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Graphic Truth: De massive problem with “de minimis” packages
Supporters of the current threshold say it streamlines trade, particularly in a world in which e-commerce is soaring. But critics point out that the US threshold is way higher than anyone else’s, and that foreign exporters often exploit that to evade import duties and inspections.
Chinese e-commerce exporters in particular use de minimis rules to skirt US tariffs, while drug cartels ship fentanyl to the US in a similar way. Someone even tried to import a helicopter from Venezuela by breaking it up into small packages labeled as “personal effects.”
The Biden administration recently cracked down on Chinese exporters’ abuse of de minimis thresholds, and the incoming Trump administration is certain to hit this issue even harder.
Here’s a snapshot of how the US threshold compares globally, along with a look at the massive rise in de minimis shipments to the US over the past 10 years.
European Commission President Ursula von der Leyen holds Former European Central Bank chief Mario Draghi's report on EU competitiveness and recommendations, as they attend a press conference, in Brussels, on Sept. 9, 2024.
“Super Mario” wants to level up Europe against China
The central problem, Draghi says in his report, is that the EU lacks a “foreign economic policy” that aligns the continent’s trade agenda with geopolitical realities. The report highlights Europe’s dependence on China for critical minerals and warns that some 40% of European imports are vulnerable to geopolitics-related supply interruptions. Europe’s trade openness, arguably one of its greatest economic assets, also leaves it vulnerable to unfair Chinese practices, such as subsidizing producers who can then undercut European ones.
A drone view shows CN MacMillan Yard in Vaughan, near Toronto, after Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) locked out workers following unsuccessful negotiation attempts with a major labor union, in Vaughan, Ontario, Canada August 22, 2024.
Rail worker lockout could cost billions
Canadian National Railway and Canadian Pacific Kansas City have locked out more than 9,000 of their workers as prolonged contract talks broke down.
Workers are pushing for a pay increase and better working conditions. As the lockout is set to disrupt transit within Canada and shipping between the country and the US, the companies are pushing for binding arbitration.
At roughly CA$341 million a day, the cost of the lockout will add up quickly. Several industries will be affected, including commuter rail – over 30,000 commuters in Toronto, Vancouver, and Montreal – along with chlorinated drinking water, fertilizer, grain, jet fuel, coal, potash, vehicles, and all kinds of manufactured goods.
The lockout will hit US-Canada trade hard, affecting supply chains and the availability – and possibly the price – of goods on both sides of the border, including food. Prior to the lockout, the rail companies had halted shipments cross-border, putting 2,500 cross-border rail cars into disuse and stranding the goods they’d otherwise carry.
What can the feds do? “Trudeau is between a rock and a hard place,” says Graeme Thompson, a senior analyst with Eurasia Group. “The Liberals don’t want to be seen as interfering in collective bargaining, especially given their support in parliament from the traditionally pro-union New Democratic Party.”
“But on the other hand, the economic consequences of even a short work stoppage for Canada would be severe,” he adds, “and the last thing Trudeau needs is more bad economic news with his party trailing the opposition Conservatives in the polls, largely due to poor perceptions of their handling of the economy.”
By late Thursday, Trudeau's government announced it had asked the country's industrial relations board to issue a back-to-work order, which is expected within a few days. So we'll be watching to see how quickly action is taken, and how quickly the rail workers get back on the job.
Canada's Minister of Foreign Affairs Melanie Joly speaks during a reception honouring the visit of the Chairperson of the African Union Commission Moussa Faki Mahamat in Gatineau, Quebec, Canada October 26, 2022.
Canadian foreign minister heads to China amid tough tariff talk
Canadian Foreign Affairs Minister Mélanie Joly made a surprise visit to Beijing on Thursday as Canada and the United States are both considering new barriers to trade with China.
Canada-China relations have gone from bad to terrible since 2018, when Canada held Huawei executive Meng Wanzhou for extradition to the United States and the Chinese government responded by detaining Michael Kovrig and Michael Spavor. Wanzhou and the two Michaels were released in 2021, but a Canadian public inquiry into foreign interference continued to put a strain on relations. Then came the suspected Chinese spy balloon surveillance in US and Canadian airspace in 2023.
Still, Chinese Foreign Minister Wang Yi said China was open to improving relations earlier this year.
But this week, Deputy Prime Minister Chrystia Freeland said she would be talking to Canadian business and labor groups about erecting new trade barriers with China. Washington sent a similar message as Joe Biden told allies on Wednesday that he is considering taking fresh action to block Chinese chip manufacturing. Meanwhile, in Milwaukee this week, Donald Trump’s running mate, JD Vance, said China is the “biggest threat” facing the United States.
The Chinese likely want to talk to Joly about avoiding new trade barriers with Canada, since China’s economy is struggling and any new limits on exports could further slow growth. Joly will no doubt listen politely, but Canada is unlikely to jeopardize its crucial trade relationship with the United States by making any side deals with Beijing.
FILE PHOTO: Semiconductor chips are seen on a printed circuit board in this illustration picture taken February 17, 2023.
The US-China chip stranglehold
The Biden administration has already imposed severe restrictions on semiconductor companies selling to China through export controls. But now it’s considering additional steps to maintain an edge over its rival in the East. The new measures would reportedly restrict China’s ability to access a specific chip architecture known as gate all around, or GAA. GAA is a powerful type of transistor that large chipmakers — including AMD, Intel, Nvidia, and Samsung — are planning to mass produce in the next year.
The US Commerce Department, which oversees export controls, hasn’t confirmed whether or when the rules will be finalized. But the administration has been dead set on limiting China’s access to chips they can use to train and run AI applications — an attitude that’ll only intensify as AI technology becomes more mature and more useful.
With a weak economy making retaliatory tariffs unlikely, Beijing is left with few responses other than subsidizing its domestic industry, which still lags behind the US.
EDITORS' NOTE: Reuters and other foreign media are subject to Iranian restrictions on leaving the office to report, film or take pictures in Tehran. A security personnel looks on at oil docks at the port of Kalantari in the city of Chabahar, 300km (186 miles) east of the Strait of Hormuz January 17, 2012.
India risks US sanctions over a new Iran port
On Monday, India signed a10-year-long agreement to operate and develop Iran’s Chabahar port. The move is meant to expand India’s agriculture exports to Afghanistan and Central Asia while bypassing existing routes through neighboring Pakistan, New Delhi’s main rival.
Flexing muscles. New Delhi, on track toovertake Japan as the world’s fourth-largest economy by 2025, has only managed the port under short-term contracts since 2018 and has already transported 2.5 million tonnes of wheat and 2,000 tonnes of pulses to Afghanistan. This new longer-term deal with a contractual value of roughly $370 million will reduce transit times between India, Iran, and Afghanistan.
But India is sailing at a risk. Just hours after the contract was signed, the US warned ofpotential sanctions on any country doing business deals with Tehran. Over the last three years, Washington has imposed over 600 sanctions on Iran-related entities.
India has not formally responded to Washington's warning yet, setting up a potential diplomatic clash that may test the limits of India’s willingness to defy its Western allies in order to pursue its own strategic interests in the region.
Tesla CEO Elon Musk steps out of a vehicle, during his visit to China, in Beijing, China, April 28, 2024, in this screen grab taken from a video.
Beijing gives Blinken cold shoulder, extends warm welcome to Musk
Last week, US Secretary of State Antony Blinken made a high-profile visit to China, marked by terse talk and some tough symbols. Two days ahead of Blinken’s arrival, China launched a submarine-based ballistic missile test, and as he departed, the Chinese air force flew jets over the Taiwan Strait. Beijing was not amused by the US Congress passing a supplemental spending bill last week, including billions in military assistance to Taipei.
In contrast, Tesla founder Elon Musk's surprise visit starting Sunday was all smiles. Musk posted to X about the honor of meeting Chinese Premier Li Qiang, who heralded Tesla as a pillar of US-China economic cooperation. Tesla has sold more than 1.7 million cars in China since it entered the market a decade ago, and its largest factory is in Shanghai.
Musk wants to roll out Tesla’s Full Self-Driving technology in China before Chinese automakers deploy similar capabilities. Musk is also seeking approval to transfer data collected in China to the US to train algorithms for FSD tech. Market watchers called the unexpected visit "a major moment for Tesla" as the company struggles with layoffs and slumping sales.U.S. Secretary of State Antony Blinken arrives at the Beijing Capital International Airport, in Beijing, China, April 25, 2024.
Blinken meets with Xi, but no breakthroughs
US Secretary of State Antony Blinken brought up concerns over China's support for Russia with his counterpart Wang Yi in Beijing on Friday, before meeting with Chinese President Xi Jinping. Blinken’s visit is largely meant to advance the mutual goal of stabilizing the relationship, and Xi said he wants to be "partners, not rivals" with the United States.
As Blinken landed in Shanghai for the first leg of his trip earlier this week, the Biden administration signed bills providing Taiwan with $8 billion in military aid and starting a process that could result in a ban of the popular video app TikTok in the US unless its Chinese owner, ByteDance, sells. The day before, the State Department released its annual human rights review, which criticized Chinese treatment of Muslim minorities.
Once he landed, Blinken pressed Shanghai Communist Party Secretary Chen Jining on treating US companies fairly. Meanwhile, he told students at NYU’s Shanghai campus that the cultural ties being built between both countries are of utmost importance.
Despite the many possible pratfalls during the first leg, China’s response has been fairly milquetoast. Spokesperson Wang Wenbin said, “We hope that the US side will respect the principle of fair competition, abide by WTO rules, and work with China to create favorable [trade] conditions.” Hardly “Wolf Warrior” stuff, and Wang said Friday that ties are “beginning to stabilize.”