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Ways the Tea Industry Can Mitigate the Impact of Tariffs
By Dan Bolton
Eliminating the $800 US “de minimis” tariff exemption for Chinese and Hong Kong goods, effective May 2, will increase the cost of importing tea, result in higher brokerage fees, add logistical complexity leading to delays, and likely double retail prices.
Packages posted from China that were formerly exempt will be subject to either a 120% duty on the value of the goods or a $100 flat fee, whichever is higher. The average price of imported Chinese tea last year was $5.20 per kilo (about 2 cents per gram). If you assume specialty tea retails for $0.06 to $0.10 per gram, then duties will be $30 for a $25 purchase. Since that is less than $100, the customs charges will be four times the retail value of the tea. The fee increases to $200 starting June 1, which means that even inexpensive teas that do not incur a high tariff will incur substantial additional costs.
The Trump Administration said it intends to cancel the exemption for additional countries, many of which also produce tea. Eliminating the exemption on low-value items is equivalent to an embargo.
“Tariffs are no longer sporadic policy tools — they are becoming central features of trade strategy,” writes Professor Arturo Bris at IMD Lucerne.
Large or small, tea vendors with high-volume online sales will experience significant margin pressure as the expense of tariffs, newly required inspections, and fees cannot be fully absorbed, leading to higher retail prices and reduced consumer demand.
Professor Bris recommends that businesses diversify their sourcing beyond a single geography, establish regional supply hubs to serve major markets within tariff-free zones, increase inventory to mitigate short-term disruptions, and explore onshoring or nearshoring options where tariff incentives favor domestic production.
US-based retailers are currently rushing to stock up before the reciprocal tariff deadline so that they can maintain stable costs and weather the situation. Cargo shipments from China to the US surged during the first quarter but plummeted by as much as 60% since the US raised tariffs in early April.
Tea is a seasonal product, so keeping a large inventory is not ideal. Wholesale importers with retail shops are scrambling to supply clients while stockpiling inventory to meet the demands of their own customers.
Specialty Tea Segment
Vendors in the premium and specialty tea market are often focused on marketing distinctive, origin-specific teas, so obtaining equivalent teas in lower-tariff countries is not an easy switch and is, in many cases, impossible. Nor would nearshoring with substantial transformation through blending make sense because the value of artisinal tea to customers is that it is a pure and authentic example of origin-specific teas.
Consumers are far more value-conscious across all sales channels. Those facing high import fees who purchase online from direct-to-consumer suppliers will likely change their shopping habits.
Tea drinkers prioritize their cuppa in good economic times and bad but often trade down in a recession. In the US, consumer confidence is at record lows, driven by anxieties about tariffs and inflation, according to data from the Conference Board and the University of Michigan.
China and the US will likely negotiate lower tariffs on non-strategic goods, such as tea, which were increased from 7.5% in January to 152.5% in just 90 days. The best outcome is to exempt tea but easing sky-high tariffs to between 10% and 50% will help bulk tea buyers, the largest of whom are already skilled at tariff arbitrage.
Howard Yu, a professor at the IMD Business School in Lucerne, writes, “This isn’t about compliance — it’s about adaptation.” This includes trade route adjustments through strategic hubs, parallel supply chains serving both Western and Chinese markets, near-shoring, and regional realignment as global trade channels become more concentrated.
Rerouting shipments for blending at low-tariff origins is underway.
It is no coincidence that “Vietnam’s exports to the US are mysteriously mirroring its rising imports from China,” according to Yu.
Tea on Temu
The US de minimis exemption is unusually high at $800 per shipment.
Consider two 500g packages of Chinese specialty tea. If you buy the tea from a tea shop in the local mall, you will pay for the cost of production, plus the cost of importing the tea, warehousing it, and the added expense of rent, high-wage labor, and utilities. If you buy directly from a venture such as Yunnan Sourcing, the de minimis exemption allows you to avoid most of these costs and pay none of the taxes or fees incurred by larger volume importers. Scott Wilson, the company’s founder, maintains a US-based onshore fulfillment operation. Low-priced strategies on premium teas, such as Pu’er, encourage consumers to purchase larger quantities while remaining well below the previous $800 ceiling.
Direct-to-consumer sites, such as Temu, account for approximately 30% of the 1.36 billion parcels that qualified for the de minimis exemption in 2024.
Most of those packages are apparel, household goods, and electronics. A search of the Temu marketplace reveals hundreds of tea utensils, including hot water dispensers, whisks, and teaware such as tea cups, caddies, iced tea pitchers, and teapots, as well as kettles and brewers, at very reasonable prices.
Perishable foods, including tea, are more commonly purchased on Amazon Marketplace or Walmart. However, you can find green tea, botanicals, tea cosmetics, instant tea, ready-to-drink tea, and matcha powder on Temu.
Temu, Shein, and other e-commerce marketers hiked prices on April 25. Prices for kitchen products and toys on Shein increased by 30%. Temu doubled some prices, according to a Bloomberg article published in the Business Times. Taxes on 14 items shipped from China, which appeared on Temu’s bestseller list, exceeded the value of the products.
Customs Clearance
There is no escape from the minimum 10% tariffs currently enforced. On July 9, reciprocal tariffs, which were suspended for 90 days, will take effect. In the meantime, retaliatory tariffs, including a 125% tariff imposed by China on US imports, make it unlikely there will be any trade in tea for the foreseeable future.
DHL’s decision to suspend global shipments to the US, valued at over $800 million, exemplifies the growing challenge posed by non-tariff trade barriers. DHL is a preferred option for retailers purchasing tea in bulk quantities at origin and for those seeking to fulfill customer orders.
DHL’s Global Forwarding division handles substantial volumes of air and ocean freight, with air freight exports totaling 1.317 million tons and ocean freight reaching 2.482 million twenty-foot equivalent units (TEUs) in the first nine months of 2024. Given the scale of these operations, it is reasonable to infer that a portion of these shipments includes tea, especially considering the prominence of tea-exporting countries in DHL’s network.
Rates are generally predictable. Fuel surcharges, remote area charges, and special handling requirements, such as those for cold chain logistics. Customs duties, taxes, and insurance all contribute to the overall cost.
Several types of tea, including green tea and oolong, are shipped using cold supply chains. Darjeeling tea is often air-freighted for expedited delivery, particularly to corporations for processing or to consumers.
A new unknown is the added time and cost of customs clearance paperwork and procedures.
The decision to no longer accept business-to-consumer packages “until further notice” is a result of delays in processing packages through US Customs, which now requires formal entry processing for all shipments valued at more than $800. The previous minimum was $2,500.
FedEx and UPS have already added a “surge fee” for goods entering the US from China
Here are some steps to consider:
· There is already a shortage of space in federally licensed bonded warehouses, where current rules allow retailers to store goods without paying duty for up to five years. Retailers pay tariffs only on goods as they are withdrawn from storage. Useful for buffering against short-term tariff hikes. Expect many more facilities to license existing warehousing as bonded storage.
· In the US, there are 195 foreign trade zones and 250 active subzones in 50 states that accept shipments, allowing importers to temporarily defer tariff payments. Jeffrey Tafel, president of the National Association of Foreign Trade Zones, told the Financial Times that interest has increased fourfold since Trump took office. Merchandise admitted to a Foreign-Trade Zone (FTZ) is exempt from duties and federal excise taxes as long as it remains within the zone. Re-exporting from an FTZ to third countries completely avoids the tariff. FTZ members reported $949 billion in goods received in 2023.
· Fulfilling tea orders from a different country, known as nearshoring, enables tea suppliers to ship large quantities without having to land goods in the United States. Fulfilling orders from Canada or Mexico globally results in lower costs for eCommerce shipments. Blends that qualify under USMCA free trade rules avoid duty so long as the finished tea has undergone “substantial transformation” according to HTUS rules.
· Stock up. Wholesalers and retailers should evaluate producers in countries with lower tariffs. Shipments from Vietnam may soon be subject to a 46% tariff, while the same tea from Malawi pays only a 10% duty. In July, Japanese teas could be subject to 24% tariffs, duties on tea from India could rise to 26%, and duties on tea from Sri Lanka may increase to 44%.
Finally, move quickly to navigate the choppy economic waters ahead, but also recognize that dictating an incoherent inflation-fueled trade policy by executive order is fragile and easily reversed.
- Revised 4/28 to add rate hikes announced by Temu and Shein
Episode 215
Dan Bolton | Podcast Host
Dan is a content creator who fosters genuine connections globally through informative, educational, and captivating conversations centered on tea. Tea Biz Blog | Podcast
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