The United States will cut the low value "de minimis" tariff on China shipments, a White House executive order said, further de-escalating a potentially damaging trade war between the world's two largest economies.

The tariff relief comes in the wake of Beijing and Washington announcing a truce in their trade spat after weekend talks in Geneva, with both sides agreeing to unwind most of the tariffs imposed on each other's goods since early April.

While their joint statement in Geneva didn't mention the de minimis duties, the White House order released later said the levies will be reduced to 54% from 120%, with a flat fee of $100 to remain, starting from May 14.

TAX-FREE CHANNEL EXPLODES

The de minimis exemption, for items valued at up to $800 and sent from China via postal services, were previously able to enter the United States duty free and with minimal inspections.

In February, President Donald Trump ended the de minimis exemption by imposing a tax of 120% of the package's value or a planned flat fee of $200 - set to come into effect by June - blaming it for being heavily used by companies such as Shein, Temu and other e-commerce firms as well as traffickers of fentanyl and other illicit goods.

The number of shipments entering the U.S. through the tax-free channel exploded in recent years with more than 90% of all packages coming via de minimis. Of those, about 60% came from China, led by direct-to-consumer retailers such as Temu and Shein.

Chinese online retailers Shein, PDD Holdings-owned Temu and U.S. rival Amazon did not immediately respond to requests for comment.

In Monday's order, the White House said the reduced tariffs will take effect by 12:01 a.m. (0401 GMT) on May 14, 2025.

The plan for a $200 flat fee duty rate would also be shelved, it said, keeping it at $100.

China exported $240 billion in direct-to-consumer goods benefiting from de minimis worldwide last year, accounting for 7% of its overseas sales and contributing 1.3% of gross domestic product, according to Nomura estimates.

China's yuan jumped to a six-month high against the dollar on Tuesday, joining a global rally in riskier assets following the broader trade deal between Beijing and Washington.

Trump's global trade war, which shredded the playbooks that have governed international trade for decades, has shaken up financial markets and raised fears of a recession.

BREATHING ROOM

The U.S. de minimis rule, which dates back to 1938, has been the target of growing criticism from both Democratic and Republican lawmakers.

Some have derided it as a loophole that allows cheap Chinese products to flood into the United States and undercut American industries, while also serving as cover for smuggling contraband such as illegal drugs and their precursor chemicals.

De minimis, a legal term referring to matters of little importance which describes the U.S. waiver of standard customs procedures and tariffs, was one of the most generous exemptions in the world: the EU de minimis threshold, for example, is 150 euros ($156).

The Geneva agreement slashed tariffs for both the United States and China by 115 percentage points each, to 10% and 30%, respectively, for at least 90 days.

The tariff pause will give online retailers like Shein and Temu breathing space to adapt their businesses, say industry experts, as online retailers are likely to use the time to bring in bulk shipments and restock their U.S. warehouses.

Big beneficiaries of de minimis include online retailers that ship goods mainly from China, such as Shein, Temu and Alibaba's AliExpress. Their growth prompted Amazon to start its own discount service, Haul, allowing marketplace merchants to ship $5 accessories and other items directly from China using de minimis.

Separately, China has removed a ban on airlines taking delivery of Boeing planes in the wake of the Geneva trade deal, Bloomberg News reported on Tuesday, citing sources familiar with the matter.

Officials in Beijing have started to tell domestic carriers and government agencies this week that deliveries of aircraft made in the United States can resume, Bloomberg said.