Trump Tariffs Aim to Close Loophole, Staunch Fentanyl Flow

February 3, 2025

Copyright Lightfield Studios/AdobeStock
Copyright Lightfield Studios/AdobeStock

In an effort to curb the flow of fentanyl and its precursor chemicals into the United States, President Donald Trump has issued new tariff orders against Canada, Mexico, and China, suspending a key duty-free exemption for low-value shipments. This exemption, commonly referred to as the "de minimis" rule, has been widely criticized as a loophole that has allowed illicit drug shipments to enter the U.S. undetected.

The suspension of de minimis exemptions is a central component of Trump's sweeping import tariffs, which impose a 25% duty on select goods from Canada and Mexico and an additional 10% on Chinese imports. However, the broader impact of this move on fentanyl trafficking remains uncertain, as the restriction applies only to shipments from these three countries and does not establish a global ban.

The de minimis exemption, which allows duty-free entry for shipments valued under $800, has been exploited by traffickers to move fentanyl precursors into the U.S. without rigorous screening. A 2023 Reuters investigation exposed how Chinese chemical traders have used this loophole to send illicit materials into the country, which are then funneled to Mexican labs for fentanyl production. The synthetic opioid was responsible for nearly 75,000 overdose deaths in the U.S. last year, according to the Centers for Disease Control and Prevention.

While White House officials specifically criticized Canada for not doing enough to curb fentanyl trafficking, the executive orders for all three countries contain identical language suspending de minimis privileges. The orders state: "For avoidance of doubt, duty-free de minimis treatment under 19 U.S.C. 1321 shall not be available for the articles described in subsection (a) of this section." However, there is no indication of a permanent or global suspension, leaving the possibility that fentanyl shipments could continue from other countries.

The new restrictions could also have significant economic consequences for Chinese e-commerce giants like Shein and Temu, which have heavily relied on the de minimis rule to ship individual consumer goods directly from China while avoiding standard U.S. tariffs.

Economic and Industry Reactions

The port and trade industries have raised concerns that the new tariffs will have unintended consequences, slowing supply chains and increasing costs for businesses and consumers.

“Tariffs are taxes,” said Cary S. Davis, President and CEO of the American Association of Port Authorities (AAPA). “While the port industry supports efforts to combat illicit drug flows, these tariffs will disrupt supply chains, tax American businesses, and drive up costs for hardworking citizens. We urge the administration and Congress to pursue alternative solutions and exempt critical national security items from these tariffs, including port equipment.”

The Growing Impact of De Minimis Shipments

Since 2015, when the de minimis threshold was raised from $200 to $800 per shipment, the volume of such imports has surged. U.S. Customs and Border Protection now processes over 1 billion of these low-value shipments annually. Census Bureau data shows that in 2023, such shipments accounted for $4.7 billion in imports from China, making them the eighth-largest U.S. import category from the country—more than doubling since 2014.

In the final weeks of the Biden administration, officials proposed new rules to curb the exemption globally, requiring shippers to declare package contents using precise tariff codes and denying de minimis treatment to goods subject to other punitive tariffs. However, it remains unclear whether Customs and Border Protection, now under Trump’s administration, will finalize and implement those measures.

While Trump’s latest tariffs take aim at fentanyl trafficking, their effectiveness in shutting down illicit drug flows—and their broader impact on trade—remain to be seen.

(Reuters + Staff)

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