Liz Young
Appearances
Today, Explained
The two dolls economy
What matters is they were made in China originally. And those goods are now subject to more formal entry procedures than they were before. That means more paperwork, etc. They also are subject to that 145% base tariff that the president has put in place, plus any additional tariffs that they already would have faced before that based on what the item is.
Today, Explained
The two dolls economy
So that's based on, you know, is it a sneaker? What type of sneaker? What type of materials is it made out of? All of those kinds of things.
Today, Explained
The two dolls economy
This is, yes. Okay. So this is something where the president says that this is a change that's needed to help stop the flow of fentanyl into the country. And lawmakers of both parties in recent years have expressed concerns about what is coming into the country through these methods. They've expressed concerns about the cotton, for example, that is incorporated in some of the clothing.
Today, Explained
The two dolls economy
They're worried that this, quote, loophole that they call it could help allow for goods made from the Xinjiang region enter the country.
Today, Explained
The two dolls economy
It's still early. So this only took effect Friday. So this, of course, will have a little bit of a delayed effect as packages start to enter the country now. Already, Timu and Sheehan have been increasing prices on their websites.
Today, Explained
The two dolls economy
So far, American consumers have responded. I mean, I've seen social media posts where people are seeing charges coming in from parcel carriers saying, hey, you have to pay this tax before we can deliver your package. Consumers are expressing frustration about that. I'm so pissed.
Today, Explained
The two dolls economy
Just also general frustration about the cost of the tariffs. I mean, these are gonna be pretty hefty tariffs that are placed on these goods. Like I said, the 145%, that's just the base. So it's something that a lot of consumers are seeing that, okay, this is gonna push up prices in one way or another.
Today, Explained
The two dolls economy
But I will also note that some American business owners say this is going to help them better compete. They say that their businesses have really struggled in recent years with this flood of goods from China that's much, much cheaper and has undercut them on price. So they're hopeful that this kind of levels the playing field.
Today, Explained
The two dolls economy
They definitely could lose their price advantage now that they face these tariffs. We've seen, like I said, the prices have been going up fast. Some 40 to 100% over the past few weeks. And some analysts have said customers might switch to Amazon. They might just go back to the old familiar website that they'd been using before. That said, there are some important caveats to this.
Today, Explained
The two dolls economy
Shein and Timu have both made a lot of changes in recent years to the way their supply chains work. in anticipation of this exemption going away. And what that includes is that Xi'an, for example, has manufacturing partners set up in Brazil, Turkey, and India, and they can still ship goods into the U.S.
Today, Explained
The two dolls economy
duty-free through de minimis from those countries because this change only applies to China right now.
Today, Explained
The two dolls economy
So this is something that. Everyone is waiting to see what happens. The president had initially suspended De Minimis as an exemption that was available to importers in February. And there was a lot of confusion among retailers, logistics operators, etc. And at that time, the U.S.
Today, Explained
The two dolls economy
Postal Service temporarily stopped accepting parcels from China and Hong Kong while they tried to figure out how to handle that volume. So since then – I mean the president a week later delayed that until a time when the Commerce Department had notified the White House that systems were set up to process the inspections and collect the tariffs. Now since then –
Today, Explained
The two dolls economy
The White House says the Commerce Department has told them systems are in place.
Today, Explained
The two dolls economy
I agree. It feels like in my lifetime, there has been this push more and more over the years toward cheaper and cheaper goods, more and more things. And it does seem there's now this tension between that and the ways the changing trade policy could serve to stop that flow of goods.
Today, Explained
The two dolls economy
you know, from my perspective, covering the supply chain and logistics industry, particularly in the US, companies have built up their supply chains specifically to enable this flow of goods. So I don't know where they think things will land. And that's kind of what they're all grappling with right now.
Today, Explained
The two dolls economy
A lot of the companies I cover are grappling with the uncertainty and trying to figure out, well, what changes should we make? But also what changes should we wait to make until we know where... The buck ultimately falls. You know, where will tariffs be before we make these massive changes that take years often to make?
Today, Explained
The two dolls economy
My name is Liz Young. I'm a reporter at The Wall Street Journal, and I cover supply chain and logistics.
Today, Explained
The two dolls economy
It's a phrase that comes from Latin that essentially means it's of little value. So many countries around the world have these de minimis trade provisions. And in essence, it means it's not worth the government's time to collect de tariffs on small goods. You know, it's just not that much money that they're going to get from the process. So in the U.S., the provision dates to 1938.
Today, Explained
The two dolls economy
It was originally aimed at helping Americans bring back little like souvenirs and things from traveling abroad. I believe it started at a dollar back then, and it's been increased several times over the years, most recently from $200 in 2016 to $800.
Today, Explained
The two dolls economy
So over the past decade, we've seen usage of this skyrocket. I mean, it is absolutely swelled. And that has been driven by Chinese-based or Chinese-founded sellers who are shipping parcels directly to consumers in the U.S. from China. So the most popular of these, of course, being Shein and Timu. Hey guys, here's a summer Shein haul.
Today, Explained
The two dolls economy
They sell fast fashion apparel. They sell little tchotchke-type goods of all kinds. Top is so freaking cute. Um, hello? I'm buying this right now. Okay, bro, can I have these two phone cases? Because I don't really like my phone case.
Today, Explained
The two dolls economy
Sheena's my new favorite store. Often coming directly from China to U.S. shoppers. And that's been something that, you know, has really pushed up the volume of these packages. We went from 400 million of these entering the U.S. in 2018 to 1.36 billion last year.
Today, Explained
The two dolls economy
Sheehan's revenue last year had grown 19% over the year before to $38 billion, but that was less than the increases of the previous few years where it had grown 40% year over year. Teemu, we're looking at something similar. Their most recent quarterly report showed that revenue had climbed 24%, but that was their slowest pace of growth again since 2022.
Today, Explained
The two dolls economy
So in early April, President Trump had decided to end the de minimis exemption for goods made in China. It went into effect just this past Friday, so very recently. And what that does is it cracks down specifically on goods made in China and Hong Kong. So it doesn't matter where things are shipped from. It doesn't matter if they're shipped through another country.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
So the tariffs taking effect just after midnight today means that any shipments that left the country of origin after that point will be eligible for these tariffs. So goods that were already on a ship, already on the water, already on their way to the U.S. will be exempted from these new tariffs.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
You know, if a shipment's being delivered by air, it'll be a little faster, but certainly it'll take days or weeks for these tariffs to really fully come into effect.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
It's more complicated because now companies that may not have traditionally had to pay tariffs or that may have paid quite minimal tariffs are having to go through their books again, work with these licensed customs brokers. and figure out what is the actual duty rate we need to be prepared to pay. How do we pay it? They have to calculate those levies themselves and then make payment.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
So they are responsible for making sure that it's the correct amount. This isn't a case where the U.S. sends them a bill and they pay it online. It's a little more complicated than that. Companies that may have only previously had to calculate one duty rate may now have to calculate three or four or more.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
So items that contain steel, for example, they might have a separate line item based on how much steel is in that item. And then the country they come from, if it's China, for example, it would have several other duties on top of that.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
So this is making a process that might have previously been, you know, let's say 10% for any item imported is now several line items that they have to go through and calculate.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
Companies are grappling with this largely by relying on licensed customs brokers. Customs brokers specialize in this. They have to set up their systems, too. So it's been something where they have to kind of race to get ready for this. But they are skilled and ready to help with the importing paperwork, help with calculating the duty rate, help with facilitating payment.
WSJ What’s News
U.S. Stocks Soar as President Trump Pauses Some Tariffs
And most companies rely on those brokers to help them navigate this.