Asia Tea Time - #89 ☕

Trump's tariffs on China packages and recognising our biases when FOMO strikes

Author

Tim Phillips
February 08, 2025 • Estimated Reading Time: 7 minutes

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This week I talk President Trump’s China tariffs and taking a step back, to recognise ourselves, when we start feeling investing FOMO.

Macro in Asia

Trump imposes tariffs on China packages, reverses course

In the US on Tuesday (4 February), President Trump imposed 10% on all Chinese goods entering the country. That also applied to small packages, valued under US$800, that are typically exempt from tariffs.

Following massive chaos and confusion about the new rules, the US administration paused tariffs on low-value packages from China in an announcement on Friday – until the logistics of collecting tariffs can be figured out.

Why it’s happening

  • If anyone isn’t aware already, Trump isn’t that keen on China’s massive trade surplus with the US (as in China exports way more to the US than it imports). As a result, he wants to impose tariffs on ALL Chinese imports.  

  • That only turns into a logistical issue since the “de minimis” rule for the US currently allows any imports with a value of under US$800 to be exempt from any duties or taxes.

  • Trump wants to change that as his administration views low-value Chinese goods flooding into the US market as a threat to domestic retailers as well as a front for illegal drug shipments like fentanyl.

Why it matters

  • Given 4 million de minimis packages enter the US every day, it’s not exactly easy to immediately tax all of them.

  • The US Postal Service (USPS) announced on Wednesday that it would stop accepting packages from Hong Kong and China, only to reverse course on Thursday as it promised to maintain deliveries.

  • Express shipping firms and logistics companies will need to work closely with the US Customs and Border Protection (CBP) department to figure out how to collect these tariffs going forward.

What’s next?

  • When will this pause on imposing tariffs on these low-value goods end? That’s unclear right now but e-commerce retailers, shipping firms and logistics will likely be expecting a “worst case scenario” when it comes to tariffs and implementation.

 

Tim’s Take

The latest tariffs on low-value packages coming from China is typical President Trump – announcing a big reform without actually thinking of how to practically implement it.

The “de minimis rule” on packages is a strange loophole and was first introduced in 1938 to facilitate the delivery of small packages. The value back then was set at US$5, or US$106 in today’s money.

Many countries globally set their de minimis exceptions at around US$200 so the US is an outlier with its US$800 threshold. That actually only came into effect in 2016, when it was raised from US$200 to US$800.

For investors, it means more uncertainty for names in Asia. While the likes of Shein – a big, Chinese fast fashion company that has taken the US by storm – is actually privately-owned, companies like Temu are owned by larger listed Chinese firms (in Temu’s case, that’s Pinduoduo).

Somewhat surprisingly, PDD’s share price was actually up over 8% and suggests that investors might have priced in harsher tariffs/worse news for China imports into the US.

For the broader e-commerce ecosystem, whether it’s retailers or suppliers, it’s clear that these tariffs will mean higher costs. Who comes out ahead in a world of higher costs? Those with scale and pricing power – in other words larger companies such as Amazon.com Inc (NASDAQ: AMZN).

Investors are already seeing that with Chinese suppliers in e-commerce looking to ship in bulk with minimum order quantities (MOQs).

Whatever the outcome of this e-commerce spat, it’s sure to be an unpredictable four years for investors everywhere given the importance of the US economy.

Tim’s Money Tip of the Week

Know thyself. In this era of mindfulness, we should also be applying the “Zen” approach to our money matters.

Whether you’re likely to be feeling FOMO when a certain tech stock or crypto coin shoots up, it’s important to check yourself and recognise what your actual risk tolerance is. What are you planning for in the future?

The instant gratification that comes from “to the moooooooon” gains is undeniably tempting…who doesn’t like 100-200% returns in a matter of weeks (or days). It’s a natural human emotion to enjoy seeing fast gains in our portfolio.

But we also have to put that into the context of our investing time horizon. Trends can take off – remember quantum computing in December of 2024? – but then just as quickly fizzle out.

For example, if you had bought Rigetti Computing (NASDAQ: RGTI), a hot quantum computing stock, at the start of December you’d be sitting on 320% gains today.

If you had bought the same company at the beginning of 2025? You’d be down 36% on your investment today.

Separating the truly speculative from the merely “expensive” when we invest in assets is critical. How much are we buying as a percentage of our total net worth? Do we expect this to go to zero? And would it severely damage our financial health if it did?

These all questions we have to ask ourself before we pull the trigger and buy something we perhaps don’t fully understand. Being comfortable with our risk tolerance, our investing time horizon and our broader financial goals means we can better mitigate the FOMO risk.d.