Editor's Note: Late Friday, the Trump administration issued updated guidance through US Customs and Border Protection that excludes a broad range of electronics from reciprocal tariffs imposed on China. The exclusions include smartphones, laptops, memory chips and semiconductors. It is not clear how many exclusions apply to Embedded Works, the electronics distribution company featured in this story. The story was originally posted prior to the CBP guidance late Friday.
Like other electronics CEOs, Andy Do has been cautiously watching the growing trade war between the US and China. As of Friday, US tariffs on Chinese goods reached 145%, while China responded with 125% tariffs on US goods entering its borders.
One facet of the trade war Do is most concerned about, however, on April 2 when President Trump signed an executive order to close a tariff loophole for “de minimis” goods from China and Hong Kong.
The EO takes effect May 2 and eliminates the current exemptions from duties and tariffs on shipments up to $800.
Goods priced $799.99 and less shipped from China will be subject to prevailing tariffs –currently at 145%.
The phrase “de minimis” is Latin for “too small to matter” or even “trifling” and refers to small shipments from abroad. While attention has been heavily focused on how the Trump administration closure of the exemption might hurt US consumers buying from low-cost retailers such as Temu or Shein, it was intended originally to also affect Do’s business distributing computer components, including sensors and wireless devices priced as little as single digits, often far below $800.
Do has been CEO at Embedded Works in Santa Clara, CA for 20 years and is now prepping his staff for the onslaught of customer concern over, currently, 145% tariffs on top of the cost of merchandise. It means prepping e-commerce systems to include ways to add the tariff on goods from China, which make up 90% of the electronics the company distributes.
“We will have to include a warning at checkout that will include a tariff is added and it is now the law,” he said in an interview with Fierce Electronics. “We will have to update the cost of goods.
“Because of the increasing tariffs we now have to change the way we transact from an e-commerce perspective and now have to account for the tariffs at checkout. It’s a new reality and we have to accept it. I haven’t sent out the email blast yet that your prices are going up.”
There will be some business expense from the e-commerce adjustment, but one effect is already taking place: customers are buying up products subject to tariff for use later. Do worries such buying behavior could mean businesses really needing the products could face shortages later in the year.
“A lot of companies are still sitting on inventory from Covid buying and can’t go through it. The attitude is they better buy now and we’re seeing a flood of interest of people hoarding” in advance of the May 2 closure date ending the de minimis exemption.
The products Embedded Works distributes are trusted global brands with manufacturing centers throughout the world that make high technology products. “It’s one thing to get shoes or toothbrushes from China but there is so much tech in an IP stack which takes a global village to manufacture.”
Do doesn’t get political about the tariffs and Trump’s policies and to some extent understands the closing of the de minimis exemption. “Our country neighbors have lower de minimis than ours but there are bigger things at play that we need to think about. Having low-cost accessible goods from an e-commerce and distribution perspective changes consumers’ purchasing instincts, and makes you think twice about how things will be more expensive.”
The current $800 exemption is very high compared to Canada, at $40, and about $150 in the Euro area. President Obama set the level at $800 in 2016, up from $200. Congress created the exemption in 1938, where it started at $1, then rose to $5 in 1990 and $200 in 1993.
The effort to eliminate the exemption actually started at the tail end of the Biden administration when US Customs and Border Protection began a rule-making process.
In January, CBP noted an increase in shipments to the US under the de minimis exemption. Such shipments increased more than 600% from 139 million in fiscal 2015 to 1 billion shipments by fiscal 2023 and 1.36 billion in fiscal 2024. Biden administration officials expressed concerns that low-value shipments included illicit drugs such as fentanyl and synthetic drug materials.
On April 2, President Trump said eliminating the exemption was a “critical step in countering the ongoing health emergency posted by the illicit flow of synthetic opioids into the US.”
Semiconductors are not subject to the steep China tariffs, yet, but President Trump has repeatedly said they will be soon. Other components in the electronics supply chain are mostly subject to tariffs.
For the reasons President Trump and others have set out, Do will comply, even amid cost concerns his customers are sure to raise.
“It’s a new government mandate and we’ll get in line and figure it out,” Do said. “I’ve gone through government mandates before and we’re a law-abiding company. Right or wrong, we’ll look at how it affects everyone.”
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In addition to serving as CEO of Embedded Works and President of SensorWorks in Santa Clara, CA, Andy Do is a musician and serves on the advisory board of Sensors Converge, which celebrates its 40th year June 24-26 in Santa Clara, CA.