Last year, companies such as Shein and Temu shipped US$46bil worth of small parcels to the United States to take advantage of the loophole. — Reuters
WASHINGTON: The decision by president Donald Trump to ban Chinese companies from using a US tariff loophole will hit tens of billions of dollars of trade and reduce China’s economic growth this year, according to new estimates by economists at Nomura Holdings Inc.
Last year, companies such as Shein and Temu shipped US$46bil worth of small parcels to the United States to take advantage of the loophole, according to Nomura’s estimates.
Tariffs of 10% or more and other new costs will slash such shipments, cutting total export growth by 1.3 percentage points and reducing China’s gross domestic product growth this year by 0.2 percentage point, economists including Ting Lu said.
The cross-Pacific trade in small parcels grew rapidly over the past few years, with China officially reporting about US$23bil worth of these exports last year, according to Bloomberg analysis of government data.
That is almost certainly an undercount, with reports that companies are shipping goods in bulk to Mexico and then breaking them down into small packages to enter the United States.
That rise in package trade is one of the factors causing the widening gap between United States and Chinese data on the bilateral trade, as the Chinese side is counting at least some of these parcels while the United States is not.
Since 2020, China has reported exporting more to the United States than the United States reports receiving from China, an abnormal gap that widened last year to US$86bil. — Bloomberg
