Small businesses in the US will be breathing a (small) sigh of relief following the White House’s partial u-turn on de minimis exemptions yesterday.
The US announced a tariff reduction from 120% to 54% on posted ecommerce goods worth less than $800 and, while the offer of paying a $100 flat fee instead remains, it will no longer double in June, as initially planned.
The new tariff level will apply for 90 days, starting 14 May.
While the tariff remains high, it offers US SMEs something of a reprieve – but it will also trigger the restart of transpacific freighters. Shein and Temu, or their customers, are more likely to be able to absorb some of that cost, and still remain competitive.
Freighter activity from China to the US has soared again. In the past 24 hours, capacity has risen 40% week on week, according to Rotate, and up 49% in the past 48 hours, since the reduction of US tariffs on China to just 30%.
Airlines will be relieved. However, the 90-day pause will continue to keep the logistics sector on its toes and unable to plan with certainty.
It is likely that the original high tariffs and US policy zigzags, frustrating corporate planning , has also led to investigations of other markets.
“I think the Chinese ecommerce platforms could very well be looking at South America as an opportunity, but obviously the logistics are challenging,” said CEO of Cargolux Richard Forson. “The Middle East could be another area where there is significant demand for ecommerce.”
But even if the relief is only for 90 days, the economy is expected to benefit. Recession forecasts for the US have lowered: Goldman Sachs cut its forecast for the US to 35% from 45%, following the tariff reduction news, as well as hiking its 2025 US GDP growth forecast by 0.5 percentage points to 1%.
However, “we are far from out of the woods”, Douglas Holtz-Eakin, president of the American Action Forum and a former economic adviser to Republicans said. “We still have tariffs at levels we haven’t seen in a century. That’s a substantial tax increase.”
Others said the reduction showed that the White House finally understood “the disastrous consequences” of high tariffs.
Much of the disaster would have been for small US businesses. Social media forums have been busy with tales of woe from the sector.
One SMB owner noted before yesterday’s announcement: “The previous steel and aluminium tariffs from the pandemic were rough. This is on another level. I don’t think most people understand how fucked we are. Currently, my suppliers are trying to raise prices slowly. They’re playing chicken with each other. They know they can’t raise everything overnight, as they’re also competing with other suppliers, and they still need to move product in order to maintain cash flow.
“I’ve been hoarding lots of inventory in preparation… but how long will it take to move that product if the economy is slow due to overall inflation? Our costs are just one aspect of being in business.
“If our customers are squeezed from every direction by tariffs on everything… then they don’t have cash to purchase things from us.”
But with tariffs on ecommerce now more than halved, the SMBs – and airlines – will live to fight another day.
