Etsy vendor community facing significant financial distress due to tariffs and the termination of the de minimis regulation
In August 2025, a significant change was introduced in the United States, affecting small businesses and online shoppers alike. The de minimis exemption, which previously allowed for tariff-free shipments of goods valued up to $800, was abolished. This change, while intended to generate revenue, has raised concerns among businesses and consumers.
One of the businesses feeling the pinch is Doris Kochanek's, a woodworking shop based in Ottawa, Canada. Kochanek sells walnut candle holders and other household items on Etsy, with a significant portion of her sales coming from the U.S. Due to the close proximity to most of the U.S. population, a free trade agreement, and the generous U.S. tax exemption called de minimis, Kochanek's shop has been thriving. However, with the end of de minimis, her products are now subject to 35% tariffs on handmade jewelry and knickknacks.
Similarly, Cindy Baldassi, a woodworker from Calgary, Alberta, is selling handmade jewelry through her Etsy shop and other sites. Baldassi's business heavily relies on the U.S. market, and she is concerned about the impact of the new tariff rules on her sales.
The change in regulations also affects online retailers outside the U.S. They now have three main options for handling tariffs when they ship to the U.S.: prepaying tariffs, adding tariffs as a line item on checkout pages, or having customers pay duties directly to Customs and Border Protection or through carriers like FedEx or DHL.
This shift in policy is not just affecting small businesses. Olu Sonola, who leads U.S. economic research at Fitch Ratings, predicts that the transition to new tariff rules could reshape online shopping trends and bring higher prices. He suggests that the end of de minimis could potentially reshape the retail landscape, particularly for small businesses.
Moreover, U.S. customers are experiencing unexpected duties for foreign items handled by UPS, DHL, and others. This has led Baldassi to urge American online shoppers to continue buying from sellers outside the U.S., acknowledging that the systems are not yet in place for easy transactions but promising to try and get back to them soon.
It's important to note that the U.S. is unique among the 38 countries in the Organisation for Economic Co-operation and Development in not having a value-added tax (VAT). This lack of a VAT could potentially make U.S. goods more attractive to foreign buyers, offsetting some of the impact of the new tariff rules.
However, the impact of the new tariff rules extends beyond the U.S. Baldassi expresses concern for vendors outside the U.S. who are facing the prospect of their businesses collapsing due to the new tariff rules. Trump's tariffs are being challenged by lawsuits, and his administration is asking the Supreme Court to affirm his power to impose them.
As the dust settles on these changes, it remains to be seen how the online retail landscape will adapt and evolve. For now, small businesses like Kochanek's and Baldassi's continue to navigate the challenges, hoping for a return to the days of minimal paperwork and cost-effective shipping.
