Why will low-income Americans be disproportionately affected by the loophole repeal?

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Low-Income Americans Face Disproportionate Impact from De Minimis Repeal

Low-income Americans are set to be disproportionately affected by the repeal of the de minimis loophole, as they tend to spend a larger proportion of their income on direct-from-China shipments compared to higher-income individuals. This exemption had previously functioned as a "pro-poor" policy, and its removal is estimated to cost US consumers between US$10.9 billion and US$13 billion overall, with a greater relative per-person cost burden falling on those with lower incomes.
Increased Relative Spending on Small Parcels

Economists' analyses of shipment data indicate that individuals in lower-income zip codes allocate a greater share of their spending to direct-from-China purchases. This means that when the de minimis exemption is removed, the subsequent price increases will represent a more significant portion of their overall budget compared to individuals in wealthier areas. The exemption had allowed low-value packages to enter the US duty-free, a benefit that was particularly utilized by consumers seeking more affordable goods.
Higher Per-Person Costs for Vulnerable Populations

The elimination of the de minimis exemption is projected to result in higher per-person costs, with a more pronounced impact on lower-income Americans. Research suggests that the relative cost per individual will be higher for those with less disposable income. Furthermore, minority Americans are also expected to bear a disproportionate burden, as zip codes with a smaller percentage of white households are projected to experience a higher per-person cost in dollar terms.
Potential for Significant Price Hikes and Demand Drop

Analysts estimate that the prices of products previously shipped under the de minimis rule could surge by as much as 55%. This substantial price increase is anticipated to lead to a corresponding 55% drop in demand for these goods. For consumers like Porche Hughes, who relies on platforms such as Shein for more affordable products, such price hikes would likely necessitate a cessation of purchases from these retailers. Companies like Temu and Shein, which together account for 30% of de minimis shipments to the US, may be compelled to raise their prices to absorb the additional costs.

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Why will low-income Americans be disproportionately affected by the loophole repeal?

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