Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.US President Donald Trump has temporarily paused measures to close a tariff exemption on low-cost shipments from China while officials figure out how to tax the millions of packages that arrive in the US every day.In an amendment to an executive order signed on Wednesday and published on Friday, the White House said the so-called de minimis provision — which exempts shipments under $800 in value from tariffs and rigorous customs checks — would remain in place until “adequate systems are in place to fully and expediently process and collect tariff revenue”.Trump had cancelled the exemption in an executive order last week that imposed an additional 10 per cent tariff on goods from China, which the White House said was aimed at punishing Beijing for allowing the flow of deadly opioid fentanyl into the US. The rest of the tariffs remain in effect.China retaliated days later, announcing tariffs of 10 to 15 per cent on US liquefied natural gas, coal, crude oil and farm equipment, which are due to take effect from Monday.Trump said on Tuesday that he was in “no rush” to talk to his Chinese counterpart.The de minimis provision was designed to help US households and small businesses purchase low-cost items from abroad without making them subject to onerous customs checks. In recent years, it has proved a boon to ecommerce platforms that ship directly to consumers, such as China’s Shein and Temu.But had analysts warned that the move to cancel the exemption, which came into effect just days after it was announced, would force customs officials to apply the more complicated formal entry process to every package arriving from China.The US Customs and Border Protection estimates that it processes more than 4mn low-value shipments daily. A congressional select committee report in 2023 estimated that about 30 per cent of those packages came from Temu and Shein.The move would also make parcels formerly qualifying for de minimis subject not only to the additional 10 per cent tariff but also to existing trade levies, according to experts.The US Postal Service on Tuesday suspended receipt of packages from China, including Hong Kong, before backtracking one day later to accept shipments. USPS said it was working with customs officials to establish an “efficient collection mechanism”, as the rapid implementation of the directive increased workloads for customs officials and stoked turmoil for exporters and freight carriers.Chinese ecommerce sellers also said this week that some logistics groups were charging them withholding fees to cover the levies and other customs costs.US officials have long had the de minimis rules in their sights. Domestic retailers that purchase items from overseas in bulk have complained that the exemption gave Chinese ecommerce groups an unfair cost advantage. Former US president Joe Biden’s administration had proposed measures to tighten rules concerning the de minimis regime.A report from analysts at Nomura, the Japanese investment bank, estimated that China shipped $46bn worth of packages to the US under de minimis rules in 2024, and that scrapping the exemptions could knock 0.2 percentage points off Chinese economic growth in 2025. More

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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump announced Nippon Steel had abandoned its plan to buy US Steel but would “invest heavily” in the iconic Pittsburgh producer.At a joint press conference with Japanese Prime Minister Shigeru Ishiba on Friday, the president said the prospect of an investment in US Steel was “very exciting”, adding he would meet Nippon officials next week.“They’ll work out the details . . . I’ll be there to mediate and arbitrate,” he said.Earlier on Friday, Trump said he had not changed his mind about opposing Nippon’s $15bn acquisition of US Steel. The companies last month sued the US after Joe Biden’s administration in January blocked the proposed deal.One person familiar with the situation said details of the investment had not been finalised. The White House did not reply to a request for more information about what the two leaders had agreed. Nippon also declined to comment. The United Steelworkers union, which was the biggest opponent to the proposed acquisition, said it remained concerned about Nippon Steel.“Our union has had no contact with either company or the administration regarding reports of a Nippon investment in US Steel,” said David McCall, the union’s president.McCall added: “Our concerns regarding Nippon’s continued interest in US Steel remain unchanged. Nippon has proven itself to be a serial trade cheater with a history of dumping its products into our markets.”Two people close to the situation said that while a full takeover was off the table, negotiations would likely proceed towards a deal that shared “very similar” elements with the original proposed acquisition, and that US Steel would keep its name.They added it was unclear whether that would absolve Nippon from the $565mn break fee it was due to pay if the deal failed to go through.Earlier on Friday, Trump said he would consider hitting Japanese exports with tariffs if the US trade deficit with the Asian country was not eliminated and he pledged to unveil “reciprocal” tariffs on other nations next week.Speaking in the Oval Office before the meeting with Ishiba, Trump said tariffs were an option to tackle the US trade deficit with Japan, the most important American ally in the Indo-Pacific. In 2024, the US deficit in goods with the country was $68bn, compared with $55bn in 2020 before the end of his first term.Trump said Washington and Tokyo would work together to cut the trade deficit, saying “they want fairness also”. Asked about the threat of tariffs, the president said: “We didn’t discuss tariffs too much.”Ishiba said he was “unable to respond to a theoretical question” when asked whether Tokyo would retaliate.Show video infoTrump also said Japan would buy more US liquefied natural gas. Prompted by the US president, Ishiba agreed the Biden administration had made it harder for Japan to buy more American LNG. He said it was “wonderful” that more sales were being allowed. On his first day in office, Trump signed an executive order to boost oil and gas production in Alaska, lifting Biden-era restrictions on drilling and prioritising the development of the state’s LNG sector, including granting permission for a pipeline and export terminal. Japan, the world’s second-largest gas consumer after China, is among the biggest importers of American LNG, which is mostly sold under long-term contracts with foreign utilities. The US government does not have a role in LNG sales. However, export capacity in the US, the largest in the world, is expected to nearly double from 2024 levels by 2028 as more terminals come online.Ishiba said: “We also want to improve the trade deficit that the US has towards Japan, so if we are able to buy those [LNG] at a stable and reasonable price, it would be a wonderful situation.” Beyond Japan, Trump said he would next week unveil “reciprocal tariffs” on unnamed countries, hinting at the universal levies he has vowed to impose on imports into the US. The comments about new tariffs marked another escalation in Trump’s rhetoric, and brought the US closer to the brink of a multi-front trade war with some of its closest trading partners and security allies.“I’ll be announcing that next week, reciprocal trade, so that we’re treated evenly with other countries,” Trump said. During the presidential campaign last year, he repeatedly warned he would impose a universal tariff on imports into the US. Earlier this week, Trump suspended until March 1 his plan to impose steep tariffs on Mexico and Canada, the US’s two largest trading partners, but proceeded with a 10 per cent levy on imports from China. Beijing responded with retaliatory tariffs that will take effect this weekend. More

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The University of Michigan consumer survey showed that respondents expect inflation a year from now to be 4.3%, a 1 percentage point jump from January and the highest since November 2023.
Worries over inflation dovetailed with lower optimism overall, as the headline index fell to 67.8, a one-month drop of 4.6% and an 11.8% move lower from the same month a year ago.

People shop at a Whole Foods store on Feb. 3, 2025 in New York City.
Michael M. Santiago | Getty Images

Consumers grew dramatically more worried about near-term inflation as President Donald Trump pushed aggressive tariffs against major U.S. trading partners, a closely watched survey showed Friday.
The University of Michigan consumer survey for February showed that respondents expect the inflation rate a year from now to be 4.3%, a 1 percentage point jump from January and the highest level since November 2023.

Though Trump postponed tariffs against Canada and Mexico, the looming threat of price pass-throughs to consumers shook sentiment. China has levied retaliatory tariffs following Trump’s move. The survey window ran from Jan. 21, the day after Trump took office, to Feb. 3.
“Many consumers appear worried that high inflation will return within the next year,” said Joanne Hsu, the survey’s director. “This is only the fifth time in 14 years we have seen such a large one-month rise (one percentage point or more) in year-ahead inflation expectations.”
Longer-run expectations weren’t hit as much, with the five-year outlook drifting up to 3.3%, a 0.1 percentage point gain.
Worries over inflation dovetailed with lower optimism overall, as the headline index fell to 67.8, a one-month drop of 4.6% and an 11.8% move lower from the same month a year ago. Economists surveyed by Dow Jones had been looking for a reading of 71.3.
The survey sometimes is influenced by shifting political winds. However, Hsu noted that declining sentiment was “pervasive, with Republicans, Independents, and Democrats all posting sentiment declines from January, along with consumers across age and wealth groups.”

Stocks turned lower after the report, with the Dow Jones Industrial Average initially off nearly 300 points.
“Higher prices from tariffs are the number one financial concern for Americans, as the weight of inflation is still oppressive to family budgets, especially among those with lower incomes,” said Robert Frick, corporate economist at Navy Credit Union. “Even slight increases in prices, especially in top pain points such as food, shelter, and transportation, would be acutely felt by millions.”
Hsu said overall declines in the various survey indexes reflect “a perception that it may be too late to avoid the negative impact of tariff policy.”
The current conditions index also slumped, down to 68.7, or 7.2% lower than January and down 13.5% from a year ago. Expectations declined to 67.3, for a respective drop of 2.9% and 10.5%.

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