WEBVTT - How Amazon Rival Temu Got Sucked Into Trump’s Trade War

0:00:02.720 --> 0:00:07.200
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:08.160 --> 0:00:09.760
<v Speaker 2>Hey there's Spencer. How's it going?

0:00:10.400 --> 0:00:10.560
<v Speaker 3>Hi?

0:00:11.080 --> 0:00:12.080
<v Speaker 4>Good, Bloomberg.

0:00:12.119 --> 0:00:15.520
<v Speaker 2>Spencer Soaper has been covering e commerce companies like Amazon

0:00:15.600 --> 0:00:18.760
<v Speaker 2>and eBay for more than a decade, and recently he's

0:00:18.800 --> 0:00:23.919
<v Speaker 2>been following one shopping app super closely, Tamu and Spencer.

0:00:24.000 --> 0:00:25.360
<v Speaker 2>Do you shop on Tamu?

0:00:25.680 --> 0:00:27.160
<v Speaker 4>Yes, yes I do.

0:00:27.160 --> 0:00:28.800
<v Speaker 2>Do you what do you buy?

0:00:29.080 --> 0:00:33.159
<v Speaker 4>Just some random things. I got some motion sensing lights

0:00:33.200 --> 0:00:35.479
<v Speaker 4>for under the cabinets in the kitchen, and then I've

0:00:35.520 --> 0:00:40.040
<v Speaker 4>also got some gardening supplies like drip irrigation things.

0:00:40.840 --> 0:00:44.159
<v Speaker 2>Tamu is an e commerce marketplace owned by the Chinese

0:00:44.159 --> 0:00:47.920
<v Speaker 2>company PDD. It started selling in the US in twenty

0:00:47.960 --> 0:00:51.199
<v Speaker 2>twenty two, and it's been growing fast, so fast that

0:00:51.280 --> 0:00:56.080
<v Speaker 2>it's now the second biggest online shopping platform, right after Amazon.

0:00:56.280 --> 0:00:59.400
<v Speaker 4>Yeah, it very quickly became the most downloaded shopping app

0:00:59.440 --> 0:01:00.240
<v Speaker 4>in the US.

0:01:00.040 --> 0:01:00.120
<v Speaker 3>Yes.

0:01:00.560 --> 0:01:02.680
<v Speaker 4>I think the last numbers I saw were fifty million

0:01:03.120 --> 0:01:04.320
<v Speaker 4>active monthly users.

0:01:04.920 --> 0:01:07.680
<v Speaker 2>One key reason that Tamu is able to win over

0:01:07.840 --> 0:01:12.319
<v Speaker 2>so many US customers is its competitive pricing. Products on

0:01:12.360 --> 0:01:16.160
<v Speaker 2>Tamu are usually much cheaper than anywhere else, and Tamu

0:01:16.360 --> 0:01:19.200
<v Speaker 2>is able to price its goods lower, largely thanks to

0:01:19.240 --> 0:01:22.840
<v Speaker 2>something called the deminimus rule, also known as.

0:01:23.080 --> 0:01:26.800
<v Speaker 4>This deminimous loophole, which means any one person in the

0:01:26.920 --> 0:01:31.640
<v Speaker 4>US can bring in anything worth less than eight hundred

0:01:31.680 --> 0:01:34.840
<v Speaker 4>dollars without paying tariffs on it. So since Timu is

0:01:34.920 --> 0:01:38.759
<v Speaker 4>doing a direct to consumer shipping model from China, they

0:01:38.800 --> 0:01:41.000
<v Speaker 4>can slip in without paying any kind of tariffs, and

0:01:41.040 --> 0:01:42.720
<v Speaker 4>those can be twenty five to thirty percent, and it

0:01:42.760 --> 0:01:44.119
<v Speaker 4>looks like they're going to go even higher.

0:01:44.440 --> 0:01:48.600
<v Speaker 2>In Latin deminimus loosely translates to too small to matter.

0:01:49.160 --> 0:01:51.600
<v Speaker 2>It's a tax rule from the nineteen thirties that was

0:01:51.640 --> 0:01:55.520
<v Speaker 2>originally created to allow Americans traveling overseas to ship back

0:01:55.560 --> 0:01:57.200
<v Speaker 2>their souvenirs duty free.

0:01:57.400 --> 0:01:59.800
<v Speaker 4>If you're coming home from a vacation to another country,

0:02:00.040 --> 0:02:03.440
<v Speaker 4>you have some gifts in your suitcase, you know they

0:02:03.440 --> 0:02:07.320
<v Speaker 4>don't want customs officials getting bogged down charging tariffs on that.

0:02:07.640 --> 0:02:11.200
<v Speaker 4>But now this is applied to e commerce and cross

0:02:11.240 --> 0:02:12.120
<v Speaker 4>border e commerce.

0:02:12.360 --> 0:02:15.720
<v Speaker 2>But earlier this month, President Donald Trump took aim at

0:02:15.720 --> 0:02:18.480
<v Speaker 2>this near century old rule, the Minimus room.

0:02:18.600 --> 0:02:22.040
<v Speaker 3>Now that is being revoked by Trump and numeris saying

0:02:22.080 --> 0:02:25.320
<v Speaker 3>it could cost China about one point three percent of

0:02:25.320 --> 0:02:28.040
<v Speaker 3>its exports growth and about zero point two percent of

0:02:28.080 --> 0:02:31.560
<v Speaker 3>its GDP, So pretty significant given that these small puzzles

0:02:31.560 --> 0:02:34.840
<v Speaker 3>may come about eleven percent of China's exports to the US.

0:02:35.120 --> 0:02:38.240
<v Speaker 5>A lot of these supplies were extremely shocked by how

0:02:38.320 --> 0:02:40.400
<v Speaker 5>sudden and chaotic this happened to them.

0:02:40.639 --> 0:02:44.720
<v Speaker 2>Rachel Chang is Bloomberg's Managing editor for Global Business in Asia.

0:02:44.880 --> 0:02:47.680
<v Speaker 5>That's definitely a chilling effect because the draw of these

0:02:47.720 --> 0:02:51.760
<v Speaker 5>places are how super cheap they are. Once you'd lose

0:02:51.840 --> 0:02:55.280
<v Speaker 5>that cheapness, once this added costle, added fees, you know,

0:02:55.320 --> 0:02:57.040
<v Speaker 5>of course, that attractiveness goes away.

0:02:57.200 --> 0:03:00.480
<v Speaker 2>And one Chinese merchant tells us that closing the tax

0:03:00.560 --> 0:03:05.480
<v Speaker 2>loophole has huge consequences for some Chinese manufacturers and retailers.

0:03:06.320 --> 0:03:11.920
<v Speaker 1>Jimmy, sure they can basically close overnight.

0:03:17.800 --> 0:03:21.320
<v Speaker 2>Welcome to the Big Take Asia from Bloomberg News. I'm Wanha.

0:03:21.360 --> 0:03:23.680
<v Speaker 2>Every week we take you inside some of the world's

0:03:23.680 --> 0:03:27.480
<v Speaker 2>biggest and most powerful economies and the markets, tycoons and

0:03:27.600 --> 0:03:31.680
<v Speaker 2>businesses that drive this ever shifting region. Today, on the

0:03:31.760 --> 0:03:35.040
<v Speaker 2>show the Deminimus and what does closing it mean for

0:03:35.160 --> 0:03:39.560
<v Speaker 2>Chinese e commerce giants like Tamu and their American Customers

0:03:44.560 --> 0:03:47.600
<v Speaker 2>Spencer For people who aren't familiar with tamu, can you

0:03:47.680 --> 0:03:50.240
<v Speaker 2>start by telling us what this app does?

0:03:50.880 --> 0:03:55.200
<v Speaker 4>So Tamu is like a discount store in your phone.

0:03:55.280 --> 0:03:57.760
<v Speaker 4>So you download the app, and when you go in,

0:03:58.000 --> 0:04:00.160
<v Speaker 4>before you even get a chance to look at anything,

0:04:00.160 --> 0:04:02.720
<v Speaker 4>you're likely going to see a prize wheel or some

0:04:02.800 --> 0:04:05.320
<v Speaker 4>sort of like maybe like an egg, and they'll say, ooh,

0:04:05.760 --> 0:04:09.119
<v Speaker 4>prize for you, and they'll already start kind of bombard

0:04:09.160 --> 0:04:10.720
<v Speaker 4>you with deals and discounts.

0:04:11.040 --> 0:04:14.000
<v Speaker 2>Tamu launched in the US in September twenty twenty two

0:04:14.280 --> 0:04:18.040
<v Speaker 2>with relatively little fanfare, and a few months later, its

0:04:18.120 --> 0:04:21.839
<v Speaker 2>parent company PDD jumped at the chance to introduce itself

0:04:21.839 --> 0:04:25.560
<v Speaker 2>formally to US consumers an event that they knew would

0:04:25.560 --> 0:04:28.960
<v Speaker 2>get the attention of millions of eyeballs, the Super Bowl.

0:04:29.440 --> 0:04:32.160
<v Speaker 4>They had a Super Bowl commercial in twenty twenty three

0:04:32.279 --> 0:04:37.279
<v Speaker 4>where they really poked at people's curiosity and it really

0:04:37.279 --> 0:04:40.240
<v Speaker 4>took off. It was an immediate hit. And they had

0:04:40.279 --> 0:04:45.000
<v Speaker 4>this campaign shopped like a billionaire, like meaning like it

0:04:45.000 --> 0:04:47.000
<v Speaker 4>doesn't matter how much money you have, you can shop

0:04:47.080 --> 0:04:49.360
<v Speaker 4>like money snow object because our deals are so good.

0:04:50.160 --> 0:04:54.719
<v Speaker 2>Like besides going big on the Super Bowl. Spencer says,

0:04:54.880 --> 0:04:57.880
<v Speaker 2>Tamu came to the US at the right time.

0:04:58.279 --> 0:05:00.080
<v Speaker 4>We had just come out of the pandemic, so so

0:05:00.480 --> 0:05:02.800
<v Speaker 4>a lot of people grew really accustomed to shopping just

0:05:02.839 --> 0:05:06.080
<v Speaker 4>about anywhere online and experimenting with new sites they weren't

0:05:06.080 --> 0:05:08.640
<v Speaker 4>necessarily familiar with. That used to be something people were

0:05:08.680 --> 0:05:12.400
<v Speaker 4>a little hesitant about. And also we had hyperinflation, and

0:05:12.480 --> 0:05:14.800
<v Speaker 4>so people were just looking for deals. So tim we

0:05:14.920 --> 0:05:17.400
<v Speaker 4>really stood out with bargains at the right time when

0:05:17.400 --> 0:05:21.000
<v Speaker 4>people were just grappling with higher costs for groceries and

0:05:21.080 --> 0:05:22.640
<v Speaker 4>everyday expenses, that sort of thing.

0:05:23.040 --> 0:05:25.599
<v Speaker 2>If you open Tamu now you can find things like

0:05:25.600 --> 0:05:28.599
<v Speaker 2>a six dollars Apple Watch look alike or a twenty

0:05:28.640 --> 0:05:32.159
<v Speaker 2>dollars mini Arcade claw machine, And if you buy more,

0:05:32.360 --> 0:05:35.599
<v Speaker 2>the app often offers an even bigger discount or throws

0:05:35.640 --> 0:05:37.120
<v Speaker 2>in freebies with your orders.

0:05:37.560 --> 0:05:40.440
<v Speaker 4>The big thing about it is discounts. You know that

0:05:40.480 --> 0:05:44.599
<v Speaker 4>the prices are very low, so you're likely to find

0:05:45.240 --> 0:05:48.000
<v Speaker 4>items at cheaper prices than you could find at a

0:05:48.000 --> 0:05:49.920
<v Speaker 4>store near you, if you could even find the item

0:05:49.960 --> 0:05:52.919
<v Speaker 4>near you or on competing marketplaces in the US like

0:05:53.000 --> 0:05:55.719
<v Speaker 4>Amazon or eBay or Walmart. A lot of things could

0:05:55.720 --> 0:05:59.000
<v Speaker 4>maybe be like half as much as on Amazon or less,

0:05:59.360 --> 0:06:00.320
<v Speaker 4>and on TikTok.

0:06:00.360 --> 0:06:03.920
<v Speaker 2>There's tons of videos where people talk about their Tamu hauls.

0:06:04.240 --> 0:06:05.440
<v Speaker 4>Why do you like to waste money?

0:06:05.480 --> 0:06:07.680
<v Speaker 2>Why are you not checking Timu before.

0:06:07.360 --> 0:06:08.200
<v Speaker 4>You buy stuff?

0:06:08.279 --> 0:06:09.400
<v Speaker 5>Let's not get duped.

0:06:09.600 --> 0:06:10.839
<v Speaker 4>Let's buy the dupe.

0:06:11.160 --> 0:06:14.159
<v Speaker 2>And the reason Amazon customers are paying a lot more

0:06:14.279 --> 0:06:17.920
<v Speaker 2>for similar or sometimes even the same item, Spencer says

0:06:17.960 --> 0:06:21.479
<v Speaker 2>the markup largely reflects the cost of fast delivery.

0:06:21.720 --> 0:06:25.400
<v Speaker 4>So Amazon is all about speed two day delivery, one

0:06:25.480 --> 0:06:28.920
<v Speaker 4>day delivery, same day delivery, and most of their items

0:06:29.000 --> 0:06:32.200
<v Speaker 4>bundled around that without a consideration to say, you know what,

0:06:32.240 --> 0:06:34.320
<v Speaker 4>I'd rather get it for less if I can wait

0:06:34.360 --> 0:06:37.159
<v Speaker 4>a little longer. Timu's saying, hey, if you can wait

0:06:37.240 --> 0:06:40.120
<v Speaker 4>seven days, ten days, we'll get you a really good

0:06:40.120 --> 0:06:42.000
<v Speaker 4>deal on this item. So that's the trade off for

0:06:42.040 --> 0:06:44.560
<v Speaker 4>the shopper. But what Timo's really shown is, hey, people

0:06:44.560 --> 0:06:46.120
<v Speaker 4>are willing to be patient for a deal.

0:06:46.600 --> 0:06:49.880
<v Speaker 2>Another factor that helped fuel Tamu's rise in the US

0:06:50.600 --> 0:06:55.080
<v Speaker 2>Donald Trump himself. Trump imposed a host of tariffs on

0:06:55.160 --> 0:06:58.440
<v Speaker 2>China during his first term, and that raised the cost

0:06:58.520 --> 0:07:03.320
<v Speaker 2>for exporters, but he left one thing untouched. The dominimous rule.

0:07:04.040 --> 0:07:07.320
<v Speaker 2>Now most of the world has versions of Dominimus, but

0:07:07.400 --> 0:07:11.080
<v Speaker 2>the US is the most generous, up to eight hundred

0:07:11.080 --> 0:07:15.240
<v Speaker 2>dollars per package, and that became a loophole for Chinese

0:07:15.240 --> 0:07:19.280
<v Speaker 2>merchants to ship lots of goods into the US duty free.

0:07:19.520 --> 0:07:22.640
<v Speaker 4>Most things, when you purchase them on Amazon, they're already

0:07:22.720 --> 0:07:25.640
<v Speaker 4>in the United States in a US warehouse, So that

0:07:25.720 --> 0:07:28.760
<v Speaker 4>means they were shipped on big cargo containers by ocean,

0:07:29.240 --> 0:07:32.120
<v Speaker 4>and then they're paying tariffs when they come into the

0:07:32.240 --> 0:07:37.080
<v Speaker 4>US through port, whereas Tamu they'll have facilities in China

0:07:37.720 --> 0:07:41.440
<v Speaker 4>where they actually take a customer's order and put it

0:07:41.440 --> 0:07:46.040
<v Speaker 4>into an individual package. You're doing that order fulfillment in

0:07:46.120 --> 0:07:49.040
<v Speaker 4>a warehouse in China where labor is cheaper, put it

0:07:49.080 --> 0:07:52.600
<v Speaker 4>on an airplane and fly it into the United States.

0:07:52.680 --> 0:07:55.840
<v Speaker 4>Through what's called the deminimous loophole. In the US, you're

0:07:55.880 --> 0:07:57.840
<v Speaker 4>not paying tariffs on the goods coming in.

0:07:58.240 --> 0:08:01.920
<v Speaker 2>The Dominimus benefited not just but also other Chinese e

0:08:01.960 --> 0:08:04.400
<v Speaker 2>commerce giants like fashion retailers she In.

0:08:04.800 --> 0:08:08.840
<v Speaker 4>Tamu and Shean have really driven a huge rise in

0:08:08.880 --> 0:08:12.200
<v Speaker 4>the volume of shipments entering the US. Through this loophole,

0:08:12.560 --> 0:08:16.600
<v Speaker 4>and it's something like one point four billion in twenty

0:08:16.640 --> 0:08:20.440
<v Speaker 4>twenty four, which was four million packages a day. It's

0:08:20.520 --> 0:08:23.080
<v Speaker 4>more than tripled over pre pandemic levels.

0:08:23.480 --> 0:08:26.880
<v Speaker 2>This year, TEMU is estimated to earn thirty billion dollars

0:08:26.920 --> 0:08:30.200
<v Speaker 2>in US sales, a milestone that took Amazon more than

0:08:30.200 --> 0:08:34.280
<v Speaker 2>a decade to reach. But now that forecast is under threat.

0:08:34.640 --> 0:08:37.840
<v Speaker 4>President Trump said, We're going to close this demnimous loophole.

0:08:38.320 --> 0:08:40.160
<v Speaker 4>And that was a big shock to the system. That's

0:08:40.200 --> 0:08:43.079
<v Speaker 4>going to affect companies like TAMU and she In, and

0:08:43.200 --> 0:08:45.640
<v Speaker 4>it's set off a scramble and a lot of people

0:08:45.640 --> 0:08:48.040
<v Speaker 4>were just confused and not sure what it meant.

0:08:48.240 --> 0:08:51.160
<v Speaker 2>A few days later, Trump reversed his order to revoke

0:08:51.200 --> 0:08:54.800
<v Speaker 2>the Deminimus rule and delay the suspension. He said he

0:08:54.880 --> 0:08:57.480
<v Speaker 2>wanted to give agencies more time to come up with

0:08:57.600 --> 0:09:01.680
<v Speaker 2>adequate systems to quote fully and ex commediately process and

0:09:01.720 --> 0:09:02.960
<v Speaker 2>collect tariff revenue.

0:09:03.200 --> 0:09:04.679
<v Speaker 4>Yeah, you're going to need you're going to need a

0:09:04.720 --> 0:09:07.240
<v Speaker 4>system in place. You're going to need infrastructure. You're going

0:09:07.280 --> 0:09:10.400
<v Speaker 4>to need rules on how to handle this volume and

0:09:10.440 --> 0:09:13.600
<v Speaker 4>how they're going to screen it and apply the appropriate tariffs.

0:09:14.000 --> 0:09:16.560
<v Speaker 4>You can expect major changes in how these goods flow

0:09:16.559 --> 0:09:17.199
<v Speaker 4>into the US.

0:09:20.640 --> 0:09:23.559
<v Speaker 2>While the US Customs figures out a way to process

0:09:23.600 --> 0:09:26.440
<v Speaker 2>and tax the hundreds of millions of parcels from China,

0:09:27.000 --> 0:09:32.280
<v Speaker 2>Chinese manufacturers are working on contingency plants. That's after the break.

0:09:43.320 --> 0:09:46.720
<v Speaker 2>On February first, President Donald Trump proposed new ten percent

0:09:46.800 --> 0:09:50.840
<v Speaker 2>tariffs on all Chinese imports, and he ordered the suspension

0:09:51.040 --> 0:09:53.880
<v Speaker 2>of the Dominimus rule for goods from China and Hong Kong.

0:09:54.559 --> 0:09:58.640
<v Speaker 2>Almost immediately, big e commerce platforms took a hit. Here's

0:09:58.679 --> 0:10:00.000
<v Speaker 2>Bloomberg's Rachel ching again.

0:10:00.200 --> 0:10:04.120
<v Speaker 5>We saw traffic in the following five days for both

0:10:04.160 --> 0:10:06.840
<v Speaker 5>she and Temu drop off. So she and US sales

0:10:06.880 --> 0:10:10.160
<v Speaker 5>fell sixteen to forty one percent for that period, while

0:10:10.280 --> 0:10:12.840
<v Speaker 5>Tamu saw a fault as much as thirty two percent

0:10:12.960 --> 0:10:13.760
<v Speaker 5>during that period.

0:10:14.000 --> 0:10:14.920
<v Speaker 2>That's a huge drop.

0:10:15.040 --> 0:10:15.880
<v Speaker 3>Yeah, I mean.

0:10:15.920 --> 0:10:18.280
<v Speaker 5>Early part of the year is generally a bit lower

0:10:18.320 --> 0:10:22.280
<v Speaker 5>than pre Christmas, like sort of Black Friday sales push.

0:10:22.480 --> 0:10:25.840
<v Speaker 5>But in terms of looking at these drops, there's obviously

0:10:25.880 --> 0:10:28.640
<v Speaker 5>an immediate chilling effect from consumers right who may be

0:10:28.760 --> 0:10:31.120
<v Speaker 5>a bit uncertain as what this means. If I buy

0:10:31.200 --> 0:10:33.480
<v Speaker 5>five hundred dollars worth of stuff from Tamu. Am I

0:10:33.600 --> 0:10:36.520
<v Speaker 5>now on the hook for customs duty on that.

0:10:36.920 --> 0:10:39.400
<v Speaker 2>Yep, they lose their advantage there. Now, if I'm a

0:10:39.480 --> 0:10:43.480
<v Speaker 2>Chinese retailer or a manufacturer who sells my products on Tamu,

0:10:44.040 --> 0:10:47.880
<v Speaker 2>what does the closing of diminus loophole mean for me?

0:10:48.760 --> 0:10:51.880
<v Speaker 5>So, you know, Chinese reporters talking to these factory owners

0:10:52.200 --> 0:10:55.679
<v Speaker 5>right from the beginning, they were already seeing their logistics agent,

0:10:55.760 --> 0:10:58.080
<v Speaker 5>which as companies that helped them get their goods from

0:10:58.080 --> 0:11:01.880
<v Speaker 5>one step to another, immediately asking for thirty percent higher

0:11:02.400 --> 0:11:05.880
<v Speaker 5>payment to cover what those additional costs might be. There's

0:11:05.960 --> 0:11:08.840
<v Speaker 5>just so much chaos around the how this rule will

0:11:08.840 --> 0:11:11.560
<v Speaker 5>be implemented, so we know for sure that would just

0:11:11.640 --> 0:11:14.560
<v Speaker 5>be a lot of higher costs for these vendors in

0:11:14.600 --> 0:11:17.800
<v Speaker 5>the medium term.

0:11:18.120 --> 0:11:20.720
<v Speaker 2>To get a closer look at this chaos, we called

0:11:20.800 --> 0:11:26.880
<v Speaker 2>up one of these logistics companies. Andy Guo is CEO

0:11:27.120 --> 0:11:30.640
<v Speaker 2>of her non Taidea. He's been helping Chinese factories and

0:11:30.679 --> 0:11:34.079
<v Speaker 2>retailers sell their products overseas since two thousand and nine.

0:11:34.679 --> 0:11:37.400
<v Speaker 2>His company has operations all over the world. But who

0:11:37.600 --> 0:11:41.600
<v Speaker 2>says that the US market until recently was probably the

0:11:41.600 --> 0:11:42.400
<v Speaker 2>most promising.

0:11:43.120 --> 0:11:43.480
<v Speaker 4>You're not.

0:11:44.920 --> 0:11:48.840
<v Speaker 1>The US is indeed a great profitable market, but on

0:11:48.880 --> 0:11:52.120
<v Speaker 1>the other hand, it is also an obvious market, so

0:11:52.160 --> 0:11:54.880
<v Speaker 1>everybody wants a piece of it, and the competition is.

0:11:54.880 --> 0:12:01.760
<v Speaker 2>Intense, who says. After COVID, the competition came even more cutthroat,

0:12:02.200 --> 0:12:05.400
<v Speaker 2>and governments around the globe started to encourage companies to

0:12:05.520 --> 0:12:07.120
<v Speaker 2>localize their operations.

0:12:08.920 --> 0:12:11.640
<v Speaker 1>What does it mean to localize your operation? It means

0:12:11.679 --> 0:12:14.320
<v Speaker 1>that if you want to expand in the US, you

0:12:14.400 --> 0:12:17.199
<v Speaker 1>need to register your business in the US and pay

0:12:17.240 --> 0:12:21.559
<v Speaker 1>your tax to the US locally. This localizing trend is

0:12:21.600 --> 0:12:24.200
<v Speaker 1>getting stronger these years for e commerce businesses.

0:12:25.760 --> 0:12:28.560
<v Speaker 2>Quo says his company moved on this trend early on

0:12:28.920 --> 0:12:33.000
<v Speaker 2>during COVID, when shipping prices were skyrocketing. They acquired business

0:12:33.040 --> 0:12:36.800
<v Speaker 2>licenses and established warehouses in the US. That means the

0:12:36.840 --> 0:12:40.160
<v Speaker 2>products he helps sell are stored in the warehouses and

0:12:40.200 --> 0:12:44.199
<v Speaker 2>can reach customers faster than smaller retailers who directly ship

0:12:44.240 --> 0:12:47.800
<v Speaker 2>from Chinaquo says his business has never relied on the

0:12:47.840 --> 0:12:51.480
<v Speaker 2>deminimus rule because the company ships products in bulk to

0:12:51.559 --> 0:12:54.880
<v Speaker 2>the US, so instead of sending small packages under eight

0:12:55.000 --> 0:12:58.120
<v Speaker 2>hundred dollars, the company has been paying tariffs from the

0:12:58.120 --> 0:13:01.480
<v Speaker 2>get go, and that's already actored into its pricing, which

0:13:01.520 --> 0:13:04.880
<v Speaker 2>is still competitive, he says, and that's why Gho's company

0:13:05.120 --> 0:13:08.680
<v Speaker 2>is more or less insulated from the latest fallout.

0:13:09.320 --> 0:13:12.560
<v Speaker 1>We don't ship a lot of small packages directly from China,

0:13:13.000 --> 0:13:15.640
<v Speaker 1>so we are less affected by this new policy. But

0:13:15.800 --> 0:13:19.200
<v Speaker 1>those companies who do, they can basically close overnight.

0:13:20.960 --> 0:13:23.839
<v Speaker 2>Guo told us that closing the Deminimus is a shock

0:13:23.960 --> 0:13:27.440
<v Speaker 2>to the retailers who compete solely by price and rely

0:13:27.640 --> 0:13:30.240
<v Speaker 2>on the loophole to make a profit.

0:13:30.920 --> 0:13:34.600
<v Speaker 1>That means for platforms such as alex Press, Tamu, and

0:13:34.640 --> 0:13:39.520
<v Speaker 1>she all this marketplaces that rely on low prices, they

0:13:39.520 --> 0:13:43.800
<v Speaker 1>are taking a major hit. Trump actually understands them very well.

0:13:44.440 --> 0:13:46.880
<v Speaker 1>They're able to keep the prices so low because of

0:13:46.920 --> 0:13:50.000
<v Speaker 1>China's cheap labor, and that's exactly what the US wants

0:13:50.000 --> 0:13:52.360
<v Speaker 1>to hit take Trump.

0:13:52.800 --> 0:13:56.079
<v Speaker 2>Quo says his logistics business can manage the changes Trump

0:13:56.120 --> 0:13:59.160
<v Speaker 2>wants to put in place, but he questions if the

0:13:59.280 --> 0:14:03.040
<v Speaker 2>US and a American consumers will ultimately come on top.

0:14:04.880 --> 0:14:08.080
<v Speaker 1>These higher costs eventually go to the customers. Just raise

0:14:08.120 --> 0:14:11.200
<v Speaker 1>the price, right, But mating China can not happen in

0:14:11.240 --> 0:14:14.040
<v Speaker 1>one year or two and Trump says he's doing this

0:14:14.120 --> 0:14:17.760
<v Speaker 1>to bring manufacturing back to America. I don't think that's

0:14:17.760 --> 0:14:19.240
<v Speaker 1>going to happen overnight either.

0:14:23.960 --> 0:14:27.840
<v Speaker 2>Groo says removing the deminimus could help drive Chinese factories

0:14:27.920 --> 0:14:31.520
<v Speaker 2>to improve the quality of their products. He says closing

0:14:31.560 --> 0:14:34.480
<v Speaker 2>the loophole will certainly remove the incentive to use cheap

0:14:34.600 --> 0:14:38.040
<v Speaker 2>labor at least And Rachel says removing the old loophole

0:14:38.200 --> 0:14:41.040
<v Speaker 2>is a watershed moment for e commerce from China.

0:14:41.160 --> 0:14:43.360
<v Speaker 5>If you look at the kind of stuff that you

0:14:43.560 --> 0:14:46.920
<v Speaker 5>got off Tamu for those sorts of prices, right, I

0:14:46.960 --> 0:14:50.000
<v Speaker 5>think sometimes a lot of people would just questioning, like

0:14:50.160 --> 0:14:52.600
<v Speaker 5>is this normal that you're able to buy all these

0:14:52.640 --> 0:14:55.120
<v Speaker 5>sorts of things so like literally like a dollar and

0:14:55.160 --> 0:14:57.640
<v Speaker 5>get them shipped from China? Right, Because if you're relying

0:14:57.720 --> 0:15:00.760
<v Speaker 5>on the loophole to build a huge business, then is

0:15:00.800 --> 0:15:03.120
<v Speaker 5>that business going to be able to be sustainable in

0:15:03.160 --> 0:15:06.880
<v Speaker 5>the long term. Is that something that is a good

0:15:06.920 --> 0:15:10.160
<v Speaker 5>business model that can be profitable or was it being

0:15:10.280 --> 0:15:15.080
<v Speaker 5>subsidized by all of these non market forces that ultimately

0:15:15.240 --> 0:15:18.080
<v Speaker 5>would disappear. And I think we're at that moment of

0:15:18.120 --> 0:15:19.040
<v Speaker 5>reckoning right now.

0:15:19.320 --> 0:15:22.880
<v Speaker 2>And Rachel, what do these changes mean to American consumers

0:15:23.000 --> 0:15:24.000
<v Speaker 2>who love a good deal.

0:15:24.640 --> 0:15:28.160
<v Speaker 5>I think what these changes mean really is higher prices

0:15:28.200 --> 0:15:31.200
<v Speaker 5>and less choice. And we know that inflation is hitting

0:15:31.240 --> 0:15:35.840
<v Speaker 5>American consumers from all directions. Right, Eggs unaffordable now because

0:15:35.880 --> 0:15:39.120
<v Speaker 5>of what bird Fool is doing. So there's just likely

0:15:39.160 --> 0:15:42.000
<v Speaker 5>to be a pullback on consumerism and rising prices in

0:15:42.000 --> 0:15:44.120
<v Speaker 5>a lot of ways. Whether or not in the long

0:15:44.200 --> 0:15:47.040
<v Speaker 5>run that is actually positive for the American economy and

0:15:47.080 --> 0:15:50.520
<v Speaker 5>allows them to rebalance their trade deficit. I think that

0:15:50.640 --> 0:15:53.160
<v Speaker 5>is a bigger question for economists. But then on the

0:15:53.200 --> 0:15:55.400
<v Speaker 5>micro level, on the individual level, it's going to mean

0:15:55.440 --> 0:15:57.680
<v Speaker 5>that some of these crazy bargains that they were seeing

0:15:57.680 --> 0:16:00.800
<v Speaker 5>on these websites are going to be gone. Mean, you know,

0:16:00.880 --> 0:16:04.120
<v Speaker 5>just higher prices, less choice, and potentially longer delivery waight

0:16:04.160 --> 0:16:04.800
<v Speaker 5>times as well.

0:16:08.240 --> 0:16:10.760
<v Speaker 2>This is the big take Asia from Bloomberg News. I'm

0:16:10.760 --> 0:16:14.400
<v Speaker 2>wan ha. This episode was produced by Young Young, Naomi

0:16:14.480 --> 0:16:18.240
<v Speaker 2>m and Jessica Beck. Additional reporting came from Danielle Away

0:16:18.400 --> 0:16:21.400
<v Speaker 2>and special thanks to Lepe. It was edited by Patty

0:16:21.480 --> 0:16:24.720
<v Speaker 2>Hirsch and Mark Million. It was mixed by Alex Suguiera

0:16:24.880 --> 0:16:27.560
<v Speaker 2>and sound designed by Jessica, who also fact checked it.

0:16:28.120 --> 0:16:31.200
<v Speaker 2>Our senior producer is Naomi Shaven. Our senior editor is

0:16:31.240 --> 0:16:35.600
<v Speaker 2>Elizabeth Ponso. Our executive producer is Nicole Beemster Bower. Sage

0:16:35.600 --> 0:16:39.080
<v Speaker 2>Bauman is Bloomberg's head of podcasts. If you like this episode,

0:16:39.080 --> 0:16:42.040
<v Speaker 2>make sure to subscribe and review The Big Take Asia

0:16:42.160 --> 0:16:45.360
<v Speaker 2>wherever you listen to podcasts. It really helps people find

0:16:45.400 --> 0:16:48.200
<v Speaker 2>the show. Thanks for listening, See you next time.