The budget reconciliation legislation recently passed by the House of Representatives, better known as the “One Big Beautiful Bill,” contains several provisions that will benefit taxpayers, but there are opportunities for the Senate to make it even better.
The Senate should remove, for example, a provision in the House bill that would end the longstanding de minimis exemption that waives tariffs for low-cost imports.
The United States has maintained some form of exemption for low-cost imports for over 100 years. Prior to 1938, the Treasury Department allowed local Customs officials to waive tariffs if they determined that collecting duties on low-value imports would be an inefficient use of federal resources.
Congress enacted a formal exemption in 1938. The exemption was increased several times over the years. Most recently, in 2016, Congress passed the Trade Facilitation and Trade Enforcement Act, which increased the exemption from tariffs for low-value imports from $200 to $800. This made imports subject to the same rules as the $800 personal exemption for goods Americans bring back when traveling internationally. The legislation projected that increasing the exemption would provide significant economic benefits to businesses and consumers in the United States.
Since then, the Senate has resisted efforts to reduce the exemption for affordable imports. For example, former Finance Committee Chairman Chuck Grassley (R-IA) opposed efforts to reduce the level in implementing legislation for the US-Mexico-Canada Agreement (USMCA), writing that such a change would be contrary to congressional intent.
When the exemption was increased to $800, no one could have expected the subsequent growth in low-cost imports. The number of goods entering under de minimis status surged from 139 million shipments in 2015 to nearly 1.4 billion in 2024.
However, most of this growth was unrelated to the increase in the tariff exemption. The average value of a de minimis package in 2023 was just $54, much lower than the current $800 exemption but also much lower than the previous $200 exemption. This is why opponents of de minimis in the House proposed eliminating it instead of just returning it to the previous level.
Sadly, some opponents of the exemption for low-cost imports have exploited the fentanyl crisis to support their position. For example, the National Council of Textile Organizations says the de minimis exemption impedes the fight against fentanyl trafficking.
But the Drug Enforcement Administration’s 2025 National Drug Threat Assessment doesn’t contain a single reference to de minimis as a contributor to the fentanyl problem. Requiring the government to devote additional resources to assessing duties on 1.4 billion low-value packages could even divert resources that would be put to better use stopping fentanyl at the US-Mexico border. In any case, all imports, regardless of value, remain subject to US narcotics laws.
Other critics disparagingly refer to the de minimis exemption as a “loophole.” That’s like calling the standard deduction for income taxes a loophole. The de minimis exemption is not a loophole but a policy specifically designed to benefit not just consumers but also manufacturers who rely on affordable imported inputs to produce goods in the United States.
While many critics of the exemption have focused on Chinese imports, notably, the House bill would impose tariffs on low-cost goods from all countries, not just China. Economist Christine McDaniel estimates that this change could cost Americans $47 billion a year, and economists Pablo Fajgelbaum and Amit Khandelwal found that low-income households would be harmed the most.
Increasing tariffs on imports from our allies is unwise. And, for those concerned about cheap imports from China, there are ways to reduce reliance on de minimis that don’t involve a big tax increase. For starters, Congress could eliminate tariffs on clothing. The average US tariff on clothing is 14.6 percent. This high tariff encourages consumers to purchase clothing directly instead of from traditional retailers, whose goods are subject to US clothing tariffs.
Regarding his plans to encourage US manufacturing, President Trump recently observed, “I’m not looking to make T-shirts, to be honest. I’m not looking to make socks.” Getting rid of our clothing tariffs would save families billions and reduce the use of de minimis.
The Trump Administration has made it a priority to tackle waste, fraud, and abuse. In particular, the DOGE effort focused on getting rid of waste in federal programs and shrinking the federal workforce.
Terminating the de minimis exemption would undermine President Trump’s efforts to shrink the administrative state. According to Oxford Economics, the cost of limiting the de minimis exemption would be greater than increased revenues generated and would require the government to hire additional workers to assess duties on millions of additional packages.
The Senate should improve One Big Beautiful Bill by removing the House’s proposal to terminate the de minimis exemption. That would be beautiful for consumers!
