Economics

Cut in low-value ‘de minimis’ tariff marks further de-escalation of trade war and will benefit Shein and Temu

The US has announced it is slashing the tariff on small parcels sent from mainland China and Hong Kong to the US from 120% to 54%, hours after Washington and Beijing agreed a 90-day pause in their trade war.

Donald Trump signed an executive order more than halving the levy, which was brought in at the start of this month to close the “de minimis” loophole allowing low-value goods to be sent to the US without paying import fees.

The exemption – taken from the Latin phrase for “of little importance” – had meant items sent from abroad via post valued at up to $800 (£606) were able to enter the US duty-free and with nominal inspections. It fuelled the rise of fast fashion companies sending goods from China such as Shein and Temu.

KEY POINTS

• China is casting the trade agreement with the U.S. as a victory.
• After two days of negotiations with U.S. officials, China got the Trump administration to roll back its 145% tariffs, which had all but halted bilateral trade.
• Stock markets across the world surged after Beijing and Washington announced the deal.

Average egg prices have fallen by more than $1 since March, but Trump’s trade war is tossing fresh unknowns into consumers’ carts.

Egg prices are stabilizing after a sharp run-up earlier this year, but grocery shoppers are already getting used to shelling out more for those and other pantry staples.

After peaking at $6.55 in mid-March, a dozen eggs sold for an average of $5.45 nationwide as of the week ending April 19, according to the latest data available from the market research firm NIQ. The ongoing decline is welcome news for consumers, but it comes amid higher prices for a number of pantry staples even as inflation overall has cooled.

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Many are now planning to trim their spending this summer on everything from clothing and furniture to travel, according to a survey the consulting firm KPMG released in late April. Groceries were one of just two categories where shoppers said they expect to spend more.

“Tariffs have gone from background noise to front and center for consumers — and their grocery receipts show it,” Heather Rice, consumer and retail tax leader at KPMG, said in a statement with the results. “Shoppers are more price-sensitive than ever, and many are connecting rising costs directly to tariffs.”

A growing number of ads on Chinese social media offer exporters in China re-exporting and freight forwarding services to hide the place of origin of goods.

A flurry of so-called “origin washing” advertisements have flooded Chinese social media platforms, offering exporters ways to avoid steep U.S. tariffs by re-exporting and freight forwarding goods or falsely labeling their place of manufacture.

Video ads posted on Xiaohongshu, or RedNote, and Douyin, the Chinese version of TikTok, show businesses promoting “one-stop re-export and freight forwarding services” via Southeast Asian countries like Vietnam and Thailand to circumvent growing restrictions on export re-routing via these markets.

“Chinese manufacturers that have the U.S. as their main market must find a way to survive,” Taiwanese businessman Lee Meng-chu told Radio Free Asia, noting the “huge demand” for transit solutions that enable exporters to sell to the U.S. but evade the 145% U.S. tariffs imposed on Chinese imports.

When DHL delivered mail to Adafruit Industries last week, it wasn't a typical invoice but a gut punch: a $36,126.46 customs duty bill that had to be paid within seven days.

The bill comes from Trump's multi-layered tariffs that can stack up to 170% on certain electronics components. For Adafruit, a company that supplies makers and engineers with specialized electronic parts, this creates a perfect storm.

These components were ordered months ago before tariff changes, can't be sourced elsewhere due to intellectual property restrictions, and must be paid for immediately — not after sales are made.

The UK is allowed to export 100,000 cars a year to the US at the lower rate.

The British car industry got a big break from Donald Trump yesterday afternoon. Trump and UK Prime Minister Kier Starmer have agreed to a bilateral trade agreement that cuts tariffs on a range of imports from the UK, including pharmaceuticals, aluminum and steel, and cars.

Now, the first 100,000 cars that come to the US from the UK will only be subject to a 10 percent tariff rather than the 27.5 percent they have been under since the start of this trade war in April.

Not everyone is as pleased as the UK car industry, however. The big three in Detroit—Ford, General Motors, and Stellantis—are upset that mostly luxury cars from Britain get a break while they have no relief on the cars they build abroad for sale here in the US.

Fed Chair Jerome Powell has delivered an alarming warning about Trump’s tariffs causing stagflation.

Jerome Powell has once again said what everyone except Trump seems to already know: Lowering inflation while enacting staggering tariffs is virtually impossible.

“If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” the Federal Reserve chair said on Wednesday. “The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately on keeping longer-term inflation expectations well-anchored.”

This is exactly what Trump doesn’t want the American public to hear.

Major corporations are best placed to benefit from Trump polices at the expense of independent farmers

The winners and losers of Trump’s first tariff war strongly suggest that bankruptcies and farm consolidation could surge during his second term, with major corporations best placed to benefit from his polices at the expense of independent farmers.

New analysis by the non-profit research advocacy group Food and Water Watch (FWW), shared exclusively with the Guardian, shows that Trump’s first-term tariffs were particularly devastating for farmers in the MAGA rural heartlands.

Farm bankruptcies surged by 24% from 2018 to 2019 – the highest number in almost a decade – as retaliatory tariffs cost US farmers a staggering $27bn.

April trade data comes the day before representatives from Washington and Beijing were set to meet to discuss Trump’s tariffs

Chinese trade with the United States slumped in April even as its total exports beat forecasts, official figures show, as trade representatives from both nations prepared to meet this weekend in the midst of a gruelling trade war between the superpower rivals.

Exports to the United States – one of China’s top trading partners – fell 17.6% in April, data showed. Against that backdrop, analysts polled by Bloomberg had expected exports to rise just 2% year-on-year last month. However they beat expectations, coming in at 8.1%.

“The damage of the US tariffs has not shown up in the trade data in April,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.

A wave of dollar selling in Asia is an ominous sign for the greenback as the world's export powerhouse starts to question a decades-long trend of investing its big trade surpluses in U.S. assets.

Ripples from Friday and Monday's record rally in the Taiwan dollar are now spreading outward, driving surges for currencies in Singapore, South Korea, Malaysia, China and Hong Kong.

The moves sound a warning for the dollar because they suggest money is moving into Asia at scale and that a key pillar of dollar support is wobbling.

I thought this was a well presented overview of historical competition for global economic dominance and how this trade war might play out

The immediate costs of Donald Trump’s trade war are fairly clear. Prices for imported goods are rising while economic growth is slowing.

Manufacturers are slashing orders, small businesses with Chinese suppliers are on the brink of insolvency, interest rates are rising, Americans’ retirement savings are bleeding value, and consumers are losing confidence.

The severity of these consequences remain to be seen. But even the administration’s defenders concede that Trump’s tariffs will entail some economic pain in the near-term. The real question concerns the long-term impacts of Trump’s misgovernance.

Donald Trump's tariffs are increasingly clogging up the wheels of a world economy which for decades were greased by predictable and relatively free trade.

Big-name multinationals right down to niche e-commerce players last week cut sales targets, warned of job cuts and reviewed their business plans, while major economies revised down growth prospects amid bleak data read-outs.

While financial markets are betting the U.S. and China will pull back from an all-out trade war and that Trump will cut deals to avert higher tariffs on others, the sheer uncertainty of where this ends has become a major drag factor in itself.

The Federal Reserve will likely keep its key short-term interest rate unchanged on Wednesday, despite weeks of harsh criticism and demands from President Donald Trump that the Fed reduce borrowing costs.

After causing a sharp drop in financial markets two weeks ago by saying he could fire Fed Chair Jerome Powell, Trump subsequently backed off and said he had no intention of doing so. Still, he and Treasury Secretary Scott Bessent have said the Fed should cut rates.

They argue that inflation has steadily cooled and high borrowing costs are no longer needed to restrain price increases. The Fed sharply ramped up its short-term rate in 2022 and 2023 as pandemic-era inflation spiked.

The Senate on Thursday approved an effort to overturn an Environmental Protection Agency rule tied to the Clean Air Act and designed to limit 7 of the most hazardous air pollutants that are emitted by heavy industry.

The 52-46 party-line vote marked the first time in the 55-year history of the Clean Air Act that Congress has moved to weaken the power of the landmark environmental law.

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The rule tied to the Clean Air Act was finalized last year to close a loophole that required all "major" sources of seven hazardous air pollutants to reduce their emissions by the maximum achievable amount, a policy called "Once in, Always In."

The rule requires that industrial facilities — often chemical plants, oil refineries, and other industrial factories classified as "major" sources of toxic air pollution — always maintain strict pollution controls. Even if they comply and limit those pollution levels, those facilities would always be labeled "major" sources under the rule.

Many Americans might not have felt major effects from Donald Trump’s sweeping tariffs – until now.

That’s because a major shipping loophole expired at one minute past midnight on Friday. The de minimis exemption, as it’s known, allowed shipments of goods worth under $800 to come into the US duty free, often more or less skipping time-consuming inspections and paperwork.

The loophole helped reshape the way countless Americans shop, allowing ultra-low-cost Chinese e-commerce sites like Shein, Temu and AliExpress to pour everything from yarn to patio furniture, clothes to photography equipment and more into US homes.

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At the heart of the issue: the sheer volume of packages. More than 80% of total US e-commerce shipments in 2022 were de minimis imports, the vast majority of which come from China, according to a congressional research report.

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