Shein and Temu tax loophole review may lead to higher UK prices

UK Shein and Temu customers may face price hikes if the "de minimis" tariff loophole is closed.

The UK could adopt Trump's policy eliminating the 'de minimis' loophole, which enables fast-fashion retailers like Shein and Temu to bypass taxes on small shipments.

International retailers are currently able to send packages with a face value of under £135 ($179.20) to the UK untaxed.

In a recent review of the practice, Chancellor of the Exchequer, Rachel Reeves stated that this gives international companies an unfair price advantage on UK businesses. 

If Reeves’ plans are approved, UK shoppers could encounter similar price rises from the online retailers Shein and Temu as US customers.

She said: “The world has changed, and we are in a new era of global trade.  

“We must stand up for free and open trade – crucial to deliver our Plan for Change to make everyone better off. We must help businesses keep their access to trade around the world.” 

Sainsbury’s, Currys and Next have already welcomed the government’s proposal, viewing it as a way to tackle unfair competition and potentially generate more tax revenue.

Alex Baldock, CEO of Currys PLC called the announcement ‘encouraging’. 

He said: “All retailers selling to UK consumers should play by the same rules. If you want to sell to UK consumers, then abide by UK standards, and pay UK tax, just as UK retailers do.”

On Friday, President Donald Trump closed the duty-free exemption for low-value imports from China, escalating his trade war.

Small parcels with a face value of or under $800 (£602.68) now receive a 30% tax rate or $25 (£18.83) per item (increasing to $50 (£37.67) per item after 1 June, 2025).

Chinese goods are already subject to a 145% tax rate introduced by Trump last month. 

Shein and Temu - who exploit the “de minimis” threshold on a daily basis - have been forced to increase their prices to compensate for the tax levy. 

For example, according to Bloomberg News, a thick kitchen cleaning being sold on Shein has hiked up 377% from $1.28 (£0.96) to $6.10 (£4.60). 

Shein and Temu released identical statements on 26 April informing customers of these ‘price adjustments’, just days before the loophole was being eliminated on 2 May.

Temu said: “Due to recent changes in global trade rules and tariffs, our operating expenses have gone up.

“To keep offering the products you love without compromising on quality, we will be making price adjustments starting April 25, 2025.”

Customers have taken to social media to express their shock.

Temu halted shipping directly from China and now only deals with orders from local US-based sellers.

Trump implemented the executive order as a way to tackle illegal goods – including drugs - being smuggled into the country.

Last year, former President Joe Biden proposed an end to the loophole which he identified as the cause of shipments of fentanyl - a synthetic opioid used as a pain relief without loss of consciousness - into the country, 

According to Statista, nearly 75,000 Americans died from a fentanyl overdose in 2022.

The European Union has also considered scrapping the €150 (£127.78; $169.77) threshold for duty-free imports.