In an effort to reduce U.S. reliance on Chinese products and support domestic industries, the Biden administration is cracking down on the flood of cheap products sold from China. This crackdown could lead to higher prices for American consumers who frequently shop on popular sites like Temu and Shein.

President Joe Biden has proposed a rule that would prevent foreign companies from evading tariffs by shipping goods valued at $800 or less. These companies, mainly from China, have taken advantage of the "de minimis exemption" to inundate the U.S. market with dresses, shoes, toys, bags, and other items directly shipped to American shoppers in small packages.

According to a White House statement, the number of these shipments has skyrocketed from 140 million annually to over 1 billion last year. This exemption not only makes it difficult to block banned imports like fentanyl and synthetic drugs but also raises concerns about the entry of unsafe and unlawful products into the country.

The move by the White House comes at a critical moment for the world's two largest economies. The United States has been striving to reduce its dependence on Chinese products, safeguard emerging industries such as electric vehicles from Chinese competition, and limit China's access to advanced computer chips. Meanwhile, China views manufacturing and exports as vital drivers of its economic growth, particularly as it faces deflation following pandemic-related lockdowns.

This week, the U.S. House unveiled a series of bipartisan bills targeting China, highlighting Washington's extensive efforts to compete with Beijing in a global race for dominance. These efforts have significant implications for everyday Americans, affecting various sectors from healthcare to shopping.

Although the House was unable to present a bill to narrow the de minimis exemption this week, 126 House Democrats have called upon President Biden to utilize his executive authority to close this loophole. They argue that the exemption poses growing dangers to American workers, manufacturers, and retailers, as well as jeopardizing health and safety. Democratic representatives Earl Blumenauer and Rosa DeLauro welcomed Biden's announcement as a first step but assert that legislative action is still necessary.

According to Customs and Border Protection data, China is the largest source of retail packages entering the U.S., accounting for the majority of parcels valued at $800 and below. Homeland Security Secretary Alejandro Mayorkas has acknowledged the impossibility of fully screening the four million packages that enter the U.S. daily under the tariff exception. Mayorkas has emphasized that the current system is built upon the false premise that low value equals low risk. He has indicated that legislative changes could grant Homeland Security wider authority to address this issue.

Individuals such as Leah DeVere, a mother from Georgia, have been campaigning against the exemption since her son tragically died after consuming a counterfeit fentanyl pill shipped from abroad. DeVere highlighted how these shipments easily bypassed U.S. Customs enforcement, urging for stricter regulations.

Various U.S. groups, ranging from law enforcement to manufacturing, have formed a coalition to lobby lawmakers and the administration to take action. However, the National Foreign Trade Council, which includes international shippers FedEx, UPS, and DHL, as well as retailers Amazon and Walmart, has defended the exemption. They argue that it is a crucial component of America's economic health and supply chain efficiency. The council contends that without the exemption, costs would rise for American consumers and small businesses.

The U.S. government has emphasized that Chinese e-commerce sites have exploited the exemption to sell cheap clothing and textiles, potentially harming domestic workers and companies. Ending this exemption could adversely affect Chinese-founded companies such as Temu and Shein, who rely on low prices to compete in the market and may now face additional scrutiny. The government has indicated that its tariffs cover around 40% of U.S. imports, including 70% of textile and apparel imports from China.

While Temu has stated that it is reviewing the proposal, the company maintains that its growth does not strictly depend on the de minimis policy. Temu has managed to offer affordable prices by employing an efficient business model that eliminates unnecessary intermediaries, thereby enabling them to pass savings directly to their customers.

As the Biden administration takes steps to reduce U.S. dependence on China and bolster domestic industries, the potential impact on American consumers and Chinese-founded companies remains uncertain. The focus now turns to Congress to provide a comprehensive solution to address these concerns effectively.