February 18, 2025 • 16 mins
Since its US launch in 2022, Chinese marketplace Temu has rapidly risen to become America’s biggest e-commerce platform after Amazon, thanks to ultra-low prices on almost every product imaginable.
On today’s Big Take Asia Podcast, host K. Oanh Ha speaks to Bloomberg’s Spencer Soper and Rachel Chang about Donald Trump’s order to close a tariff loophole and what it means for American shoppers and the giants supplying them with goods direct from China.
Further listening: The Tariff Wars Are Here — And They’re Messy
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Hey there's Spencer. How's it going?
Speaker 3 (00:10):
Hi?
Speaker 4 (00:11):
Good, Bloomberg.
Speaker 2 (00:12):
Spencer Soaper has been covering e commerce companies like Amazon
and eBay for more than a decade, and recently he's
been following one shopping app super closely, Tamu and Spencer.
Do you shop on Tamu?
Speaker 4 (00:25):
Yes, yes I do.
Speaker 2 (00:27):
Do you what do you buy?
Speaker 4 (00:29):
Just some random things. I got some motion sensing lights
for under the cabinets in the kitchen, and then I've
also got some gardening supplies like drip irrigation things.
Speaker 2 (00:40):
Tamu is an e commerce marketplace owned by the Chinese
company PDD. It started selling in the US in twenty
twenty two, and it's been growing fast, so fast that
it's now the second biggest online shopping platform, right after Amazon.
Speaker 4 (00:56):
Yeah, it very quickly became the most downloaded shopping app
in the US.
Speaker 3 (01:00):
Yes.
Speaker 4 (01:00):
I think the last numbers I saw were fifty million
active monthly users.
Speaker 2 (01:04):
One key reason that Tamu is able to win over
so many US customers is its competitive pricing. Products on
Tamu are usually much cheaper than anywhere else, and Tamu
is able to price its goods lower, largely thanks to
something called the deminimus rule, also known as.
Speaker 4 (01:23):
This deminimous loophole, which means any one person in the
US can bring in anything worth less than eight hundred
dollars without paying tariffs on it. So since Timu is
doing a direct to consumer shipping model from China, they
can slip in without paying any kind of tariffs, and
those can be twenty five to thirty percent, and it
looks like they're going to go even higher.
Speaker 2 (01:44):
In Latin deminimus loosely translates to too small to matter.
It's a tax rule from the nineteen thirties that was
originally created to allow Americans traveling overseas to ship back
their souvenirs duty free.
Speaker 4 (01:57):
If you're coming home from a vacation to another country,
you have some gifts in your suitcase, you know they
don't want customs officials getting bogged down charging tariffs on that.
But now this is applied to e commerce and cross
border e commerce.
Speaker 2 (02:12):
But earlier this month, President Donald Trump took aim at
this near century old rule, the Minimus room.
Speaker 3 (02:18):
Now that is being revoked by Trump and numeris saying
it could cost China about one point three percent of
its exports growth and about zero point two percent of
its GDP, So pretty significant given that these small puzzles
may come about eleven percent of China's exports to the US.
Speaker 5 (02:35):
A lot of these supplies were extremely shocked by how
sudden and chaotic this happened to them.
Speaker 2 (02:40):
Rachel Chang is Bloomberg's Managing editor for Global Business in Asia.
Speaker 5 (02:44):
That's definitely a chilling effect because the draw of these
places are how super cheap they are. Once you'd lose
that cheapness, once this added costle, added fees, you know,
of course, that attractiveness goes away.
Speaker 2 (02:57):
And one Chinese merchant tells us that closing the tax
loophole has huge consequences for some Chinese manufacturers and retailers.
Speaker 1 (03:06):
Jimmy, sure they can basically close overnight.
Speaker 2 (03:17):
Welcome to the Big Take Asia from Bloomberg News. I'm Wanha.
Every week we take you inside some of the world's
biggest and most powerful economies and the markets, tycoons and
businesses that drive this ever shifting region. Today, on the
show the Deminimus and what does closing it mean for
Chinese e commerce giants like Tamu and their American Customers
(03:44):
Spencer For people who aren't familiar with tamu, can you
start by telling us what this app does?
Speaker 4 (03:50):
So Tamu is like a discount store in your phone.
So you download the app, and when you go in,
before you even get a chance to look at anything,
you're likely going to see a prize wheel or some
sort of like maybe like an egg, and they'll say, ooh,
prize for you, and they'll already start kind of bombard
you with deals and discounts.
Speaker 2 (04:11):
Tamu launched in the US in September twenty twenty two
with relatively little fanfare, and a few months later, its
parent company PDD jumped at the chance to introduce itself
formally to US consumers an event that they knew would
get the attention of millions of eyeballs, the Super Bowl.
Speaker 4 (04:29):
They had a Super Bowl commercial in twenty twenty three
where they really poked at people's curiosity and it really
took off. It was an immediate hit. And they had
this campaign shopped like a billionaire, like meaning like it
doesn't matter how much money you have, you can shop
like money snow object because our deals are so good.
Speaker 2 (04:50):
Like besides going big on the Super Bowl. Spencer says,
Tamu came to the US at the right time.
Speaker 4 (04:58):
We had just come out of the pandemic, so so
a lot of people grew really accustomed to shopping just
about anywhere online and experimenting with new sites they weren't
necessarily familiar with. That used to be something people were
a little hesitant about. And also we had hyperinflation, and
so people were just looking for deals. So tim we
really stood out with bargains at the right time when
people were just grappling with higher costs for groceries and
(05:21):
everyday expenses, that sort of thing.
Speaker 2 (05:23):
If you open Tamu now you can find things like
a six dollars Apple Watch look alike or a twenty
dollars mini Arcade claw machine, And if you buy more,
the app often offers an even bigger discount or throws
in freebies with your orders.
Speaker 4 (05:37):
The big thing about it is discounts. You know that
the prices are very low, so you're likely to find
items at cheaper prices than you could find at a
store near you, if you could even find the item
near you or on competing marketplaces in the US like
Amazon or eBay or Walmart. A lot of things could
maybe be like half as much as on Amazon or less,
(05:59):
and on TikTok.
Speaker 2 (06:00):
There's tons of videos where people talk about their Tamu hauls.
Speaker 4 (06:04):
Why do you like to waste money?
Speaker 2 (06:05):
Why are you not checking Timu before.
Speaker 4 (06:07):
You buy stuff?
Speaker 5 (06:08):
Let's not get duped.
Speaker 4 (06:09):
Let's buy the dupe.
Speaker 2 (06:11):
And the reason Amazon customers are paying a lot more
for similar or sometimes even the same item, Spencer says
the markup largely reflects the cost of fast delivery.
Speaker 4 (06:21):
So Amazon is all about speed two day delivery, one
day delivery, same day delivery, and most of their items
bundled around that without a consideration to say, you know what,
I'd rather get it for less if I can wait
a little longer. Timu's saying, hey, if you can wait
seven days, ten days, we'll get you a really good
deal on this item. So that's the trade off for
(06:42):
the shopper. But what Timo's really shown is, hey, people
are willing to be patient for a deal.
Speaker 2 (06:46):
Another factor that helped fuel Tamu's rise in the US
Donald Trump himself. Trump imposed a host of tariffs on
China during his first term, and that raised the cost
for exporters, but he left one thing untouched. The dominimous rule.
Now most of the world has versions of Dominimus, but
(07:07):
the US is the most generous, up to eight hundred
dollars per package, and that became a loophole for Chinese
merchants to ship lots of goods into the US duty free.
Speaker 4 (07:19):
Most things, when you purchase them on Amazon, they're already
in the United States in a US warehouse, So that
means they were shipped on big cargo containers by ocean,
and then they're paying tariffs when they come into the
US through port, whereas Tamu they'll have facilities in China
where they actually take a customer's order and put it
(07:41):
into an individual package. You're doing that order fulfillment in
a warehouse in China where labor is cheaper, put it
on an airplane and fly it into the United States.
Through what's called the deminimous loophole. In the US, you're
not paying tariffs on the goods coming in.
Speaker 2 (07:58):
The Dominimus benefited not just but also other Chinese e
commerce giants like fashion retailers she In.
Speaker 4 (08:04):
Tamu and Shean have really driven a huge rise in
the volume of shipments entering the US. Through this loophole,
and it's something like one point four billion in twenty
twenty four, which was four million packages a day. It's
more than tripled over pre pandemic levels.
Speaker 2 (08:23):
This year, TEMU is estimated to earn thirty billion dollars
in US sales, a milestone that took Amazon more than
a decade to reach. But now that forecast is under threat.
Speaker 4 (08:34):
President Trump said, We're going to close this demnimous loophole.
And that was a big shock to the system. That's
going to affect companies like TAMU and she In, and
it's set off a scramble and a lot of people
were just confused and not sure what it meant.
Speaker 2 (08:48):
A few days later, Trump reversed his order to revoke
the Deminimus rule and delay the suspension. He said he
wanted to give agencies more time to come up with
adequate systems to quote fully and ex commediately process and
collect tariff revenue.
Speaker 4 (09:03):
Yeah, you're going to need you're going to need a
system in place. You're going to need infrastructure. You're going
to need rules on how to handle this volume and
how they're going to screen it and apply the appropriate tariffs.
You can expect major changes in how these goods flow
into the US.
Speaker 2 (09:20):
While the US Customs figures out a way to process
and tax the hundreds of millions of parcels from China,
Chinese manufacturers are working on contingency plants. That's after the break.
(09:43):
On February first, President Donald Trump proposed new ten percent
tariffs on all Chinese imports, and he ordered the suspension
of the Dominimus rule for goods from China and Hong Kong.
Almost immediately, big e commerce platforms took a hit. Here's
Bloomberg's Rachel ching again.
Speaker 5 (10:00):
We saw traffic in the following five days for both
she and Temu drop off. So she and US sales
fell sixteen to forty one percent for that period, while
Tamu saw a fault as much as thirty two percent
during that period.
Speaker 2 (10:14):
That's a huge drop.
Speaker 3 (10:15):
Yeah, I mean.
Speaker 5 (10:15):
Early part of the year is generally a bit lower
than pre Christmas, like sort of Black Friday sales push.
But in terms of looking at these drops, there's obviously
an immediate chilling effect from consumers right who may be
a bit uncertain as what this means. If I buy
five hundred dollars worth of stuff from Tamu. Am I
now on the hook for customs duty on that.
Speaker 2 (10:36):
Yep, they lose their advantage there. Now, if I'm a
Chinese retailer or a manufacturer who sells my products on Tamu,
what does the closing of diminus loophole mean for me?
Speaker 5 (10:48):
So, you know, Chinese reporters talking to these factory owners
right from the beginning, they were already seeing their logistics agent,
which as companies that helped them get their goods from
one step to another, immediately asking for thirty percent higher
payment to cover what those additional costs might be. There's
just so much chaos around the how this rule will
(11:08):
be implemented, so we know for sure that would just
be a lot of higher costs for these vendors in
the medium term.
Speaker 2 (11:18):
To get a closer look at this chaos, we called
up one of these logistics companies. Andy Guo is CEO
of her non Taidea. He's been helping Chinese factories and
retailers sell their products overseas since two thousand and nine.
His company has operations all over the world. But who
says that the US market until recently was probably the
(11:41):
most promising.
Speaker 4 (11:43):
You're not.
Speaker 1 (11:44):
The US is indeed a great profitable market, but on
the other hand, it is also an obvious market, so
everybody wants a piece of it, and the competition is.
Speaker 2 (11:54):
Intense, who says. After COVID, the competition came even more cutthroat,
and governments around the globe started to encourage companies to
localize their operations.
Speaker 1 (12:08):
What does it mean to localize your operation? It means
that if you want to expand in the US, you
need to register your business in the US and pay
your tax to the US locally. This localizing trend is
getting stronger these years for e commerce businesses.
Speaker 2 (12:25):
Quo says his company moved on this trend early on
during COVID, when shipping prices were skyrocketing. They acquired business
licenses and established warehouses in the US. That means the
products he helps sell are stored in the warehouses and
can reach customers faster than smaller retailers who directly ship
from Chinaquo says his business has never relied on the
(12:47):
deminimus rule because the company ships products in bulk to
the US, so instead of sending small packages under eight
hundred dollars, the company has been paying tariffs from the
get go, and that's already actored into its pricing, which
is still competitive, he says, and that's why Gho's company
is more or less insulated from the latest fallout.
Speaker 1 (13:09):
We don't ship a lot of small packages directly from China,
so we are less affected by this new policy. But
those companies who do, they can basically close overnight.
Speaker 2 (13:20):
Guo told us that closing the Deminimus is a shock
to the retailers who compete solely by price and rely
on the loophole to make a profit.
Speaker 1 (13:30):
That means for platforms such as alex Press, Tamu, and
she all this marketplaces that rely on low prices, they
are taking a major hit. Trump actually understands them very well.
They're able to keep the prices so low because of
China's cheap labor, and that's exactly what the US wants
to hit take Trump.
Speaker 2 (13:52):
Quo says his logistics business can manage the changes Trump
wants to put in place, but he questions if the
US and a American consumers will ultimately come on top.
Speaker 1 (14:04):
These higher costs eventually go to the customers. Just raise
the price, right, But mating China can not happen in
one year or two and Trump says he's doing this
to bring manufacturing back to America. I don't think that's
going to happen overnight either.
Speaker 2 (14:23):
Groo says removing the deminimus could help drive Chinese factories
to improve the quality of their products. He says closing
the loophole will certainly remove the incentive to use cheap
labor at least And Rachel says removing the old loophole
is a watershed moment for e commerce from China.
Speaker 5 (14:41):
If you look at the kind of stuff that you
got off Tamu for those sorts of prices, right, I
think sometimes a lot of people would just questioning, like
is this normal that you're able to buy all these
sorts of things so like literally like a dollar and
get them shipped from China? Right, Because if you're relying
on the loophole to build a huge business, then is
that business going to be able to be sustainable in
(15:03):
the long term. Is that something that is a good
business model that can be profitable or was it being
subsidized by all of these non market forces that ultimately
would disappear. And I think we're at that moment of
reckoning right now.
Speaker 2 (15:19):
And Rachel, what do these changes mean to American consumers
who love a good deal.
Speaker 5 (15:24):
I think what these changes mean really is higher prices
and less choice. And we know that inflation is hitting
American consumers from all directions. Right, Eggs unaffordable now because
of what bird Fool is doing. So there's just likely
to be a pullback on consumerism and rising prices in
a lot of ways. Whether or not in the long
run that is actually positive for the American economy and
(15:47):
allows them to rebalance their trade deficit. I think that
is a bigger question for economists. But then on the
micro level, on the individual level, it's going to mean
that some of these crazy bargains that they were seeing
on these websites are going to be gone. Mean, you know,
just higher prices, less choice, and potentially longer delivery waight
times as well.
Speaker 2 (16:08):
This is the big take Asia from Bloomberg News. I'm
wan ha. This episode was produced by Young Young, Naomi
m and Jessica Beck. Additional reporting came from Danielle Away
and special thanks to Lepe. It was edited by Patty
Hirsch and Mark Million. It was mixed by Alex Suguiera
and sound designed by Jessica, who also fact checked it.
Our senior producer is Naomi Shaven. Our senior editor is
(16:31):
Elizabeth Ponso. Our executive producer is Nicole Beemster Bower. Sage
Bauman is Bloomberg's head of podcasts. If you like this episode,
make sure to subscribe and review The Big Take Asia
wherever you listen to podcasts. It really helps people find
the show. Thanks for listening, See you next time.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Hey there's Spencer. How's it going?
Speaker 3 (00:10):
Hi?
Speaker 4 (00:11):
Good, Bloomberg.
Speaker 2 (00:12):
Spencer Soaper has been covering e commerce companies like Amazon
and eBay for more than a decade, and recently he's
been following one shopping app super closely, Tamu and Spencer.
Do you shop on Tamu?
Speaker 4 (00:25):
Yes, yes I do.
Speaker 2 (00:27):
Do you what do you buy?
Speaker 4 (00:29):
Just some random things. I got some motion sensing lights
for under the cabinets in the kitchen, and then I've
also got some gardening supplies like drip irrigation things.
Speaker 2 (00:40):
Tamu is an e commerce marketplace owned by the Chinese
company PDD. It started selling in the US in twenty
twenty two, and it's been growing fast, so fast that
it's now the second biggest online shopping platform, right after Amazon.
Speaker 4 (00:56):
Yeah, it very quickly became the most downloaded shopping app
in the US.
Speaker 3 (01:00):
Yes.
Speaker 4 (01:00):
I think the last numbers I saw were fifty million
active monthly users.
Speaker 2 (01:04):
One key reason that Tamu is able to win over
so many US customers is its competitive pricing. Products on
Tamu are usually much cheaper than anywhere else, and Tamu
is able to price its goods lower, largely thanks to
something called the deminimus rule, also known as.
Speaker 4 (01:23):
This deminimous loophole, which means any one person in the
US can bring in anything worth less than eight hundred
dollars without paying tariffs on it. So since Timu is
doing a direct to consumer shipping model from China, they
can slip in without paying any kind of tariffs, and
those can be twenty five to thirty percent, and it
looks like they're going to go even higher.
Speaker 2 (01:44):
In Latin deminimus loosely translates to too small to matter.
It's a tax rule from the nineteen thirties that was
originally created to allow Americans traveling overseas to ship back
their souvenirs duty free.
Speaker 4 (01:57):
If you're coming home from a vacation to another country,
you have some gifts in your suitcase, you know they
don't want customs officials getting bogged down charging tariffs on that.
But now this is applied to e commerce and cross
border e commerce.
Speaker 2 (02:12):
But earlier this month, President Donald Trump took aim at
this near century old rule, the Minimus room.
Speaker 3 (02:18):
Now that is being revoked by Trump and numeris saying
it could cost China about one point three percent of
its exports growth and about zero point two percent of
its GDP, So pretty significant given that these small puzzles
may come about eleven percent of China's exports to the US.
Speaker 5 (02:35):
A lot of these supplies were extremely shocked by how
sudden and chaotic this happened to them.
Speaker 2 (02:40):
Rachel Chang is Bloomberg's Managing editor for Global Business in Asia.
Speaker 5 (02:44):
That's definitely a chilling effect because the draw of these
places are how super cheap they are. Once you'd lose
that cheapness, once this added costle, added fees, you know,
of course, that attractiveness goes away.
Speaker 2 (02:57):
And one Chinese merchant tells us that closing the tax
loophole has huge consequences for some Chinese manufacturers and retailers.
Speaker 1 (03:06):
Jimmy, sure they can basically close overnight.
Speaker 2 (03:17):
Welcome to the Big Take Asia from Bloomberg News. I'm Wanha.
Every week we take you inside some of the world's
biggest and most powerful economies and the markets, tycoons and
businesses that drive this ever shifting region. Today, on the
show the Deminimus and what does closing it mean for
Chinese e commerce giants like Tamu and their American Customers
(03:44):
Spencer For people who aren't familiar with tamu, can you
start by telling us what this app does?
Speaker 4 (03:50):
So Tamu is like a discount store in your phone.
So you download the app, and when you go in,
before you even get a chance to look at anything,
you're likely going to see a prize wheel or some
sort of like maybe like an egg, and they'll say, ooh,
prize for you, and they'll already start kind of bombard
you with deals and discounts.
Speaker 2 (04:11):
Tamu launched in the US in September twenty twenty two
with relatively little fanfare, and a few months later, its
parent company PDD jumped at the chance to introduce itself
formally to US consumers an event that they knew would
get the attention of millions of eyeballs, the Super Bowl.
Speaker 4 (04:29):
They had a Super Bowl commercial in twenty twenty three
where they really poked at people's curiosity and it really
took off. It was an immediate hit. And they had
this campaign shopped like a billionaire, like meaning like it
doesn't matter how much money you have, you can shop
like money snow object because our deals are so good.
Speaker 2 (04:50):
Like besides going big on the Super Bowl. Spencer says,
Tamu came to the US at the right time.
Speaker 4 (04:58):
We had just come out of the pandemic, so so
a lot of people grew really accustomed to shopping just
about anywhere online and experimenting with new sites they weren't
necessarily familiar with. That used to be something people were
a little hesitant about. And also we had hyperinflation, and
so people were just looking for deals. So tim we
really stood out with bargains at the right time when
people were just grappling with higher costs for groceries and
(05:21):
everyday expenses, that sort of thing.
Speaker 2 (05:23):
If you open Tamu now you can find things like
a six dollars Apple Watch look alike or a twenty
dollars mini Arcade claw machine, And if you buy more,
the app often offers an even bigger discount or throws
in freebies with your orders.
Speaker 4 (05:37):
The big thing about it is discounts. You know that
the prices are very low, so you're likely to find
items at cheaper prices than you could find at a
store near you, if you could even find the item
near you or on competing marketplaces in the US like
Amazon or eBay or Walmart. A lot of things could
maybe be like half as much as on Amazon or less,
(05:59):
and on TikTok.
Speaker 2 (06:00):
There's tons of videos where people talk about their Tamu hauls.
Speaker 4 (06:04):
Why do you like to waste money?
Speaker 2 (06:05):
Why are you not checking Timu before.
Speaker 4 (06:07):
You buy stuff?
Speaker 5 (06:08):
Let's not get duped.
Speaker 4 (06:09):
Let's buy the dupe.
Speaker 2 (06:11):
And the reason Amazon customers are paying a lot more
for similar or sometimes even the same item, Spencer says
the markup largely reflects the cost of fast delivery.
Speaker 4 (06:21):
So Amazon is all about speed two day delivery, one
day delivery, same day delivery, and most of their items
bundled around that without a consideration to say, you know what,
I'd rather get it for less if I can wait
a little longer. Timu's saying, hey, if you can wait
seven days, ten days, we'll get you a really good
deal on this item. So that's the trade off for
(06:42):
the shopper. But what Timo's really shown is, hey, people
are willing to be patient for a deal.
Speaker 2 (06:46):
Another factor that helped fuel Tamu's rise in the US
Donald Trump himself. Trump imposed a host of tariffs on
China during his first term, and that raised the cost
for exporters, but he left one thing untouched. The dominimous rule.
Now most of the world has versions of Dominimus, but
(07:07):
the US is the most generous, up to eight hundred
dollars per package, and that became a loophole for Chinese
merchants to ship lots of goods into the US duty free.
Speaker 4 (07:19):
Most things, when you purchase them on Amazon, they're already
in the United States in a US warehouse, So that
means they were shipped on big cargo containers by ocean,
and then they're paying tariffs when they come into the
US through port, whereas Tamu they'll have facilities in China
where they actually take a customer's order and put it
(07:41):
into an individual package. You're doing that order fulfillment in
a warehouse in China where labor is cheaper, put it
on an airplane and fly it into the United States.
Through what's called the deminimous loophole. In the US, you're
not paying tariffs on the goods coming in.
Speaker 2 (07:58):
The Dominimus benefited not just but also other Chinese e
commerce giants like fashion retailers she In.
Speaker 4 (08:04):
Tamu and Shean have really driven a huge rise in
the volume of shipments entering the US. Through this loophole,
and it's something like one point four billion in twenty
twenty four, which was four million packages a day. It's
more than tripled over pre pandemic levels.
Speaker 2 (08:23):
This year, TEMU is estimated to earn thirty billion dollars
in US sales, a milestone that took Amazon more than
a decade to reach. But now that forecast is under threat.
Speaker 4 (08:34):
President Trump said, We're going to close this demnimous loophole.
And that was a big shock to the system. That's
going to affect companies like TAMU and she In, and
it's set off a scramble and a lot of people
were just confused and not sure what it meant.
Speaker 2 (08:48):
A few days later, Trump reversed his order to revoke
the Deminimus rule and delay the suspension. He said he
wanted to give agencies more time to come up with
adequate systems to quote fully and ex commediately process and
collect tariff revenue.
Speaker 4 (09:03):
Yeah, you're going to need you're going to need a
system in place. You're going to need infrastructure. You're going
to need rules on how to handle this volume and
how they're going to screen it and apply the appropriate tariffs.
You can expect major changes in how these goods flow
into the US.
Speaker 2 (09:20):
While the US Customs figures out a way to process
and tax the hundreds of millions of parcels from China,
Chinese manufacturers are working on contingency plants. That's after the break.
(09:43):
On February first, President Donald Trump proposed new ten percent
tariffs on all Chinese imports, and he ordered the suspension
of the Dominimus rule for goods from China and Hong Kong.
Almost immediately, big e commerce platforms took a hit. Here's
Bloomberg's Rachel ching again.
Speaker 5 (10:00):
We saw traffic in the following five days for both
she and Temu drop off. So she and US sales
fell sixteen to forty one percent for that period, while
Tamu saw a fault as much as thirty two percent
during that period.
Speaker 2 (10:14):
That's a huge drop.
Speaker 3 (10:15):
Yeah, I mean.
Speaker 5 (10:15):
Early part of the year is generally a bit lower
than pre Christmas, like sort of Black Friday sales push.
But in terms of looking at these drops, there's obviously
an immediate chilling effect from consumers right who may be
a bit uncertain as what this means. If I buy
five hundred dollars worth of stuff from Tamu. Am I
now on the hook for customs duty on that.
Speaker 2 (10:36):
Yep, they lose their advantage there. Now, if I'm a
Chinese retailer or a manufacturer who sells my products on Tamu,
what does the closing of diminus loophole mean for me?
Speaker 5 (10:48):
So, you know, Chinese reporters talking to these factory owners
right from the beginning, they were already seeing their logistics agent,
which as companies that helped them get their goods from
one step to another, immediately asking for thirty percent higher
payment to cover what those additional costs might be. There's
just so much chaos around the how this rule will
(11:08):
be implemented, so we know for sure that would just
be a lot of higher costs for these vendors in
the medium term.
Speaker 2 (11:18):
To get a closer look at this chaos, we called
up one of these logistics companies. Andy Guo is CEO
of her non Taidea. He's been helping Chinese factories and
retailers sell their products overseas since two thousand and nine.
His company has operations all over the world. But who
says that the US market until recently was probably the
(11:41):
most promising.
Speaker 4 (11:43):
You're not.
Speaker 1 (11:44):
The US is indeed a great profitable market, but on
the other hand, it is also an obvious market, so
everybody wants a piece of it, and the competition is.
Speaker 2 (11:54):
Intense, who says. After COVID, the competition came even more cutthroat,
and governments around the globe started to encourage companies to
localize their operations.
Speaker 1 (12:08):
What does it mean to localize your operation? It means
that if you want to expand in the US, you
need to register your business in the US and pay
your tax to the US locally. This localizing trend is
getting stronger these years for e commerce businesses.
Speaker 2 (12:25):
Quo says his company moved on this trend early on
during COVID, when shipping prices were skyrocketing. They acquired business
licenses and established warehouses in the US. That means the
products he helps sell are stored in the warehouses and
can reach customers faster than smaller retailers who directly ship
from Chinaquo says his business has never relied on the
(12:47):
deminimus rule because the company ships products in bulk to
the US, so instead of sending small packages under eight
hundred dollars, the company has been paying tariffs from the
get go, and that's already actored into its pricing, which
is still competitive, he says, and that's why Gho's company
is more or less insulated from the latest fallout.
Speaker 1 (13:09):
We don't ship a lot of small packages directly from China,
so we are less affected by this new policy. But
those companies who do, they can basically close overnight.
Speaker 2 (13:20):
Guo told us that closing the Deminimus is a shock
to the retailers who compete solely by price and rely
on the loophole to make a profit.
Speaker 1 (13:30):
That means for platforms such as alex Press, Tamu, and
she all this marketplaces that rely on low prices, they
are taking a major hit. Trump actually understands them very well.
They're able to keep the prices so low because of
China's cheap labor, and that's exactly what the US wants
to hit take Trump.
Speaker 2 (13:52):
Quo says his logistics business can manage the changes Trump
wants to put in place, but he questions if the
US and a American consumers will ultimately come on top.
Speaker 1 (14:04):
These higher costs eventually go to the customers. Just raise
the price, right, But mating China can not happen in
one year or two and Trump says he's doing this
to bring manufacturing back to America. I don't think that's
going to happen overnight either.
Speaker 2 (14:23):
Groo says removing the deminimus could help drive Chinese factories
to improve the quality of their products. He says closing
the loophole will certainly remove the incentive to use cheap
labor at least And Rachel says removing the old loophole
is a watershed moment for e commerce from China.
Speaker 5 (14:41):
If you look at the kind of stuff that you
got off Tamu for those sorts of prices, right, I
think sometimes a lot of people would just questioning, like
is this normal that you're able to buy all these
sorts of things so like literally like a dollar and
get them shipped from China? Right, Because if you're relying
on the loophole to build a huge business, then is
that business going to be able to be sustainable in
(15:03):
the long term. Is that something that is a good
business model that can be profitable or was it being
subsidized by all of these non market forces that ultimately
would disappear. And I think we're at that moment of
reckoning right now.
Speaker 2 (15:19):
And Rachel, what do these changes mean to American consumers
who love a good deal.
Speaker 5 (15:24):
I think what these changes mean really is higher prices
and less choice. And we know that inflation is hitting
American consumers from all directions. Right, Eggs unaffordable now because
of what bird Fool is doing. So there's just likely
to be a pullback on consumerism and rising prices in
a lot of ways. Whether or not in the long
run that is actually positive for the American economy and
(15:47):
allows them to rebalance their trade deficit. I think that
is a bigger question for economists. But then on the
micro level, on the individual level, it's going to mean
that some of these crazy bargains that they were seeing
on these websites are going to be gone. Mean, you know,
just higher prices, less choice, and potentially longer delivery waight
times as well.
Speaker 2 (16:08):
This is the big take Asia from Bloomberg News. I'm
wan ha. This episode was produced by Young Young, Naomi
m and Jessica Beck. Additional reporting came from Danielle Away
and special thanks to Lepe. It was edited by Patty
Hirsch and Mark Million. It was mixed by Alex Suguiera
and sound designed by Jessica, who also fact checked it.
Our senior producer is Naomi Shaven. Our senior editor is
(16:31):
Elizabeth Ponso. Our executive producer is Nicole Beemster Bower. Sage
Bauman is Bloomberg's head of podcasts. If you like this episode,
make sure to subscribe and review The Big Take Asia
wherever you listen to podcasts. It really helps people find
the show. Thanks for listening, See you next time.
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