Senator Sherrod Brown (D-OH) and many other lawmakers are trying to impose a large tax increase on low-income families by eliminating the “de minimis” (from the Latin for “relating to small or insignificant things”) exemption in the tariff law, which excludes goods valued under $800 from non-market economies such as China. Senate Finance Committee Chairman Ron Wyden has introduced a separate bill that would impose an average tax of 14.7 percent on all imported low-cost clothing.

A recent working paper from the National Bureau of Economic Research concludes that completely eliminating the de minimis exemption for imports from all countries would reduce U.S. net wealth by $11.8 billion to $14.3 billion, disproportionately hurting low-income and minority consumers. Economists Pablo D. Fajgelbaum and Amit Khandelwal calculated that if the de minimis exemption were eliminated, people in the poorest zip codes would face average tariffs of 12.1 percent, while the richest zip codes would only face average tariffs of 6.7 percent. In addition, many small and medium-sized businesses rely heavily on the de minimis exemption.

Removing the exemption only for products from China and other non-market economies would also be costly. According to federal statistics, China accounted for 64 percent of US de minimis imports between 2018 and 2021.

The federal government created a de minimis exemption for low-value imports in 1938 “to save the government costs and inconveniences disproportionate to the revenue it would otherwise receive.” Most of these low-value de minimis imports are exempt from duties, other taxes, the requirement to use a customs agent, and handling fees.

Congress increased the exemption limit several times over the years, most recently to $800 in the Trade Facilitation and Trade Enforcement Act of 2015. This increase was intended to benefit businesses and consumers in the United States by reducing costs and allowing U.S. Customs and Border Protection (CBP) to focus its limited resources on higher-value imports.

Critics of the de minimis waiver continue to claim it is a loophole that allows China to circumvent U.S. laws and tariffs. Yet from 2018 to 2021, CBP seized more than 400,000 de minimis packages. Last year, the government collected $44 billion in tariffs from China, more than triple the amount collected in 2015 before the de minimis threshold was raised to $800. Tariffs on imports from China accounted for 61 percent of total tariffs collected by the U.S. last year, up from 42 percent before the de minimis threshold was raised.

In addition, while low-value imports are not subject to tariffs, they are subject to strict security checks and controls like other forms of imports. All imports, regardless of value, are subject to U.S. drug laws, anti-forced labor laws, including the Uyghur Forced Labor Prevention Act, intellectual property laws, and other measures.

Critics have also falsely suggested that the de minimis exemption is a major cause of the fentanyl epidemic. But that ignores the main problem. According to the Drug Enforcement Agency (DEA), the fentanyl epidemic is primarily caused by Mexican cartels using Chinese chemical shipments and smuggling drugs across the southern border.

Even abolishing the de minimis exemption for imports from China or for all clothing imports would not change this, but would mean a strong regressive tax increase for American households.

Congress should consider alternative approaches, such as eliminating tariffs on 79 percent of clothing Americans import from countries other than China. Currently, tariffs on these imports average 12.7 percent, which incentivizes consumers to buy inferior clothing from China.

Lowering tariffs to lower clothing prices and encourage families not to source their clothes from China is a no-brainer.