The European Union formally kicked off enforcement of its landmark artificial intelligence law Sunday, paving the way for tough restrictions and potential large fines for violations.

The EU AI Act, a first-of-its-kind regulatory framework for the technology, formally entered into force in August 2024.

On Sunday, the deadline for prohibitions on certain artificial intelligence systems and requirements to ensure sufficient technology literacy among staff officially lapsed.

That means companies must now comply with the restrictions and can face penalties if they fail to do so.

The AI Act bans certain applications of AI which it deems as posing “unacceptable risk” to citizens.

Those include social scoring systems, real-time facial recognition and other forms of biometric identification that categorize people by race, sex life, sexual orientation and other attributes, and “manipulative” AI tools.

Companies face fines of as much as 35 million euros ($35.8 million) or 7% of their global annual revenues — whichever amount is higher — for breaches of the EU AI Act.

The size of the penalties will depend on the infringement and size of the company fined.

That’s higher than the fines possible under the GDPR, Europe’s strict digital privacy law. Companies face fines of up to 20 million euros or 4% of annual global turnover for GDPR breaches.

Cryptocurrencies tumbled on Sunday in a risk-off move after President Donald Trump hit Canada, Mexico and China with long-threatened import tariffs.

The price of bitcoin was last lower by 7% at $93,768.66, according to Coin Metrics. The CoinDesk 20 index, which measures the largest 20 digital assets by market cap, dropped 19%. Ether slumped 20% to its lowest level since November.

The slide began Saturday night after Trump signed an order imposing 25% tariffs on imports from Mexico and Canada, as well as a 10% duty on China, which will take effect Tuesday. The U.S. does about $1.6 trillion in business with the three countries.

Jeff Park, Bitwise Asset Management’s head of alpha strategies, said a sustained tariff war will be “amazing” for bitcoin in the long-run due to an eventual weakening of the dollar and U.S. rates.

While many believe bitcoin is a hedge against inflation and uncertainty over the long term, it trades like a risk asset in the short term — and is likely to respond negatively to any uncertainty around the trade war triggered by Trump’s tariffs.

Investors are watching $90,000 as the key support level in bitcoin, and some have warned of an even deeper pullback toward $80,000 should the cryptocurrency meaningfully break below its support.

Bitcoin is about 16% off its Jan. 20 record of $109,350.72. Seasoned crypto investors and traders have become accustomed over the years to corrections of around 30% during bull markets.

President Donald Trump’s tariffs against China, Canada and Mexico target a trade provision that helped fuel the explosive growth of budget online retailers, including Temu and Shein.

Trump on Saturday signed executive orders imposing tariffs on the country’s top three trading partners. Goods imported from Canada and Mexico will be slapped with a 25% tariff, while goods from China will be charged a 10% tax. Energy resources from Canada will have a lower 10% tariff. The duties are expected to take effect on Tuesday.

The orders against China, Canada and Mexico all halt a trade exemption, known as “de minimis,” which allows exporters to ship packages worth less than $800 into the U.S. duty free.

The de minimis provision has existed since the 1930s, but its use has come under increasing scrutiny in recent years. The Biden administration took steps last September to curb the “overuse and abuse” of de minimis, arguing it has helped Chinese e-commerce companies undercut competitors with lower prices. Officials have also argued that de minimis shipments are “subject to minimal documentation and inspection,” raising product safety concerns.

The U.S. processed more than 1.3 billion de minimis shipments in 2024, according to data from the U.S. Customs and Border Protection agency. That’s up from 139 million a year in 2015, the CBP said.

The loophole has enabled low-cost e-commerce companies like PDD Holdings-owned Temu, Shein, and Alibaba‘s AliExpress, which all have links to China, to offer a virtual smorgasbord of cheap apparel, household items and electronics, such as $15 smartwatches and $3 shoes.

Shein and Temu have gone on a digital marketing blitz over the last few years in an attempt to lure more deal-hungry shoppers. Temu in 2024 vaulted to the top of Apple’s list of the most downloaded free apps in the U.S. for the second year in a row, while Shein came in at number 12.

Representatives from Temu, Shein and Alibaba didn’t immediately respond to requests for comment. Temu has previously denied that its growth is dependent upon de minimis.

Shein previously told CNBC that import compliance is a “top priority.” Shein’s executive chairman, Donald Tang, has also said he supports efforts to reform de minimis, saying it needs a “complete makeover.”

Their popularity in the U.S. prompted Amazon to launch its own bargain outlet, called Haul, last year that allows third-party sellers to ship goods to consumers directly from China. Amazon reportedly relies on the de minimis trade rule to import items sold on Haul to bypass tariffs, The Information reported, citing people familiar with the program. An Amazon spokesperson didn’t immediately respond to CNBC for a request for comment.

Amazon, eBay and Etsy could stand to benefit from the Trump administration’s clampdown on the de minimis loophole. The companies operate online marketplaces that let third-party sellers market wares directly to consumers, competing directly with Temu and Shein.

Amazon has long connected Chinese manufacturers to American shoppers through its sprawling third-party marketplace. The marketplace is a key component of Amazon’s retail strategy, accounting for about 60% of products sold on the site. Amazon also generates fees by providing fulfillment, shipping, account support and advertising services to sellers.

China-based merchants have made up a sizable contingent of Amazon’s marketplace for many years, though the company acknowledged for the first time in 2023 that they account for a “significant portion.” By some estimates, they outnumber American sellers on the platform, according to data from Marketplace Pulse.

Temu and Shein have also expanded their strategies as the de minimis loophole came under threat. Last year, Temu began onboarding Chinese sellers to its site that have inventory at U.S. warehouses, allowing it to ship packages faster to American shoppers, according to The Information. Shein has also opened distribution centers and a supply chain hub in the U.S.

WATCH: Amazon Haul takes on Temu to bring shoppers cheap goods from China