Why Etsy's shares fell more than 8% on Monday

SourceMotley_fool

Aug 25, 2025 10:05 PM

Key Points

  • A legal loophole in exports that benefited the company is about to close.

  • It is about the “de minimis” exemption, which had been a blessing for customers making small purchases from foreign sellers.

  • 10 actions we like more than Etsy ›

The end of a beneficial legal loophole is severely affecting Etsy's shares. The crafts site saw a drop of more than 8% in its price this Monday, as this advantage is expected to disappear by the end of this week. In comparison, the benchmark S&P 500 was barely affected with a decrease of 0.4%.

Goodbye to de minimis

This legal loophole is the “de minimis” exemption, under which goods imported to the U.S. are exempt from taxes and tariffs if a shipment is worth less than $800. At the end of July, President Trump signed an executive order eliminating this exemption, effective this Friday, August 29.

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Image source: Getty Images.

As Etsy is an online marketplace that spans numerous geographies, its fundamentals are likely to be negatively impacted by this measure. Many of the sellers on its platform create small and relatively inexpensive items, and being subject to tariffs threatens to make these transactions prohibitively expensive.

Etsy is trying to get ahead of this. Last week it sought to reassure its sellers with a page titled “Navigating Evolving Global Tariff Policies,” where it suggested best practices following the disappearance of the “de minimis.”

Minimum or maximum effect?

This new tariff regime will undoubtedly harm Etsy's revenues and other key metrics in its finances, but for now, it is unclear to what extent. We hope that management will provide data or statistics on this in their upcoming earnings reports; in the meantime, investors would do well to act cautiously regarding these stocks.

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Eric Volkman has no position in any of the mentioned stocks. The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy.

Disclaimer: For informational purposes only. Past performance is not indicative of future results.

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