Crypto News: Tariffs won’t kill Temu

Many discount shoppers were rattled this week when additional tariffs were imposed on China, along with the closing of a loophole that exempted some goods. Spencer Soper is here to say, "Don't panic." Plus: Go inside the fan experience of five dedicated gamblers, who say they do it for the camaraderie as much as the money. If this email was forwarded to you, click here to sign up.

Count me among the whiplashed. I went to bed late on Tuesday after helping some colleagues wrestle with an out-of-the-blue announcement that the US Postal Service would suspend inbound parcels from China and Hong Kong. Then I awoke before dawn on Wednesday to a headline that the Postal Service would resume accepting them.

The abrupt flip followed weekend news about new US tariffs on China (Canada and Mexico, too, but those were quickly put on hold) and the closure of a decades-old "de minimis" trade loophole that had emerged as a popular way to dodge the tariffs President Donald Trump imposed on Chinese goods in his first term.

You've likely seen a lot of headlines and hot takes about what these changes "could" mean for discount online marketplace Temu and fast-fashion site Shein, where you can still find plus-size lace lingerie for just $6.49. When news is shocking, the markets, analysts and journalists have a proclivity to exaggerate and oversimplify only because there's no time to consider nuance.

A US Postal Service processing facility in Dulles, Virginia. Photographer: Valerie Plesch/Bloomberg

Let's unpack now that we've had a minute. The Postal Service announcement delivered a lot more surprise than impact. Inbound international mail from China has been declining for about a decade because of price hikes and glacial delivery speeds. Remember Wish.com, the dollar-store smartphone app? You'd order some cheap trinket, forget about it and then a month or so later get a package in the mail labeled in Mandarin. That's the kind of stuff the Postal Service was going to suspend, but few businesses are even using it anymore.

Which brings us to tariffs. Trump imposed an additional 10% duty on Chinese imports and aims to close the de minimis loophole, something President Joe Biden initiated through more formal procedures in his final weeks in office. De minimis is a Latin term meaning marginal value, and the loophole lets goods enter the US from other countries duty-free so long as the value doesn't exceed $800. Think a tourist returning from vacation with gifts stuffed in a suitcase. That same exemption applies to packages sent direct to US shoppers from China, which has given Temu and Shein a cost advantage over brick-and-mortar retailers and even Amazon.com, which import products in bulk by ship and pay duties when they reach a US port.

So does closing the loophole kill Temu and Shein? Probably not. There are benefits to their business models beyond a tariff dodge. Shipping inventory by sea is slow, which means it can take up to six months to convert a $100,000 factory order into cash from customers. Temu and Shein narrow that payoff time to weeks by packing items on planes and sending them directly to shoppers when ordered.

That fast cash flow conversion appeals to Chinese factories and merchants, especially if they have leftover inventory they want to unload. A lot of factories are trying to diversify so they aren't too reliant on a handful of US retailers or sales on Amazon. Temu and Shein have become outlets to quickly convert inventory to cash when they need it. Poor cash flow can hamstring even profitable businesses, so there's always a place for a business offering a quicker payoff.

I spoke with Izzy Rosenzweig, chief executive officer of Portless, a cross-border logistics company that specializes in helping online brands sell directly to shoppers in the US and Europe from factories in China and Vietnam, with all orders sent in airplanes. He's bullish on the factory direct model even without the tariff exemption. Tariffs of as much as 35% will apply to the wholesale cost of goods, so shoppers will likely end up paying an extra 10%, he says.

"This won't kill the model," Rosenzweig says. "Shein didn't become a multibillion-dollar company because it saved 30 cents in duties on a T-shirt."

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Why Football Fans Bet

A gambler watches Sunday NFL games in his home theater. Photographer: Ben Lowy for Bloomberg Businessweek

For millions of Americans, Sundays mean football—and football means gambling. The American Gaming Association estimates that 73.5 million Americans, more than a quarter of the US adult population, bet during the 2023-24 NFL season. And in the six-plus years since the US Supreme Court ruled that sports gambling could expand beyond Nevada, the industry has seen massive growth: 38 states, plus Puerto Rico and Washington, DC, now offer legal sports wagering. This football season, the AGA projects that Americans will bet $35 billion with legal sportsbooks.

And those numbers spike for the big game; 26% of US adults were projected to bet on the 2024 Super Bowl. But for many, sports betting has become a constant. A survey from the Siena College Research Institute found that 59% of sports bettors gamble at least once a week.

Researchers have begun to examine the macro impact of these trends, finding, for instance, that betting particularly hurts the credit ratings of the economically vulnerable. But Bloomberg Businessweek wanted to know what it was like for individual sports fans to bring legal betting into their life. We followed five gamblers as they placed and tracked their bets to see how they spent their money and their game days. For many, it's a community, a way for fans, who are overwhelmingly men and often young, to build relationships and have regular conversations with other guys. These friendships—largely built online in Discords, X spaces, Reddit threads and the comment sections of YouTube streams—can be expensive to maintain, but fans say it's worth the cost. "Guys need an icebreaker for friendship," says Sean Green, co-founder of the Sports Gambling Podcast Network (SGPN) and co-host of the Sports Gambling Podcast, "and sports gambling can be that for them."

Charley Locke introduces us to the betters here: Betting $10,000 Every Sunday

Nicotine Boom

25%

That's how much sales of Zyn nicotine pouches rose last year, helping to boost profits for tobacco maker Philip Morris. Although Zyn products contain fewer of the particles and chemicals that have linked cigarettes to cancer and heart disease, their popularity has sparked fears that young people who have never smoked have become hooked on them.

Cost of Doing Business

"Being global is a choice. Frankly, it is the more difficult choice to make. I know this is difficult and may become increasingly so."

Bob Sternfels

Global managing partner, McKinsey

McKinsey partners have been questioning the consulting giant's presence in China, worried that doing business there may not be worth the risks given the Asian superpower's increasingly volatile relationship with the US.