When the US government moved to terminate the long-standing de minimis exemption, the duty-free threshold for low-value imports, it sent a tremor through America’s small business ecosystem. For decades, the rule allowed shipments valued under $800 to enter the country without tariffs or burdensome paperwork, a lifeline for small retailers and niche importers. Now, with its removal, the shock is reverberating most acutely through the fashion and apparel industry, where margins are slim and reliance on small-batch imports is common.

Fashion and apparel sector on the edge

For Peri Olson, founder of Diesel and Lulu’s, a boutique importing premium European apparel, the change has been nothing short of a nightmare. Olson says they are taking it day by day now and they have to absorb a good deal of the costs while waiting it out to see what happens, but they can’t absorb it all. Her experience reflects a broader reality. Small-batch imports once a competitive advantage for niche labels and artisan boutiques are now saddled with tariffs, increased compliance costs, and delayed shipments. Fashion startups that thrived by bringing in unique styles from Italy, France, or the UK face a new calculus: either raise prices, cut staff, or risk closing down.

Meanwhile, large e-commerce giants like Shein and Temu often criticized for exploiting de minimis loopholes are finding ways around the rules by bulk-shipping into the US and redistributing domestically. The irony isn’t lost on small business owners: while the policy shift was partly aimed at curbing fast-fashion imports, it may end up hurting American entrepreneurs more than the overseas titans it was meant to target.

The broader economic fallout

Small businesses are not just the heart of Main Street America; they are a pillar of the national economy. They employ nearly half of the American workforce and contribute over 40 per cent of US GDP. The end of de minimis threatens to squeeze these businesses on multiple fronts. First is job losses as rising costs may force owners to reduce staff, scale back hours, or shut down. Also consumers will see higher prices as duties and shipping costs are passed down. And communities that rely on small businesses could see reduced local spending power and weakened retail ecosystems. The scale of de minimis usage underscores how significant its removal is.

Table: Impact of de minimis removal

Source: U.S. Customs and Border Protection, 2024

The removal has led to several winners and losers. For example, Diesel and Lulu’s facing increased shipping costs and duties on small-batch European imports are absorbing costs in the short term but are unsure of long-term survival. Merchant & Mills, a British fabric and pattern company, has already been forced to raise US retail prices by 15 per cent to offset duties. Shein & Temu the e-commerce giants are navigating around restrictions by bulk importing, potentially gaining even greater advantage over smaller rivals.

Why the de minimis door was shut

The decision to eliminate the exemption comes amid a heated political debate. Both Democrats and Republicans have criticized de minimis as a loophole that disproportionately benefited Chinese e-commerce giants. In 2023, bills such as the Import Fairness Act gained traction, targeting Shein and Temu by name. US Customs and Border Protection (CBP) too warned that the sheer volume of de minimis packages over 1 billion annually was overwhelming inspection capacity, creating risks of unsafe or counterfeit goods slipping through. Meanwhile domestic manufacturers, unions, and textile associations pushed for reform, arguing that unchecked duty-free imports undermined US jobs. Yet critics argue that the policy was applied too broadly. Instead of narrowly targeting high-volume importers exploiting the system, it hit small businesses importing in good faith.

“It’s like using a hammer when what you needed was a scalpel,” said Amy O’Neill, a Washington-based trade policy consultant.

However, industry analysts warn that the burden will fall heaviest on America’s smallest players. “Small businesses are the first to feel the effect, and they feel it the most acutely, but that effect does trickle down to the wider economy,” says Jacob Bennett, CEO and cofounder of Crux Analytics. “The paperwork sounds difficult now, but this will get normalized, and ultimately you’ll still be left with the increased cost,” added Martin Balaam, CEO of Pimberly. The consensus therefore is that even as businesses adapt to the administrative side of the change, the financial weight will remain.