. "Savvy consumers will look to ramp up savings and rewards opportunities any way they can.”

Email Dieter Holger at dholger@consumeraffairs.com.