An under-the-radar import rule means Trump's China tariffs could hurt the US more than expected

• US consumers could face a bigger fallout from tariffs on goods from China, Fed research says.
• A large chunk of US-Chinese trade is unaccounted for in official data.
• Meanwhile, Trump's plan to eliminate an import exemption could expose many cheap products to tariffs.

Doing away with an under-the-radar rule governing some imports could make US tariffs on products from China hit harder than expected, according to new research from the Federal Reserve Bank of New York.

Economists have warned that President Donald Trump's tariff policy could spur inflation higher, as trade duties make it more expensive to import foreign goods, a cost that's often ultimately passed on to consumers.

While that concern has been voiced for months since Trump won the election, a post this week from the New York Fed shows US data fails to capture the actual scale of trade between America and China. There's as much as $100 billion in imports "missing" from official calculations, the bank said.

While that fact alone can hide the true impact of tariffs on China, an even bigger price shock could come if the Trump administration manages to terminate the so-called "de minimis" import rule.

Generally, this exemption allows products below $800 to trade duty-free, a rule the White House is looking to end.

"This suggests that U.S. consumers could face larger consequences than meet the eye from the recent 10 percentage point tariff increase if the de minimis exception is ended for China and Chinese sellers do not slash their profit margins by reducing their export prices," wrote Hunter L. Clark, an economic policy advisor at the New York Fed.

While it's difficult to pinpoint precisely, Clark calculated that the US imported over $50 billion in Chinese products that fell under the de minimis rule last year. If the exemption is lifted, that would suddenly expose a vast swathe of products to America's sweeping tariff regime.

"For example, a sweater bought from China through an online retail site would rise in price to the extent the firm does not offset the new 33.5 percent tariff charge (16 percent general duty plus 7.5 percent on Chinese imports applied in 2019 plus 10 percent applied this year), not even including additional handling charges that the seller may impose to account for more costly customs procedures," Clark listed.

Since President Trump took office, the White House has already moved to eliminate the nearly century-old loophole. However, the restriction was paused at the start of the year. Some had pushed back on the idea, given the popularity of de minimis in some corners of the market.

For instance, Shopify president Harley Finkelstein noted that the rule was "crucial" for small businesses, which benefit from low-cost cross-border trade. Some brands cited said there was a sense of becoming "collateral damage" of Trump's protectionist policy.

While the fate of de minimis imports remains uncertain, Trump has remained focused on increasing tariffs. After he added a 10% tariff on Chinese goods last month, the president committed to another same-figure increase announced Thursday, as well as reaffirming commitment to tariffs on Canada and Mexico starting in March.