Small packages trigger high inflation: 145% tariffs force retailers to retreat. The "inflation beast" is about to sweep across the United States again.

As the United States officially cancels the tariff exemption for low-priced small packages on local time Friday, some global retailers with e-commerce businesses have stopped shipping and selling any products to customers in the United States. Other retailers are hopeful that the US-China trade negotiations will start soon to push for a substantial reduction in tariff rates between the US and China, and are temporarily finding ways to navigate through price increases. More importantly, for American consumers facing persistent inflation pressure for many years and with tight pockets, the "inflation beast" may reappear due to retailers of essential consumer goods and popular apparel retailers leaving the United States in succession, leading to further escalation of the severe life cost pressure they face, ultimately likely to lead to a collapse in the US labor market and the US economy entering a period of recession. Goods from China, the largest trading partner for daily necessities and essential consumer goods in the world, are facing tariffs as high as 145%, and the exemption of low-value goods from China ended on Friday. Some online retailers, especially those focusing on daily necessities, essential consumer goods, and popular apparel products, have stopped serving the US market due to tariff issues. Goldman Sachs Group, Inc., a Wall Street major bank, recently raised its core PCE inflation index by 0.5% percentage points to 3.5% by the end of 2025, and expects it to rise to 4%, emphasizing the difficulty of reaching the Federal Reserve's target of 2% even by 2026. In March of this year, the core PCE index grew by 2.6% year-over-year. The core PCE index is a favorite inflation measure for Federal Reserve Chairman Powell and other Fed officials. According to the latest tracking and statistical data compiled by the media on e-commerce platforms like Amazon.com, Inc., as the Trump administration begins to impose taxes on small packages, the number of retailers choosing to abandon the US market is increasing. The world's largest e-commerce giant Amazon.com, Inc. (AMZN.US) Friday's latest financial report data showed that because Amazon.com, Inc.'s various goods, especially essential consumer goods primarily come from China, Amazon.com, Inc. management directly mentioned tariffs and trade when providing performance guidance, suggesting a significant negative impact on performance, resulting in Amazon.com, Inc. providing operating profit outlook lower than analyst expectations. The entire operating profit guidance range is below analyst expectations, with the high end of the range about 1.8% lower than expected by analysts, and the low end even 27% lower than expected by analysts. After the tariff exemption policy of "duty-free e-commerce packages under $800" (de minimis) was canceled, goods from the Chinese market will face universal tariffs as high as 145% - a decision announced by US President Donald Trump last month that has disrupted global trade and triggered retaliatory tariffs or potential retaliatory actions from trading partners such as China and the European Union. The UK beauty retailer Space NK, whose own personal care products sell well on the Amazon.com, Inc. e-commerce platform, announced on Wednesday that they have suspended e-commerce orders and e-commerce merchandise delivery to the US market to avoid customers incurring errors or additional substantial charges. Space NK is not alone. Canadian-based lingerie brand Understance, which manufactures and produces in China, announced on the social media platform Instagram that they will no longer ship to the US due to tariffs, and will resume shipping when the situation is clearer. "The unprecedented increase in tariffs from 0% to 145% is difficult for both companies and consumers to bear," said Cindy Allen, CEO of the global trade consulting company Trade Force Multiplier, in an interview. "Therefore, I see many small and medium-sized daily necessities retailers simply temporarily withdrawing from the US market." Specific import costs may vary depending on the mode of transportation. Guidance from US Customs and Border Protection shows that e-commerce packages processed by the US Postal Service will be charged a tariff equivalent to at least 120% of the value, or at least $100 per item, and will rise to $200 starting in June. A new wave of price increases in the United States is about to begin For retailers who still wish to enter the US market, they are forced to significantly increase prices to deal with the Trump administration's unprecedented aggressive imposition of tariffs on global trade. Although the Trump administration announced a 90-day extension of the most severe "reciprocal tariffs" shortly after "Liberation Day" due to continued sharp declines in the US stock, bond, and currency markets, during this period, the benchmark tariffs for most countries except China have been adjusted to 10%. However, according to forecasts from Bloomberg's Economic Research team, the "effective tariff rate" in the United States is currently close to 23% - the highest level in over a century. This has already caused severe shock to US consumer and business confidence. The Trump administration's decision to impose astonishing tariffs of up to 145% on China, one of the top three trading partners of the United States, and at least 10% tariffs on most other countries, has led many forecasters to warn that the global economy will sharply slow down in the future, with some even predicting a deep economic recession in the US this year. This is partly because since the high inflation period of 2022, American households facing persistent inflation pressure may significantly reduce their demand, with some households already feeling the pinch, while household demand or consumption accounts for about two-thirds of US GDP. The UK clothing retailer Oh Polly's prices in the US market are 20% higher than in other markets, and they may be forced to further raise prices due to higher tariffs, said Mike Blaney, the company's managing director, in an interview. Shein, the Singapore-based fast fashion giant, is also facing the same issue. In its American market Instagram account, Shein posted to reassure consumers: "Some product prices may be different, but most of our series are still affordable as always." It is understood that Shein's clothing products are mainly produced in China, and the United States is its largest market.Amazon.com, Inc. and other e-commerce platforms such as Shein will run out of imported inventory before the tariffs on small packages take effect on May 2. Merchants on platforms like Shein and Amazon.com, Inc. have already significantly reduced their digital advertising expenses in the United States in recent weeks, preparing for the potential trade policy changes that could severely impact sales. According to reports, the developer of the social platform Snapchat, which focuses on "ephemeral" instant private themes, Snap Inc (SNAP.US), recently stated that its online advertising business is facing rare macroeconomic headwinds due to Trump's tariff policies, and management refused to provide revenue forecast data for the current quarter in their earnings report. The company's CFO, Derek Andersen, stated in this week's investor earnings call that due to the Trump administration's plans to modify the "low-value tariff exemption" rule - which currently exempts any Chinese import goods valued below $800 from tariffs, some advertisers are significantly tightening their advertising expenditures. The so-called "de minimis rule" - which exempts tax on e-commerce packages below $800, was originally intended to facilitate online shopping for American consumers and promote international trade. However, it has been criticized harshly by many Republicans for aiding in fentanyl precursor smuggling and the influx of large-scale imports of cheap clothing, toys, and furniture through platforms like Shein and Amazon.com, Inc.'s Haul. De minimis has also become a channel for counterfeit goods. In 2024, 97% of the goods seized by the U.S. Customs and Border Protection for intellectual property infringement were de minimis goods. After the exemption is cancelled, sellers of imported Chinese goods must provide more detailed information about the origin of each component of their products to U.S. customs to determine if they comply with the North American Free Trade Agreement. This not only increases administrative costs, but also, along with substantial tariff costs, is causing small retailers worldwide to hesitate. However, the essential consumer goods and popular fashion products provided by these small retailers are on the long-term shopping lists of most American consumers. Soon, the high prices of essential consumer goods will inevitably lead to increased inflation in the United States. The CEO of United Parcel Service (UPS.US), Carol Tome, stated on Tuesday that many of the small and medium-sized retail businesses that are their clients have all of their goods coming from China. The online auction marketplace Etsy (ETSY.US) announced earlier this month in a seller notification that it will make it easier for sellers to indicate the country of origin of their products, as tariffs are levied based on the manufacturing location rather than the shipping location. For e-commerce platforms, this policy is extremely disruptive on the demand and supply side, but it may be a significant positive for retailers that do not depend on e-commerce business or on Chinese manufacturing. The fast fashion retailer Primark from the UK, which only sells offline through stores in popular American shopping districts, and does not engage in online e-commerce type of low-cost sales business, may benefit greatly from Trump's tariff policy. The CEO of its parent company Associated British Foods, George Weston, told the media on Tuesday: "With the possibility of price increases on these types of goods, I wonder if some American consumers will return to shopping centers to find real value." The global e-commerce giant Amazon.com, Inc. has warned of the impact of tariffs. In the context of a new round of global trade wars led by the Trump administration, the social media platform Snap, with its "ephemeral" app, is just one of many companies warning of increasing operational difficulties. Prior to this, many retail leaders in the field such as Colgate-Palmolive, Procter & Gamble Company, Unilever PLC Sponsored ADR, and Nestle warned that tariffs would bring huge costs. Snap's temporary withdrawal of guidance shows that the negative effects of Trump's tariff policies have permeated the e-commerce and online advertising sectors, undoubtedly affecting the performance expectations of e-commerce and social media platforms such as Amazon.com, Inc., Meta (Facebook's parent company), and Pinterest. Financial data released by Amazon.com, Inc. on Friday shows that the revenue growth rate in the first quarter is the slowest since the fourth quarter of 2020, and profit growth per share (EPS) has significantly slowed compared to the previous quarter. Since various goods on the Amazon.com, Inc. platform, especially essential consumer goods, mainly come from China, the Amazon.com, Inc. management warned directly of the potential negative impact of Trump's tariffs and the new global trade battle on the performance of this e-commerce giant. Therefore, the operating profit outlook provided by Amazon.com, Inc. is below the expectations of Wall Street analysts. Amazon.com, Inc.'s performance outlook shows that the entire operating profit guidance range is below analyst expectations, with the high end of the range being about 1.8% lower than expected, and the low end being as much as 27% lower than expected. This means that in the worst-case operating profit scenario as predicted by Amazon.com Inc.'s management, the operating profit for the second quarter may be 27% lower than the average analyst expectation. It is worth noting that, when announcing the earnings outlook, Amazon.com, Inc. management implied that the guidance provided does not include any potential impact of implementing tariffs after April. In other words, if the incremental tariff policy implemented by the Trump administration starting in May leads to reduced consumer spending, it could further impact Amazon.com, Inc.The performance of the company may exceed expectations in this quarter, even possibly higher than anticipated in the guidance provided by Amazon.com, Inc.Je ne comprends pas.